Saturday, January 26, 2002

Remora

Limited Inc had beer last night with a faithful reader, who made comments about Limited Inc's Enron obsession. The hint over the table was that we are becoming, shall we say, a little tedious on the subject. Without, this reader also implied, being particularly acute.

Well, that hurts. We are drawn to this story for the same reason a shark is drawn onward by the thrashing of the wounded swimmer -- it is the frenzy of instinct, against which man and beast strive in vain. We are, after all, caught in the net of our blood before we are caught in any other net, God help us all. Given our limited resources, we can't sift through documents given to us late at night by anonymous sources, but we have hoped to develop, for our readers, a sense of the connections between politics and the liberalized financial markets that are sometimes not adumbrated in the daily paper. The daily paper, after all, has to have room for the funnies, and often seems to pitch its prose to the level of your average reader of Beetle Bailey, and the precincts of the night in which oil forwards are traded between punks in highrises might disturb such a reader -- worse, might cause his eyes to glaze over.

Turn to James Ridgeway's column in the Village Voice this week. Here's a trail which surely needs scouting down:


"One unexplored approach to unraveling the Enron scandal may lie in the company's use of offshore tax havens, which have scant banking-disclosure laws. The company had over 2800 subsidiaries, some 800 of which were headquartered in nations officially designated as tax havens, including the Cayman Islands. In its lengthy study of Enron, the watchdog Public Citizen argues that by stashing money in this myriad of subsidiaries, Enron could conceivably hide from a growing list of creditors as well as U.S. tax investigators. Indeed, Enron appears not only to have paid no taxes for four of the past five years, but also may have been eligible for hundreds of millions in refunds."

[-- next graf: The Clinton administration tired to pressure the tax havens}

"With Bush, everything changed. Less than a month after his inauguration last year, his Treasury announced the Clinton deals had been placed under review. Last spring the administration told OECD that it wouldn't be going along with the Clinton agreements. Instead, on November 27 of last year, in the midst of the gathering Enron scandal and a few days before the company formally filed for bankruptcy, Treasury Secretary Paul O'Neill said the Cayman Islands had agreed to start cooperating with U.S. investigators in 2004. That might sound tough, but it actually gives Enron and other companies a 25-month breather to clear the decks and find somewhere else to stash their money. Even then, as Manhattan District Attorney Robert M. Morgenthau charged, the Cayman Islands could back out of an agreement with three months' notice and suffer no repercussions."

The Bushies must be aware that the Cayman deal could blow up in their face. Here's a typical ass covering story from that front:

It isn't clear if Enron Corp.'s use of Caribbean tax havens is linked to the illicit financial activities that the U.S. is seeking to crack down on through tax treaties with offshore financial havens, U.S. Treasury Secretary Paul O'Neill said Friday.

"It's not clear that it's related in any way to the issue of illicit financial activities," O'Neill told reporters when asked whether he was worried about the use of offshore subsidiaries by bankrupt energy-trading giant Enron

What isn't clear to O'Neill could be clarified, with high resolution intensity, by a congressional investigation with teeth.

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