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Non-Tech : The ENRON Scandal -- Ignore unavailable to you. Want to Upgrade?


To: Baldur Fjvlnisson who wrote (4120)6/29/2002 10:51:53 AM
From: Mephisto  Respond to of 5185
 
How auditor found $4bn black hole:

Corporate fraud uncovered by second female
Whistleblower


Julian Borger in Washington and Richard Wray
Guardian

Friday June 28, 2002

The financial scandal that has enveloped WorldCom, one of
America's largest phone companies, was unearthed by an
employee running a spot check on the Mississippi-based
company's books, it emerged yesterday.

Cynthia Cooper is about to become corporate America's second
famous female whistleblower, following in the footsteps of
Sherron Watkins, whose warning to the board of the energy
trading giant Enron that the company would "implode in a wave
of accounting scandals" proved all too prescient.


Ms Cooper's role came to light as the US Congress called on
WorldCom's executives to answer for their role in the $4bn fraud
- the largest in American corporate history.

The US financial markets regulator, the securities and exchange
commission, has started a fraud inquiry while the department of
justice is also likely to begin a criminal investigation.

Yesterday the house financial services committee subpoenaed
the Salomon Smith Barney analyst Jack Grubman, who was the
company's No 1 fan on Wall Street during the boom times.

He stopped recommending that his clients buy WorldCom's
shares just a day before the disclosure of the financial scandal.

WorldCom's own links with Capitol Hill also came under scrutiny
yesterday as it emerged that the long-distance phone company
had made political donations to the Republicans.

Days before WorldCom became the latest byword for corporate
corruption, the company handed over $100,000 to the
Republicans at a fundraising gala attended by President Bush.
But there is no evidence that the payment was an attempt to
persuade the administration to save it from disaster.


The company made the same contribution last year and, unlike
Enron, WorldCom does not appear to have been well-connected
in the Bush White House. So far there is no evidence that
company executives attempted to contact administration
officials, as Enron's Kenneth Lay did, to help protect them when
the extent of the accounting scam became known.

An analysis carried out by the Centre for Responsive Politics, a
money-in-politics watchdog in Washington, found that the
Mississippi company had made campaign contributions of
$7.5m since 1989, split roughly equally between Republicans
and Democrats.

WorldCom's gala contribution was a routine part of its $3m a
year lobbying effort in Washington, aimed at influencing tax
policy and the planned deregulation of the long- distance
telephone market - legislation to which WorldCom is opposed.

The company focused on cultivating Mississippi politicians,
particularly the Republican leader in the Senate, Trent Lott.

Three years ago WorldCom contributed $1m to the University of
Mississippi to help set up the Trent Lott Leadership Institute,
just a few weeks after the Mississippi senator had appointed a
company official to an advisory panel on the issue of taxing
internet sales.

Another recipient of WorldCom largesse was the attorney
general, John ASHCROFT, who took $10,000 in contributions from
the firm for his 2000 Senate campaign. It was unclear yesterday
whether Mr Ashcroft would excuse himself from the investigation
of WorldCom, as he had done in the case of Enron, another
campaign contributor.


Much of the credit for bringing WorldCom's fraudulent accounting
to light yesterday went to Ms Cooper.

Employed as an internal auditor, she was asked to check
spending records by the company's new chief executive, John
Sidgmore, just weeks after he took over from WorldCom's
cowboy boot-wearing founder, Bernie Ebbers.

She discovered that over the space of almost a year and a half
the company's chief financial officer, Scott Sullivan - who helped
build the business with Mr Ebbers - had been using unorthodox
techniques to account for charges paid to local phone
companies to complete WorldCom's long-distance calls.

The fraud, which involved one of the company's largest costs,
had inflated WorldCom's profits by hundreds of millions of
pounds - helping it to post good results through most of last
year while the rest of the world's communications industry was
heading into the worst slump in living memory.

The fiddle distorted WorldCom's figures to the tune of almost
$4bn - almost six times the size of the hole in the books of
Houston-based Enron.

But unlike in the case of the Enron whistleblower, Ms Cooper's
information was acted on immediately by senior management.
They contacted the head of the company's auditing committee,
Max Bobbitt, and then used Ms Cooper's evidence to back up
the sacking of Mr Sullivan late on Tuesday night.


guardian.co.uk



To: Baldur Fjvlnisson who wrote (4120)6/29/2002 10:58:54 AM
From: Mephisto  Respond to of 5185
 
"Since the September 11 terrorist attacks on the Pentagon and World Trade Center, government agencies have placed a greater emphasis on secrecy and restricted information for security reasons, he says. "With these restrictions come a greater danger of stopping the legitimate disclosure of wrongdoing and mismanagement, especially about public safety and security. Bureaucracies have an instinct to cover up their misdeeds and mistakes, and that temptation is even greater when they can use a potential security issue as an excuse."
>>>>>>>>>>>

Baldur, Bush and Ashcroft depend upon secrecy to hide their actions. They have restricted access to
Cheney's meetings with Enron officials but they have restricted access to public documents . They
have restricted American's access to Freedom of Information Act, a serious setback to democracy.
-Mephisto
>>>>>>>>>>>>>>>>>>>>>>>

For their eyes only The democratic principle of open government is under pressure from a US administration obsessed with
secrecy and media manipulation, writes Julian Borger


The Guardian
Wednesday March 6, 2002

The United States possesses an extraordinary institution which
sets it apart from almost every other nation on Earth and helps
define America as an open democracy. It is called the 1966
Freedom of Information Act, and it is in serious trouble.


For journalists and ordinary citizens alike, Foia (pronounced
"foyer") is the daily embodiment of government of, by and for the
people. In theory at least it works like this: you fill in a Foia
request form and ask for any piece of information you want from
any government agency, and that agency is obliged - barring
clear national security considerations - to open its files.

In practice, the time this process takes has always depended
on who you are. The New York Times tends to get better service
out of the system than Joe Public, but the principle of universal
access to information has by and large been upheld. That is
beginning to change under the present administration, which is
emerging as the most obsessive about government secrecy
since Watergate.

Government officials are under instructions from the attorney
general's office to drag their heels on Foia requests whenever it
is legal to do so. Furthermore, the White House issued an
executive order in November restricting access to the
documentary records of past presidencies, while the Pentagon
is experimenting with infotainment in place of information.

In part, the emphasis on government secrecy is an inevitable
consequence of September 11. The terrorist attacks
demonstrated that the nation was vulnerable to attack on many
fronts not previously thought of as having anything to do with
national security. Information about city water supplies or public
health contingency plans has been stripped from open websites,
for example.

However, the information clampdown has a history which
predates the war on terror. The official papers from the Texas
governor's mansion under George Bush's stewardship might
have revealed much about the influence of big business on the
way he ran the state. But instead of sending them to the Texas
archives, where they would have been subject to the state's own
Public Information Act, he had them shipped to his father's
presidential library, where they will be considerably harder to get
at.

The key document that is currently strangling Foia is a
memorandum from John Ashcroft, the attorney general,
explicitly urging government employees to be stingy with their
treatment of information requests. It was issued back in October
and was being drafted before September 11. The memo tells civil
servants that "when you carefully consider Foia requests and
decide to withhold records . . . you can be assured that the
department of justice will defend your decisions."

The chill induced by Ashcroft's note is only now making itself
felt. The energy department delayed the release of documents
concerning the corporate role in drawing up the administration's
energy policy for months, until a court judgment published last
week rebuked it for its "glacial pace" and ordered it to hand the
papers over. In an unambiguous ruling judge Gladys Kessler, of
the US district court in Washington said: "The government can
offer no legal or practical excuse for its excessive delay."

The ruling represented a significant victory for government
transparency, but the administration is standing firm on other
fronts. The vice-president, Dick Cheney, has vowed not to hand
over the papers from the deliberations of his energy task force
last year and is being taken to court by Congress's auditing
arm, the general accounting office.

Meanwhile the health and human services department has sat
on a two year study into the effects of fallout from Cold War
nuclear testing, which estimated that it caused the deaths of
15,000 Americans.

The study, ordered by Congress in 1998 sat on the department's
shelves for months, while officials insisted that it was a work in
progress, until a democratic senator, Tom Harkin, pressured the
administration into issuing a "progress report". The health
department insists it dispatched that report in September, but it
only arrived in the senator's office - less than a mile away - in
February.

Confidentiality imposed for reasons of national security is also
showing signs of "spillage", corroding formally entrenched civil
rights. Examples of this include the secrecy surrounding the
large-scale detention of illegal immigrants, and the refusal to
allow detainees in Guantanamo Bay have access to legal
advice.

Meanwhile, the Pentagon has severely rationed the flow of
information about the war in Afghanistan, appropriately enough
in a campaign so reliant on special forces operations and covert
action. But the defence department too has gone far beyond the
requirements of national security in its zeal for news
management. Television cameras have been barred from
"negative" incidents, like the evacuation of friendly fire
casualties, while film crews have been encouraged to
concentrate on soft lifestyle features about US soldiers.

The apotheosis of this policy was the aborted creation of an
office of strategic influence (OSI), designed to feed ready-made
stories - both true and otherwise - to the world's media. In a sign
that investigative journalism is going to be a hard beast to
defeat, the New York Times revealed the OSI's intentions last
month forcing its hasty closure, amid half-hearted denials from
the defence secretary, Donald Rumsfeld.

But Rumsfeld has not given up making the news in his desired
image. The Pentagon has bypassed the ABC News, and done a
deal with the television network's entertainment division to
produce a reality series about the lives of the troops in
Afghanistan. It will be co-produced by Jerry Bruckheimer, who
cooperated closely with the Pentagon to make Black Hawk
Down, and Bertram Van Munster, who produces a regular
television show called Cops offering a sympathetic
fly-on-the-wall portrait of the police.

Like Cops, the Afghan show is likely to be compulsive viewing,
but it's unlikely to tell Americans very much about what is being
done in Afghanistan in their name. That, of course, may be the
whole point.
guardian.co.uk
·