05/11/2002

-- WASHINGTON

BIG SCANDALS always start with big lies. Back in October, then-CEO Kenneth Lay stood before the workers at Enron and made broad assurances about the company's future.

"There are no big, significant layoffs planned in any group that I am aware of," promised Lay. Weeks before, he had encouraged employees to buy more company stock.

This was welcome news. After all, the stock was slumping, and these workers had most of their 401(k) retirement funds tied up in Enron, without the option to sell. Less than six weeks later, Lay's upbeat assessment would be shattered by an utterly different reality.

As Enron stock nose-dived, the company filed for Chapter 11 -- the largest bankruptcy in U.S. history. Workers were laid off by the thousands and watched their Enron-heavy 401(k) plans perform a disappearing act that would have amazed Houdini. Enron workers didn't even receive their severance pay, and now have to fight in court to get it.

Over 15,000 Enron employees lost over $1 billion in retirement savings. Meanwhile, top Enron executives were counting their cash. Twenty-nine of them carted home $1.1 billion after cashing out their stock before it tanked. Back in Washington, Treasury Secretary Paul O'Neill astonished onlookers by describing Enron's collapse as part of the "genius of capitalism."

But the money trail leads to a different story. Enron lavished donations on both political parties at every level of government, two-thirds of it going to Republicans. In a corporate-sponsored system where political favors are bought and sold like stocks, Enron became the lead broker. And what did this captain of big energy get for its dollars? Just about everything it asked for. Deregulation of energy markets, access to government officials, tax breaks, even Vice President Dick Cheney's ear.

No fewer than 52 former Enron executives, lobbyists, lawyers, or significant shareholders ended up working for the Bush administration.

The biggest scandal wasn't that Enron executives broke the rules, it's that they used the political clout they bought to make the rules. Even now, after Enron's shell game and its ties to the Bush administration have been exposed, advocates of hands-off capitalism still champion deregulation and privatization of Social Security. They want us to believe that Enron was an aberration -- just a single case of accounting malpractice.

But as I travel the country, I meet very few who are buying that message. Enron, they know, is a symptom of a cancer in our economic and political system that requires emergency treatment.

Across America, the people charged with acting in the interests of investors and the public -- directors, auditors, analysts, and regulators -- are infected with conflicts, self-dealing and just plain selfishness. Just the other week, the New York State attorney general revealed evidence that Merrill Lynch advised investors to buy stocks that its researchers knew were "a piece of junk." From Enron to Arthur Andersen to Merrill Lynch, corporate irresponsibility is rampant, and it's time to do something about it.

Their unethical practices cry our for reform on three fronts:

Congress and the Securities and Exchange Commission should enact corporate governance reforms, including genuinely independent audits at public companies that dominate pension portfolios and an end to compensation schemes for accountants, analysts and executives that promote fraud.

We must terminate corporate ownership of our political system -- and hold accountable those in the Bush administration who personally profited from Enron.

We must strengthen retirement security for working families. We must increase the number of workers with guaranteed, defined-benefit pension plans. Some 1,000 employees of Enron subsidiaries who are members of the Sheet Metal Workers Union, didn't lose a dime in pension dollars because they were protected with a defined-benefit plan. And we must pass 401(k) plan reforms to protect all workers now.

Sen. Edward Kennedy (D.-Mass.) has put forward legislation that would give workers new protections and a real voice in running their 401(k)s, and the bill has the strong backing of the AFL-CIO.

The same people who let Enron write its own rules cannot be permitted to legislate cosmetic changes and phony reforms. Working men and women have every right to demand integrity from corporate America and vigilance from the officials we elect to represent us. Promises of good behavior and superficial fixes won't clean up a rotten system.

John Sweeney is president of the AFL-CIO.