Because the best things in life are free.

 
No Quarter

Businessweek observes that federal sentencing guidelines have been overturned just as the Department of Justice readies its case against such corporate crooks as Bernie Ebbers and Ken Lay. I think the Government is extremely reluctant to cut a deal with both of them. Both men are from Texas and knew George W. Bush. It does not help that Lay ran Enron, a compnay which California's state pension fund sued for misrepresentation of its stock price after the firms collapse. Lay's trial is going to provide fodder that equity fund managers do not remain particularly vigilant about their clients' money. With the Bush Administration desperate to partially privatize Social Security into the purview of these same managers, the courtroom dramas will provide plenty of negative publicity for Alliance Capital, Janus, Vanguard 500 and Fidelity.

But wait there's more. The WorldCom trial is likely to cause investigations into media deregulation. Though it hasn't received much press, the Bush Administration through Federal Communications Commissioner Michael Powell is hoping to overturn the 1969 Supreme Court decision of US v. Red Lion. Previously major media players such as Viacom and Disney opposed the case building to overturn Red Lion. However do to Powell's phony war on obscenity they have begun to play ball and change their position on the case. Should Powell succeed, the FCC would lose much of its power to rein in telecommunications. Up to now, this policy by Powell has received little scrutiny but once Ebbers has to present a defense it might turn public sentiment against Powell.

And if that is not enough, there is real potential that Lay will try to undercut the Government by discussing his participation in a secret Energy Task Force convened by Dick Cheney in 2001. The pretense being that Enron was encouraged to be aggressive by the Vice President. Lay would then suggest that this goading by Cheney made him more willing to trust people like Enron CFO Andy Fastow. Lay already hopes to claim that being trusting of board members like Skilling and Fastow might have been naive but not criminal. Add some encouragement by the former President of Halliburton (who conveniently is Vice President at the time) and Lay might succeed in appearing the "real victim".

The trial against Lay is still a few months away. Jury selection for US. v. Ebbers, however, begins Wednesday, January 19.

posted by Thomas at 11:26 PM 0 comments