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Politics : PRESIDENT GEORGE W. BUSH -- Ignore unavailable to you. Want to Upgrade?

To: Patricia Trinchero who wrote (296837)	9/14/2002 5:05:55 PM
From: Raymond Duray	Read Replies (1) \| Respond to of 769667

CHENEY SECRECY SCANDAL: DAY 492 -Documents held Hostage dailyenron.com And in recent news.... dailyenron.com Enron's Giant Photon Scam Probed: Is the IRS About to Soak the Rich? At some point it dawned on the wheeler-dealers at Enron that selling real things - like gas and oil - had it limits. What they needed were products that had no physical limits. Energy contract futures were their first discovery, <and how sweet they were. No more messy oil or smelly gas to deliver - just electronic bookkeeping notations. How terribly civilized. How wonderfully fungible - especially when they were kept in sunny offshore Caribbean accounts. Like the old song about music: "It goes in here…goes around and around and around and around…and comes out here" - or - maybe it never comes out. Energy future contracts were great but they still had some relation to the physical world - actual energy products. And, that placed some physical-world limitations on just how much they could be manipulated. That's when Jeffrey Skilling discovered a product so ephemeral it bordered on metaphysical - bandwidth. Hot dog! It was weightless, colorless and odorless. A million angels could dance on the tip of this pin and one could argue without fear of contradiction that there was still room for a million more. This was the scam artist's Holy Grail and Enron declared it as its own. Here was the thrust of the scam. Bandwidth - which is nothing more than available digital communication capacity - (i.e. internet access) should be treated like a commodity, the company said. So, Enron would begin brokering available bandwidth. Say Company A has a contract that allows them free use of a large-capacity "T1" highspeed data line. But, it only uses it during hours 9 am to 5 pm daily. During the rest of the day they are not using the "space" on that line. Enron would add that unused bandwidth capacity to its inventory and find customers who need bandwidth during that period and contract it to them. It's an over-simplified explanation for what became a much more complex scheme. Enron had finally found the perfect product. It was no longer selling anything real, not even an atom. Instead they were selling space…the space through which photons travel down fiber cables. Enron was now brokering something so wispy, so hard to quantify, so difficult to audit, that the sky was the limit. At the time Enron's Skilling was hawking this new business line - Enron Broadband Services (EBS) - to investors, the company was being praised for its vision and for being the first company of the emerging cyber age. In fact it may have been Enron's most audacious scam. In January 2001, during Enron's annual analysts' meeting at the Four Seasons Hotel, Enron's then-President Jeff Skilling aggressively promoted the new business. He went so far as to claim that their new virtual product line was worth at least $40 per share all by itself. Back in Houston, EBS employees watching the presentation on closed circuit TV gasped in amazement. They knew that in reality EBS was little more than a giant smoke and mirrors operation. Almost everything EBS did was phony. In the summer of 2000, EBS announced it would purchase 18,000 servers from Sun Microsystems - ostensibly to manage all that bandwidth they were brokering. It never happened. But, it was a good show for investors who poured more money into Enron stock, which, of course, rose on the basis of this news. At one point Enron executives filled a room full of computer terminals staffed by Enron employees from other departments when analysts came to see the new EBS operation. The terminals were not connected to anything. The whole thing was an elaborate Hollywood set. Bandwidth was also the perfect way for likeminded companies to manufacture illusory revenue streams. Investigators have been looking into a deal Enron did with Denver-based communications company Qwest back in September 2001. Qwest agreed to pay Enron $308 million for use of "dark fiber" -- unused fiber optic capacity. In exchange, Enron agreed to pay Qwest between $86 million and $195 million for access to active sections of Qwest's network. The deal was all nonsense, of course, allowing both companies to record fat revenues for the period. In reality, the deal allowed Enron to avoid reporting a fat loss that period. -------------------------------------------------------------------------------- IRS to Soak the Rich? Don't Hold Your Breath Paying taxes is for chumps. Wage earning chumps, that is. If you are in business or wealthy enough to hire the right kind of accountants, you can avoid the hassle altogether. That fact is hardly news. It's always been so and will probably always be so. But, then came all the bad publicity about non-chumps like Enron's Ken Lay, Global Crossing's Gary Winnick and other modern-day robber barons. And, the chumps are demanding changes. In response IRS commissioner Charles O. Rossotti, announced this week that his agency was shifting agents from their aggressive pursuit of tips earned by waiters and waitresses, to the tax avoidance schemes of the wealthy. Rossotti would not say how many IRS agents would be redeployed to wealthy-watch, except to say that several hundred revenue agents would be trained as fraud specialists. But, there is still apparently a lot of wiggle room for those who can afford to fight the IRS. Rossotti acknowledged that not all tax cheats will be pursued, even if they were identified. The rich do not use the IRS's short form. The complexity of tax returns filed by high-income people, Rossotti said, has grown, and attempts to untangle them are often hindered by highly paid attorneys. Rossotti said tax abuses by "people in the highest income brackets have more of a veneer of legitimacy, and maybe more than a veneer. In some cases they have actually come up with devices that work." Offshore tax havens are one of the most successful techniques "that work." While each of the corporate failures in recent months had its own unique abuse profile, most had one thing in common - insiders that profited secured their ill-gotten gains in complex trusts, shelters and offshore partnerships. Accounting firms have been among the most aggressive in pimping offshore tax shelters to corporations and corporate insiders. Earlier this year, The New York Times reported on four tax avoidance schemes the Ernst & Young accounting firm was marketing to its clients, including one that used foreign currency transactions to eliminate taxes. Accounting firms have also been in the vanguard of advising and helping US corporations avoid taxes by reincorporating them in low or no-tax offshore locations. The IRS estimates that such corporate tax avoidance schemes cost the US Treasure at least $70 billion a year in lost tax revenue - twice the annual cost of the war on terrorism. Democrats in both the House and Senate have been trying since the Clinton administration to close offshore tax loopholes but each of those attempts has been thwarted by GOP members who view offshore shelters as legitimate competition for what they believe are excessive US taxes.