Clinton-Gore: See no evil
washtimes.com
The Economist is a normally sober-minded weekly "newspaper" edited in Britain. To its credit, it was one of the few journals that long ago, and then relentlessly, warned of an ever-expanding bubble that was growing throughout America's equity markets during the late 1990s and early 2000. When the bubble burst, the Economist proved to be quite prescient. However, in recalling the populist campaign based on class warfare that Al Gore unsuccessfully waged in the 2000 presidential election, the Economist's weekly Lexington column offered this inexplicable observation in the July 13 issue: "Each corporate scandal increases the likelihood that the 2004 election will be a rematch of 2000 — and even, perhaps, that Mr. Gore may win it."
But perusing the details underlying the scandals demonstrates beyond doubt that the genesis of these scandals occurred during the Clinton-Gore administration:
• Enron: The firm misreported nearly $600 million in earnings for the years 1997-2001, a fact it did not acknowledge until last November, when it also reported that it would be increasing the debt on its balance sheet by $2.5 billion. The month before, Enron chopped $1.2 billion from its shareholders' equity. Most of this involved reported losses related to off-the-books partnerships that Enron, with the help of its accountant, Arthur Andersen, created in 1999 and 2000 to hide debt and to gin up profits.
• Global Crossing: In 1999, this then-highflying telecom began swapping network capacity with other companies, including Enron and Qwest. Outlined in a February 1999 memo by the Arthur Andersen executive responsible for auditing Global Crossing — someone Global Crossing later hired as its executive vice president for finance — the scheme enabled that firm to record hundreds of millions of dollars worth of capacity it sold to others as revenue (thus grossly inflating its profits). While this occurred, the firm recorded capacity it "acquired" from others as a capital expenditure, which allowed its cash flow to climb relentlessly. The combination helped to propel its stock price to the stratospheric level of $64.25, a development that allowed Democratic National Committee Chairman Terry McAuliffe to turn a $100,000 investment into $18 million.
• Qwest: Another Andersen client, Qwest, was involved in the early network-capacity swap deals with Global Crossing during the Clinton-Gore administration. Qwest is now being investigated by the SEC, the FBI and the U.S. attorney for those capacity-swap contracts, while its investors are being pulverized.
• Xerox: This once-golden firm recently restated an astounding $6.4 billion in revenues for the 1997-2001 period. Earlier, it paid a $10 million fine, the largest the SEC had ever levied on a corporation.
• WorldCom: Another Arthur Andersen client, WorldCom is believed by congressional investigators to have begun cooking its books well before 2000. Already, WorldCom, whose investors have lost $115 billion in market value since June 1999, has acknowledged that it misclassified $3.8 billion of expenses as capital expenditures in order to overstate cash flow by a comparable amount and to drastically inflate profits since the beginning of 2001. "[T]he accounting hanky-panky at WorldCom occurred much earlier than the company has admitted," House Commerce Committee spokesman Ken Johnson told the New York Times last weekend.
• Tyco: Another once-high-flying conglomerate, Tyco admitted in February that it had spent $3.8 billion in 1999 and 2000 on 400 acquisitions it had never bothered to disclose. The admission confirmed the worst fears of accounting irregularities that had already cost investors $86 billion in lost market value this year.
• Adelphia: On May 2, this family controlled cable company restated its financial statements for 1999, 2000 and 2001, adding $3.5 billion in liabilities. The month before, Adelphia admitted not reporting $2.3 billion in loan guarantees it had made over the years on behalf of the Rigas family, its controlling shareholders.
• Arthur Andersen: See Enron, Global Crossing, Qwest and WorldCom above. Elsewhere, see also Sunbeam, which restated 1997 earnings by nearly $100 million, and Waste Management, whose 1992-1996 audit reports certified by Andersen were alleged by the SEC to be "false and misleading," for which Andersen paid a $7 million fine, the largest fine the SEC ever levied on an accounting firm.
It takes a certain amount of gall — which Mr. Gore has in excess — to pretend that corporate misbehavior began on Jan. 20, 2001, and to forget who was in charge of the regulatory agencies from 1993-2000. |
