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Issue No. 124 15 February 2002  

Chickens Come Home
For anyone who believes in karma, the events of the summer show how bad Australia's is right now.


Unions: Winning the Heartland
John Robertson unveils new research on attitudes to refugees and argues it's time for unions to mount their own propaganda war.

Interview: Swan's Song
Federal ALP front-bencher Wayne Swan expands on his ideas for rebuilding the Party in the wake of the Tampa election.

Corporate: Lessons from Enron
Jim Marr looks at the shock-waves the collapse of a US corporate heavy-weight are having around the globe.

Politics: What We Did Last Summer
We look back over a summer when it all went pear-shaped. Some events, at home and abroad, look set to have ongoing ramifications.

History: Solidarity in Song
Mark Gregory looks back on the annals of labour songs and offers some hints for those planning a tilt at the Labor Council's worker anthem comp.

International: A Tale of Two Cities
New York and Port Alegre are poles apart � but they both played host to important conferences on the future of globalisation over the summer.

Poetry: Nobody Told Me
Labour academic David Peetz commits the Prime Minister's current woes to verse.

Review: Labor and the Rings
Tolkien�s epic tale provides a timely reminder that that there are forces of good and evil in the world � and that they are not necessarily where we expect to find them, writes Michael Gadiel.

Satire: Rafter Named Bermudan Of The Year For Tax Purposes
Australian of the Year Pat Rafter was last night also named Bermudan of the Year, in a simple ceremony held in Bermuda's Parliament.


 Unions' Commit to Battle for Hearts

 Carr on Notice - Expectations Up

 Mad Monk Sides With Angels � Briefly

 Maritime Union Acts on Spy Scandal

 May Day Play-Off for Workers' Anthem

 Burmese Links Shroud Winter Olympics

 New Phone Venture One.Tel In Drag

 Two Million Face Rights Downgrade

 Enron Collapse Hits Share-Owner Agenda

 Corrrigan Snaps Up Rail Bargain

 Kinko Clowns With Workers' Rights

 MPs Face Security Checks

 Telstra's Tragic Delays Of Its Own Making

 Burrow Puts Case to World Economic Forum

 Shangri La Protests Hit Melbourne

 Activists Notebook


The Soapbox
Chinks in the Armour
The ACTU's Michael Crosby argues that Mark Latham's attack on the Labor for Refugees movement is the betrayal of Party values.

The Locker Room
Off-side in Korea?
With the World Cup set to kick off in a matter of months, South Korea's treatment of unions is under the microscope.

Week in Review
Cloak and Dagger
In the first of what will be a regular column, we place the week's labour news into a nutshell.

 In Whose Interests?
 'International Labour's Year in Review' - A Re-View
 Belly's Broad-Side
 Collins Gets Cryptic
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Lessons from Enron

Jim Marr looks at the shock-waves the collapse of a US corporate heavy-weight are having around the globe.



When multi-millionaire Enron executive, John Baxter, was discovered dead in his Mercedes, mid-January, the game was up - not just for the company, its man, and the employees and shareholders whose life savings they helped gamble away. Enron, should come to read, Endgame, for the fundamentalist market experiment it represented.

Enron, and rip, shit or bust CEO Kenneth Lay, were the darlings of the US business right. They forced their mantra of "market, market, and more market" on economies from their native Texas to India, Britain and South America to resounding cheers from The Economist, Fortune magazine, Wall St, Harvard Business School, business professors, analysts and journalists.

Lay's constant demands were deregulation and privatisation. His vision was a dog-eat-dog market that could be applied to everything from water, gas and electricity to gambling on the weather through the futures markets.

The CEO and his company spent millions cultivating George Bush and weren't above taking the crooked route to ensure control of public utilities in places like India.

Lay was a hands-on, can-do sorta Texan guy. The market loved his style - small wonder as, in not much more than a decade, he transformed a Houston-based gas pipeline operator into the seventh largest company in the US, boosting its share price by a staggering 1700 percent.

Last November, however, Enron shares tumbled 85 percent in a single day from their high of more than $US90. The following week they were at junk bond levels and today they trade amongst those fascinated by memorabilia.

When Enron filed for bankruptcy it represented the biggest corporate collapse in US history.

Today, no fewer than 10 official enquiries are picking over the carcass. The real questions, though, are not so much how it failed but why the illusion of success was allowed, and encouraged, for so long.

But this is not just a story of a US tall poppy's fall. Enron raises issues central to Australia's future. Not least ...


Can democracy survive a system in which politicians and political parties are dependent on the support of big business?

Enron was a classic example of how corporate power undermines the democratic process by donation and intensive lobbying.

The energy trading giant bankrolled politicians where and when it had to. Not just its favourite Republicans, but Democrats as well because under the US federal system many assets and opportunities were still controlled by Democrat administrations.

Enron spent $US2.4 billion on political influence in the US alone - $1.7b for Republicans and $700 million to Democrats.

Its favourite political representative was former Texas Governor, George W. Bush. During the 2000 US presidential campaign, Lay, personally kicked more than half a million dollars into the Bush kitty.

Over the last decade, returns on those investments were massive. Energy markets were opened up and regulations were watered down or eliminated.

Rarely was the going better than in Texas where Bush appeared to do the bidding of the buddy he called "Kenny Boy". At secret meetings with Bush officials, oil and gas interests wrote lax rules on emission controls with predictable air quality outcomes.

Not to worry, Bush introduced sweeping tort reform, making it difficult for ordinary citizens to sue corporations. Bush appointed Enron nominee, Pat Wood, to head Texas' public utility commission, which got on with the deregulation energy companies had been demanding.

In his new job, Bush moved quickly to slash income taxes, heavily weighted in favour of the top five percent of earners, and backed a stimulus package replete with corporate tax breaks and amnesties.

In August, 2000, he appointed "Kenny Boy" an adviser to his presidential transitional team, then redrafted national energy policy to the point where it was labeled a "polluters charter".

In the months before Enron imploded, executives held six meetings with vice-president Dick Cheney and other top Bush officials.

Cheney has repeatedly refused to release documentation from those meetings. In the light of the $1 billion Enron executives contributed to Republican coffers in the preceding three years, there has been a storm of protest.

The players, however, are but a sideline. The real issue is the rules of the game.


Enron based its fortune on grabbing control of vital public services particularly, in the early days, natural gas, electricity and water.

This wasn't restricted to its American operations, it dived into British water when it bought privatised Wessex Water for $2.2 billion, and carved huge profits out of similar services in India and South America.

Rarely did this ownership do much for the public.

Besides air quality issues in the US, Enron was a major player in the privatisation of Californian power. Residents and businesses in that state faced rolling blackouts and price blowouts as Enron made hay.

Enron was the US' biggest electricity trader at a time when Californian prices soared to $593 a megawatt hour, more than 10 times what they had been 12 months earlier.

It's record in the developing world, where Lay's hands-off demands were backed by the IMF and World Bank, was simply atrocious. Enron is still the only company to have a whole Amnesty International report devoted to its activities. The document was a digest of human rights abuses from Asia to South America.

Enron was at the center of one of India's biggest corruption scandals in which huge sums lined the pockets of politicians who backed the privatisation of power companies.


Lay's mantra has long been deregulation. Winning politicians to that corner allowed his company to play fast and loose with a minimum of supervision, let alone rules.

This issue was highlighted by the Californian debacle and the company's eventual collapse.

In the latter, lax accounting and reporting regimes allowed Enron to hide its true position from investors and employees for years. The company used "special partnerships" to hide debt and simply failed to report significant losses until the writing was on the wall.

On the way through, it boosted profits by benefiting from Governments weakening or removing rules on such things as competition, pollution and safety.

Such was the company's attraction to those of similar ideological hue that, in the same issue, Fortune Magazine rated Enron the "It stock" and conceded its operation was "largely impenetrable" to outsiders.

"In the end," Fortune concluded "it boils down to a matter of faith".

While that might be good enough for the gambling end of the stockmarket, it is way less than what citizens are entitled to expect of public policy.


Consultants are playing an ever-bigger role in an increasingly deregulated Australian economy, with mixed results.

The problem becomes acute when reputable professionals diversify their involvement in the same business.

Trans-national accountants, Arthur Andersen, under questioning for their role in Australia's HIH collapse, have found themselves in the Enron hot seat.

Not only were they the company's accountants, responsible for reporting its factual position to the market, but they boosted their annual earn to more than $US100 million by doubling as consultants to the business.

Andersen employees have admitted shredding Enron records, raising significant question marks over their dual role.

There is widespread acceptance in the modern economy of business diversifying from its core product into anything that returns a dollar. It was the same blueprint that led a Texan pipeline company into ventures as diversified as the internet and gambling on futures.


In line with its leading role as a new-right mover and shaker, Enron was largely a non-union operation. It ran a strategy, known as "rank and yank" that saw 10 percent of the workforce dismissed each year in a bid to keep survivors on their toes.

Enron was about individualism, competition and fanatical loyalty to high-profile bosses Kenneth Lay and Jeff Skilling. Winners were promoted and rewarded rapidly. Andrew Fastow, architect of its controversial and possibly illegal off-balance-sheet debts, was 36 when he was made chief financial officer.

Before the crash, the Economist described the internal culture as "cult-like".

On December 3, 2001, Enron laid off its 4100 employees and bankruptcy cost them all their entitlements and the bulk of their pension plans.

Enron's commitment to individualism and entrepreneurialism eliminated any opportunity for either constructive tension or the questioning that comes from an independent, organised workforce.



July 1985: Natural gas pipeline company, Enron, formed by merger between Houston Natural Gas and InterNorth.

November, 1999: EnronOnLine launched - the world's first global trading website

September, 2000: Company chairman, Kenneth Lay, contributes $US290,000 to George Bush's presidential election campaign.

January, 2000: Bush names Lay an adviser to his transitional team/ Enron shares hit $US90.56

August, 2001: Enron vice-president, Sherron Watkins, warns Lay of questionable accounting practices which could lead company to "implode on a wave of accounting scandals."

October, 2001:

- Andersen lawyer, Nancy Temple, emails Houston officer reminding of the firm's document destruction policy. Company calls the email "routine" some executives label it "unprecedented".

- Enron reports $US618m loss and discloses a $US1.2 billion reduction in shareholders' equity.

- Enron under investigation by securities and exchange commission over possible conflicts of interest between the company and its partnerships.

- Financial controller, Andrew Fastow, sacked.

November, 2001: Enron admits overstating profits by $US600 million, since 1997

December 2, 2001: Enron files for bankruptcy, the largest in US history

December 3, 2001: Enron sacks 4100 workers, most have their pension plans, full of Enron shares, wiped out.

January 9, 2002: Justice Department opens criminal investigation.

January 10, 2002: Andersen admits its employees destroyed Enron documents.

January 17, 2002: Enron fires Andersen for destroying its documents.

January 24, 2002: Lay quits as chairman and chief executive.

January 25, 2002: John Baxter, former Enron vice-chairman, found dead with gunshot wound to head. Cornoner returns suicide verdict.

January 27, 2002: US vice-president, Dick Cheney, refuses to divulge details of meeting with Enron executives to discuss energy policy.


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