PAGE 13
NORTH COAST TIMES E A G L E, APRIUMAY 2003
investment syndicate had not been rigging the right laws and
regulations and pushing regulator “indifference” or “incompe
tence" throughout. The developers and S&L CEOs and manage
ment were the small time fraudsters or patsies. It was the quiet
guys who made the big money behind the scenes who were the
real bad guys. They got away scot free As far as I’m concerned
that is why Enron happened. The folks who made money on
Iran/Contra were able to rise to and consolidate control of the
investment community, media and government.
Unfortunately, part of the reason this happens is that
honest government enforcement career staff are put in the
position of landing on Normandy Beach with water pistols As
an example, the SEC during the last administration fought vigor
ously against “The Street” on any number of accounting issues,
and any number of “new financial structures' that obfuscated
financial transactions. The underfunding of these efforts and the
lack of serious political support play a significant part in allowing
these kinds of fraud to happen.
DA: You link the S&L crisis with Iran/Contra. Are you
saying it's the same network of people — or using that word
again, the same syndicate' that perpetrated Iran/Contra also
perpetrated the S&L meltdown?
CAF: Go back to the books and articles I mentioned
earlier. The S&L crisis was simply part of Iran/Contra — an
intentional systemic fraud. Our banking governance and regula
tory structure did not work for a reason. The people in charge
did not want them to — everyone involved made a lot of money,
both in ripping off the S&Ls or HUD or the banks. Then they
made money buying up the assets cheap after the crash. It was
a pump and dump of the real estate market, with the S&Ls as
the primary financial patsy that had to be refinanced by the tax
payers. Very few got held responsible. The message was “crime
pays.” Both the Clinton and Bush groups were Iran/Contra
winners.
DA: Clinton too7 Is that why Clinton never brought up
Iran/Contra during the 1992 election?
CAF: Can you spell Mena Arkansas?
DA: I'm sorry, Catherine, I just don't want to believe this.
CAF: No one does. That’s how they got away with it.
The seventh step in a legitimate investigation is: You
cancel federal government contracts, particularly sensitive ones,
and seize payables and other assets available where criminal
behavior at the top of the organization indicates that the organ
ization is a criminal enterprise.
So I would ask: If Enron and Arthur Andersen by their
own admission are guilty of criminal violations of destroying
evidence, of cooking the books, and you have Enron board
members saying that Arthur Andersen and the management
lied, then on what basis should they not be immediately disbar
red from doing business with the federal government?
DA: On March 15 last year the General Services Admin
istration did prohibit new contracts with Enron for 12 months and
with Arthur Andersen for the duration of the present indictment.
CAF: Almost four months after Enron declared bank
ruptcy. Those contracts could have been canceled within the
space of 24 hours — as soon as there was any evidence of
wrongdoing. And cash that was owed under those contracts
could also have been seized as an offset for a variety of things
whenever probable fraud is evident. Why should Enron be
rewarded with government contracts after causing the fraud
ulent energy billing of Americans in the billions? Would you
continue to hire and use a person or company who has just
stolen your money? Of course not. It is interesting to note that
Arthur Andersen spin-off Accenture has been hired by the
Pentagon through IBM to sort out the Defense Department’s
missing trillions of dollars.
DA: While, in the case of Hamilton Securities, you
experienced the Clinton administration DO J acting to this very
purpose — canceling contracts and seizing moneys. In fact,
HUD still owes you somewhere between $2 million and $3
million for work completed on contracts you had with them.
CAF: The Hamilton Securities case proves indisputably
that when there is a will, federal investigators can quickly and
aggressively assert control over records of an investigative
KIRK
target. They can do so even when their own investigators take
the position there has been no wrongdoing. They can do so
when they have strong assurances as to supoena compliance
and protection of documents, and they know that their combined
actions will shut down the company, smear the reputations of its
founders, management and investors, and cause employees to
lose their jobs and the value of their company stock.
DA: But the DO J dropped their investigation of Hamilton
Securities and you were proven innocent of the allegations made
by Ervin & Associates. How in the world did you win your battle?
CAF: There were many reasons. I think the principle
reason was the extraordinary support of literally hundreds of
decent men and women throughout government and among
the many people who had worked with me and the people who
stayed on to help This group tried to do the right thing or to
support us in whatever ways they could — as did my family and
friends We did not have the support of the rich and powerful,
but we had the support of the “little people.’’ When the “little
people" work together we are far more powerful than we know.
As the support of the “little people” allowed the truth to come
out, numerous former colleagues and associates returned to
support after they realized that very prestigious and powerful
sources had misled or lied to them. There is an old saying,
“truth comes together and lies fall apart." That is what happened
The full story of our success is a story of miracles big and small
I believe our freedom comes to us from divine authority, and my
story provides a concrete example. One of the miracles was that
our attorneys included a few fighting Irishmen who stuck with it
when the going got tough.
DA: Are you still hounded by the DOJ?
CAF: Managing the liquidation of Hamilton Securities
remains a full time job.
DA: What do you mean?
CAF: The DOJ has not moved to dismiss the qui tarn
*
against us, nor as you mentioned, have we been paid moneys
owed to Hamilton Securities.
We are in litigation between Hamilton Securities, DOJ
and Ervin & Associates with two cases in discovery now and
scheduled for trial in September and one case not yet scheduled
despite years of effort. I think the absence of any DOJ action to
BUSH & ENRON
Did George W. Bush once have a financial relationship
with Enron? In 1986, according to publicly available records,
the two drilled for oil together at a time when Bush was a not too
successful oilman in Texas and his oil venture was in dire need
of help.
Spectrum 7, a privately owned oil company chaired by
Bush, faced serious trouble in 1986. Two years earlier Bush had
merged his failing Bush Exploration Company with the profitable
Spectrum 7 and was named its chief executive and director. He
was paid $75,000 a year and given 1.1 million shares, according
to First Son, Bill Minutaglio's biography of Bush. Under this deal,
Bush ended up owning about 15% of Spectrum 7 By the end of
1985, Spectrum’s fortunes had reversed. With oil prices falling,
the company was losing money and on the verge of collapse.
To save the firm Bush began negotiations to sell Spec
trum 7 to Harken Energy, a large Dallas based energy company
owned mostly by billionaire George Soros, Saudi businessman
Abdullah Taha Baksh and Harvard Management Corporation
The deal took months to work out but by September 1986, Spec
trum 7 and Harken announced they had reached an agreement.
Under the plan Spectrum 7 shareholders would receive Harken
stock. Bush said that Spectrum 7 would continue to operate in
Midland, Texas as a wholly owned subsidiary of Harken and
that he would become an active member of Harken’s board of
directors. As Minutaglio noted, the deal would give Bush about
$600,000 in Harken shares and $50,000 to $120,000 a year in
consultant’s fees. It would also provide $2.25 million in Harken
stock for a company with a net value close to $1.8 million.
As the details of the Spectrum/Harken acquisition —
which Bush badly needed — were being finalized, Enron Oil &
Gas Company, a subsidiary of Enron Corporation, announced
on October 16, 1986, that it had completed a well producing
both oil and natural gas in Martin County, Texas An Enron Oil
& Gas press release reported the well was producing 24,000
cubic feet of natural gas and 411 barrels of oil per day in the
Belspec Fusselman Field, fifteen miles northeast of Midland
Enron held 52% interest in the well.According to the company’s
announcement, 10% belonged to Spectrum 7. At that point,
Spectrum 7 was still Bush's company; Harken’s completion of
the Spectrum 7 acquisition was announced in early November
To spell it out: George W Bush and Enron Oil & Gas
were in business together in 1986 — when Ken Lay was head
of Enron. (Lay was named Enron chairman in February that
year) How did this deal come about? Was this the only project
in which Bush and Enron were partners? A call placed to the
White House produced no response Karen Denne, an Enron
spokeswoman, said “I can't tell you anything about that project,"
explaining Enron sold all its domestic exploration and production
assets around 2000 to EOG resources.
After the Enron bankruptcy began generating frontpage
headlines, Bush attempted to distance himself from Enron and
Ken Lay In early January 2002, the President claimed he and
Lay had not always been close pals. “He was a supporter of
(Texas Governor) Ann Richards in my run (against her) in 1994,"
Bush asserted, noting he did get “to know Ken" and work with
him until after that election.
But campaign records show Lay donated three times as
much money to Bush as he did to Richards Moreover, contacts
between Lay and the Bush family predated that campaign Lay
chaired the host committee for the 1992 Republican convention
in Houston, where Bush’s father won his second Presidential
nomination Lay was a sleepover guest at the White House of
President George H. W Bush.
The Enron/George W Bush connection goes back
further than the President has suggested But does that mean
the relationship between the younger Bush and Lay stretches to
the mid-1980s? The deal could have happened without contact
between them, but most company heads would be interested to
know the son of a sitting Vice President had invested in one of
their enterprises. If Lay had been aware of the partnership, that
would not prove the two were pals or that Bush and Spectrum 7
had received undue consideration from Enron But given Enron’s
penchant to use political ties to win and protect business oppor
tunities, it is tough not to wonder if this Bush/Enron venture
involved special arrangements This is certainly one more Enron
partnership that deserves scrutiny — especially since George
W Bush has yet to acknowledge it. The Spectrum/Enron deal
is either an odd historical coincidence or an indication there is
more to learn about the Bush/Enron association
-DAVID HORN
This article has been excerpted from The Nation
pay us versus generous settlements and sole source contracts
unnecessarily awarded to Ervin & Associates speak for them
selves. I anticipate I will spend years in litigation defending
Hamilton Securities against Ervin, holding both Ervin &
Associates and John Ervin personally accountable, and
collecting moneys owed by the government to Hamilton over
DOJ’s objection. My estimate is that the federal enforcement
establishment may have spent more to target me over the last
six years in this litigation than they spent to get Osama bin
Laden before 9/11.The fact they have provided generous inside
deals to Ervin which helped drive honest people out of govern
ment and ensure that billions of dollars were lost by government
is particularly disturbing
DA: What does this mean to you? That is, compare the
treatment you received and the treatment presently being given
to Enron?
CAF: Congress did all this screaming and ranting and
raving that really makes it seem like they are doing something
significant. Now what’s happening? I’m sitting there, watching
this unfold — then nothing. It’s “déjà vu all over again,” as far
as I'm concerned. They are covering Enron up, exactly the way
they covered up the S&L stuff which was a very similar situation.
A bunch of guys from Houston and New York Fed member
banks and Wall Street who got together and stole a couple
of hundred billion dollars. It’s the same private syndicate —
so here we go again — and Congress is playing the same
coverup game again. So, basically, the comparison becomes
an out and out contradiction of values. Hamilton Securities was
wrongly accused and its assets were destroyed. Enron is getting
kid-glove treatment, while the stolen money is getting away.
DA: Okay, Catherine, you've laid out your argument.
You’ve seen this from the inside. You’ve seen this from the
outside. At the very least, the Congressional investigation has
been lax, inefficient, and disturbingly slow Mistakes and
omissions have occurred. But you keep calling it a coverup
You've said Enron management provided the fall guys and that
the big winners are really outside the company, the second and
third party Enron investors and banks that were able to get huge
sums of money out before the collapse These are the real inside
traders. You've also mentioned Enron and the S&L crisis in the
same breath as though Enron was to some extent an intentional
play from the outside—not just endemic greed in a few members
of Enron management. You've even suggested that some of the
players were involved across the span of S&L fraud, BCCI/lran-
Contra and Enron. I struggle here I think most of us want to
reject this idea of systemic syndicated crime — especially at
the level you're talking. But you are one of the few people in the
entire world who has seen all of this up close as an inside invest
igator Now, it could be said that because of what the DOJ and
HUD did to you, you're just slinging mud at the U.S government
and certain HUD contractors From talking to you many times
over several months, I have to say, however, I don't get that
feeling from you at all. This is simply my opinion In the end, I
don't like what you’re telling me but your argument is compelling.
So let's have it. You mentioned a “bunch of guys from Houston
and the New York Fed and Wall Street. " Clarify this as best you
can Who or what is at the bottom of Enron? In your opinion.
What is the Real Deal?
CAF: My recommendation is to start studying Herbert
Pug' Winokur, who, I mentioned earlier, chaired the finance
committee of Enron's board He is the top guy responsible on
the board to know how the money works and to make sure it is
working in the way that it is supposed to Pug was a member of
the Powers Investigation, the committee set up to investigate
the financial operation that Pug himself oversaw He was a
board member of Harvard, overseeing the Harvard Endowment
that invested heavily in Enron, as well as co-investor active with
Harvard. He is also on the board as the former chairman, lead
outside investor and current chairman of the Compensation
Committee of DynCorp It is important to ask the question as
to why our Congressmen and Senators, when they have had
Winokur in front of them and he was saying yah-yah, they let
him get away with it?
DA: I heard your comments on Winokur in your interview
with KPFA 's Dennis Berstein The DynCorp connection is big
With DynCorp providing information via PROMIS — including the
U S Attorney's office, the FBI and the SEC, Winokur presumably
CONTINUED ON PAGE 14
* An action brought by a person on behalf of a government
against a party alleged to have violated a statute, especially
against defrauding the government through false claims and
that provides for part of a penalty to go to the person bringing
the action Late Latin who as much, who as well; from the first
words of a clause referring to the plaintiff as one who sues as
much for the state as for himself or herself (Dictionary of Law,
Miriam Webster)