Lessons of Enron and Global Crossing
There's a ruling class, and it's not us
By Deirdre Griswold
First it was Enron. Now it's Global Crossing. The more the
glitzy layer of prosperity is peeled back from Corporate
America, the more the inner workings reveal a brutal,
class-divided society in which the workers, the majority, are
ruthlessly plundered by a small minority.
That is not the view of the U.S. economy given in textbooks.
It's not what innocent schoolchildren learn on class trips to
the New York Stock Exchange. They are told that there is no
ruling class, that the majority of the people own the vast
means of production through stock ownership, and that the
system works for everyone.
Indeed, in recent decades, as companies have pushed workers
to accept stock options instead of pay raises, and 401(k) plans
instead of company pensions, the percentage of the population
owning stocks, either as individuals or through their pension
plans, has risen markedly.
As recently as last April, the Joint Economic Committee of
Congress put out a study on "The Roots of Broadened Stock
Ownership" that said nearly half of all U.S. households were
stockholders. It concluded that this represents the
"democratization of the stock market" and that "Mutual funds,
IRAs and 401(k) plans have made the retirement tools of the
upper class available to all."
Tell that to the workers at Enron and Global Crossing.
Corporate heads like Kenneth Lay of Enron and Gary Winnick
of Global Crossing can walk away from bankrupt companies with
hundreds of millions of dollars in their pockets, while the
workers lose both their jobs and their retirement savings.
Not power--vulnerability
Doesn't this show that mere ownership of stocks does not
empower the workers or the middle class? On the contrary, it
leaves them immensely vulnerable to the ups and downs of the
capitalist markets.
In effect, these bosses have been flying high on deferred
wages that they wheedled out of the workers. Now that the
capitalist bust has come, they are hell-bent on preserving
their ill-gotten gains--all perfectly legal, of course--while
those who had worked overtime, scrimping and saving for a
lifetime so they could live a little in retirement, are crying
in disbelief.
Kenneth Lay is refusing to testify before Congress about
what he did, but it is public knowledge that he cashed in his
own stock in Enron--to the tune of at least $300 million--while
telling the employees of the company that everything was fine.
When they began to find out it wasn't, they also found out that
their pension funds were frozen. They couldn't sell their
stock, even as they saw it plummet from over $80 a share to
around 15 cents.
Now it seems that Winnick, the chairman of Global Crossing,
was doing the same thing as Lay--except that the shares he
cashed in before the company declared bankruptcy were worth
$734 million. That's three quarters of a billion dollars.
Alumnus of junk-bond scandal
What is Global Crossing? It didn't exist before 1997, when
Winnick created this communications conglomerate specializing
in transoceanic fiber-optic cables. Winnick had earlier been an
executive at the Wall Street firm of Drexel Burnham Lambert,
infamous for its dealing in junk bonds. He was close to Michael
Milken, who went to jail for his part in the scam.
Yet even that huge scandal, which cost so many small
investors their shirts and so many workers their jobs, didn't
seem to tarnish Winnick. He sits on the National Advisory Board
of Chase Manhattan Bank.
Winnick is the kind of executive that the financial
magazines speak of with fascination. His dubious past only adds
to his charisma, in their eyes. They practically drool as they
explain that he is believed to have paid more for a
single-family house--$60 million--than anyone else, ever.
Democrats, Republicans, Bush, McCain--every palm is
greased
Winnick and the other executives of Global Crossing, like
Lay of Enron, lavished contributions on key political figures.
Winnick personally handed out $363,750 in campaign
contributions in the 2000 elections. His former CEO, Leo
Hindery Jr., rewarded his favorite politicians even more
handsomely. He spent $591,902 on the campaigns. But hey, this
kind of investment pays off.
When the company wanted help from the Federal Communications
Com mission, "Global Crossing's lobbying effort got a boost
from someone best known for crusading against the corrupting
influence of campaign finance: Senator John McCain. In March
1999, McCain wrote a letter urging the FCC to encourage the
development of the company's cables. On the last day of that
month, [co-chairman Lodwrick] Cook, Winnick, and other donors
with ties to Global Crossing gave at least $23,000 to McCain's
presidential campaign."(Michael Scherer writing in Mother Jones
magazine, March 5, 2001)
The elder George Bush is another recipient of Global
Crossing's largesse. When the company announced it was laying a
trans-Pacific cable in 1998, it got Bush to speak at the
announcement. Bush's words are golden. He usually gets an
$80,000 honorarium for his speeches. The company gave him stock
instead, which a year later was worth $14.4 million.
"Global Crossing's creditors may be lucky to get pennies on
the dollar," reported the Feb. 11 New York Times. "Many
employees lost significant parts of their 401(k) funds. And
anyone still holding shares has a stock that closed at 7 cents
on Friday [Feb. 8]."
Here's a question: Does Bush Sr. still have his stock? Or
did he, like Gary Winnick, cash it in early before the public
knew that this company was heading for bankruptcy?
Before you start feeling sorry for the Democrats, you should
know that they made out just fine. Global Crossing, its
affiliates and executives gave the Democratic Party $1,265,268
in the 2000 election cycle.
In August 2000, Winnick paid for a luncheon for the National
Democratic Institute attended by President Bill Clinton,
Secretary of State Madeleine Albright, and a host of foreign
dignitaries and big-time political donors. "When Albright got
up to speak, Winnick adorned her with a baseball cap bearing
the corporate logo of his telecommunications company, Global
Crossing," wrote Scherer.
Global Crossing, which raised over $20 billion in capital in
a few years, was not a household name. But it should be.
It shows in the starkest way what capitalism has in store
for the workers. And it shows why workers can't rely on the
capitalist parties or the courts to protect their rights. Paid
agents of big business write the laws, so whatever the
corporate criminals do, they can claim legality.
It's the system itself that is the crime.
Reprinted from the Feb. 21, 2002, issue of
Workers World newspaper
This article is copyright under a Creative
Commons License.
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