Armed Madhouse

by Greg Palast

  The conspiracy upset him, and he blew the whistle in February 1973, or tried to, by mailing evidence to European authorities. But the law’s a little different over there. In Switzerland, giving up a corporate secret is a crime. And Adams had given up quite a secret about Europe’s biggest corporations. The Swiss jailed him—incommunicado, without trial. When his wife, Mariléne, tried to locate him, she was told he would be held in solitary confinement, without any communication allowed with the outside world, for twenty years. The 31-year-old Mariléne wrote that, despite their three children, she could not face this future, and hung herself. Shortly after, Adams made an extraordinary escape to Britain. Last time I heard from him, he was in a men’s boardinghouse in England, penniless. European authorities wagged their fingers at Roche, officially warned the company to stay out of trouble, then winked while Roche prepared a more effective conspiracy with ADM.

  Not every whistle-blower gets the Adams treatment. In 2005, Swiss drugmaker Serono SA was caught selling a useless medicine to AIDS victims. Lots of it, $704 million worth. Horrified insiders called some lawyers, the Feds swooped in and the company will now give back every penny it collected and pay the whistle-blowers and the AIDS Healthcare Center a $75 million reward.

  In other words, the Swiss company was nailed in the USA where such frauds are crimes, where price-fixing is a crime, and crucially, where customers can sue the bastards. Believe it or not, customers overcharged by a price-fixing conspiracy in Europe can’t get their money back, even if the companies confess. And what we call “private rights of action”—your ability to go to court to get your money back—and “class actions” where you get everybody’s money back, just doesn’t exist in most of the world. The guy who came up with the idea of the whistleblower reward? Abraham Lincoln. He signed the False Claims Act when he became fed up with Big Business profiteering during the Civil War. It was a proclamation of emancipation from corporate greed.

  After U.S. lawyers won ripped-off customers over a billion from the vitamin-price-fixing ring, the Euro-American operators dropped out of the Vitamin C business and cheap Chinese manufacturers stepped into their shoes. They not only took over the business, taking 80% of the world market, “they stepped right into the shoes of the European vitamin conspirators and set up a new conspiracy,” says attorney William Isaacson, who is suing them for a billion dollars. But it’s quite an unusual conspiracy: The companies posted some of their price-fixing meetings on the Internet. The in-your-face methods of the Chinese, and their few public statements, suggests that they operated with at least the knowledge, if not the blessing, of China’s government. And that could be a big problem for Isaacson, who, in 2006, is seeking a billion dollars or so on behalf of U.S. customers: The Chinese could use the “OPEC” defense, that is, argue their price-setting confabs are a sovereign right of the Chinese dictatorship.

  Americans read a story like this, the difference between America and the rest of this sad planet, and feel darn proud of the USA. But before you and the kids start marching around the living room singing “The Stars and Stripes Forever,” I have to tell you that the owners in the Washington plantation house have decided it’s time to end our rebellious ways. Read on.

  “Just Put Down That Lawsuit, Pardner, and No One Gets Hurt”

  There are 200 million guns in civilian hands in the United States. That works out to 200 per lawyer. Wade through the foaming Web sites of the anti-Semites, white supremacists, weekend militiamen and Republicans, and it becomes clear that many among America’s well-armed citizenry have performed the same calculation. Because if there is any hope of the cease-fire that they fear, it will come out of the barrel of a lawsuit.

  First, the score. Gunshot deaths in the U.S. are way down—to only 83 a day. Around 80,000 lucky Americans were treated for bullet wounds each year; 30,000 unlucky ones die, including a dozen policemen by their own weapons. For Americans, America remains more deadly than Iraq.

  But, hey, that’s business for you. And what a business it is. Guns, ammo and accessories are a $6-billion-a-year honeypot for several corporations: Glock, Smith & Wesson, Colt and others. But, the guno-philiacs say, what does po’ widdle Smith & Wesson have to do with a mugger who uses his gun in an unsocial manner?

  This cop-out drives Elisa Barnes crazy. Barnes thought it was just too convenient for gun makers to blame the criminal alone. Criminals are a much-valued, if unpublicized, market segment sought out and provisioned by these upstanding manufacturers.

  Her statistics, which she worked on for years, are compelling. Gun companies dumped several million weapons into outlets in states with few curbs on purchases, super-saturating the legal market, knowing full well that the excess will flow up the “Iron Pipeline” to meet black-market demand in New York and other big cities. Like Zig-Zag, which sells rolling papers in quantities far outstripping sales of legal tobacco, gun manufacturers have a nod-and-wink understanding of where their products end up.

  Every year, federal Alcohol, Tobacco and Firearms agents send the companies about 800,000 requests to trace guns recovered from crime scenes. You’d think that after the first half-million reports, the CEOs would realize that a large hunk of their market was made up by persons with little interest in bird hunting.

  One of the gun-makers’ customers bagged a Fox—Steven Fox. Steven can describe feeling pieces of his brain fly from his skull after the mugger shot him. Fox is permanently paralyzed.

  So, this lady with the statistics, Barnes: Is she some kind of do-gooder freak with nothing better to do than wipe the blood off serial numbers on gun barrels? No, Barnes is a parasite. A bloodsucker: Stephen Fox’s greedy, wheedling lawyer. At least that’s how she and other plaintiffs’ attorneys are played by something called the “Tort Reform” movement.

  “Tort reform” has nothing to do with saving prostitutes from a life of sin. Rather, “tort reform” is a deliberately bland but sly little trope meant to disarm you politically. When the owner class owns governors, regulators, Congress and the law enforcement machinery, you still have that unique American right to haul bad guys’ butts into court just like Stephen Fox did.

  Or did until July 29, 2005, when the U.S. Senate voted to grant immunity from lawsuits to gun manufacturers. Not schoolteachers: gun makers. The new law was a quite effective bullet in the head to Fox’s chance for financial recovery—his case was thrown out. The shoot-to-kill coalition was led by Wild Bill Frist, M.D., Republican majority leader, and his simpering sidekick, Democratic minority leader Harry Reid. What got Frist’s posse all riled up was that a jury found several makers of .25-caliber handguns guilty of negligent distribution and ordered them and the shooter to compensate Steven. But Steven was just collateral damage. Frist and Reid were gunning for the City of New Orleans and the NAACP, because the city and the civil rights group had the effrontery to file a class action suit against the gun makers asking them to alter marketing plans to keep their products out of the hands of killers.

  “Class action” is aptly named. Corporations don’t file class action suits. Billionaires, dictators, and captains of industry don’t file class action suits. Class actions are filed against them by the victim class, the working class. The point of a class action is to take the claims of thousands, sometimes millions, of victims of asbestos poisoning, baby carriage mangling, Nazi slave camp torture or electricity bill overcharges and join their claims together. That way, the victims who can’t possibly afford to take on Hitler’s bankers or Enron alone can, on paper, create a human pyramid that can meet the big boys eye to eye in court.

  Class action is class warfare intended to channel, in a positive manner, Americans’ instinct for seeking justice (see gun sales, above). “Tort reform” is all about taking away your day in court. I’m using the example of gun peddlers run amok, but the list of ne’er-do-wells who need to be reformed by a tort action is quite lengthy—a job requiring a plaintiff’s lawyer.

  For example, when Jeb Bush and Katherine Harris used the fake fel
on list that fixed the 2000 election, a bunch of bloodsucking, torttoting lawyers for the NAACP sued Governor Jeb and his coconspirator, ChoicePoint. If it weren’t for these plaintiffs’ attorneys, Jeb would never have agreed to stop the lynching by laptop.

  As long as the tort reformers are gunning for evil plaintiff’s lawyers, they won’t want to miss Nancy Vurner. You remember Kimberly Haeg, the young, paralyzed woman fighting for breath. Her insurer, Empire Blue Cross, refused to pay for full-time nursing. The company had just a few years ago converted itself into a for-profit operation, and obviously, Kimberly is not a profit center. Lawyer Vurner challenged the corporation on behalf of the Haeg family and, in 2006, got back the payment for nurses.

  I spoke with the attorney for the City of New Orleans and the NAACP in the gun case, Mike Hausfeld, who’d just returned from beating Hitler’s war machine. In a class action against Mercedes-Benz and other multinationals, his firm won $1.2 billion to compensate Polish prisoners enslaved by the producers of war materiel for the Fuhrer. Hausfeld argues that gun-maker Glock, like the Nazi defense contractors, owes their profits from sales to criminals to the victims of their crimes. Likewise, New Orleans should receive compensation for buying extra body armor for their cops.

  But when Bush signed the new immunity law, “We were only taking orders” (for more guns) became a Bush-blessed defense. The City of New Orleans and the NAACP were kicked out of the courtroom.

  Republican Majority Leader Frist makes a big deal about being a doctor. He must believe the Hippocratic oath changed from “First, do no harm,” to “Shoot first, then run for President.”

  Frist’s majority in the Senate had other victims of evil class-action tort lawyers to protect. His Senate Republicans tried to immunize medical-device manufacturers against class actions, like Pfizer (who knowingly sold badly made heart valves). About 800 valves burst and the wearers’ hearts exploded. I can’t help thinking that “tort reform” would die if, instead of exploding hearts, Pfizer’s other big product, Viagra, also caused its target organ to detonate.

  When Ahnold Got Lay’d

  The consumer protection striptease is usually planned behind closed doors by a Washington coven of Grover Norquists (the super-lobbyist, you will recall, whose small, soft hands rewrote Iraq’s tax laws). But once in a while, a note marked “confidential” comes through my fax machine that lets us eavesdrop on a politically debauched ritual of the rich in one of their natural habitats, for example, the Peninsula Hotel in Beverly Hills.

  May 17, 2001. In a room at the Peninsula, the Financial Criminal of the twentieth century, not long out of prison, met with the then-leading candidate for Financial Criminal of the twenty-first century who feared he may also have to do hard time. These two, bond-market manipulator Mike Millikin and Ken Lay, not-yet-indicted Chairman of Enron Corporation, were joined by a select group of movers and shakers—and one movie star. Arnold Schwarzenegger had been to such private parties before. As a young immigrant without a nickel to his name, he put on private displays of his musculature for guests of his promoter. As with those early closed gatherings, I don’t know all that went on at the Peninsula Hotel meet, though I understand “Ahnold,” this time, did not have to strip down to his Speedos. Nevertheless, the moral undressing was just as lascivious, if you read through the 34 pages of notes that arrived at our office.

  Lay, who convened the hugger-mugger, was in a bit of trouble. Enron and the small oligopoly of other companies that ruled California’s electricity system had been caught jacking up the price of power and gas by fraud, conspiracy and manipulation. A billion here, a billion there, and pretty soon it was real money—$6.3 billion in suspect windfalls in just six months, May through December 2000, for a half-dozen electricity buccaneers, at least $9 billion for the year. Their skim would have been higher but the tricksters thought they were limited by the number of digits the state’s power-buying computers could read. When Ken met Arnold in the hotel room, the games were far from over. For example, in June 2003, Reliant Corporation of Houston simply turned off several power plants, and when California cities faced going dark, the company sold them a pittance of kilowatts for more than gold, making several million in minutes.

  Power-market shenanigans were nothing new in 2000. What was new was the response of Governor Gray Davis. A normally quiet, if not dull, man, this Governor had the temerity to call the energy sellers “pirates”—in public!—and, even more radically, he asked them to give back all the ill-gotten loot, at least $9 billion. The state filed a regulatory complaint with the federal government.

  The Peninsula Hotel get-together was all about how to “settle” the legal actions in such a way that Enron and friends could get the state to accept dog food instead of dollars. Davis seemed unlikely to see things Ken’s way. Life would be so much better if California had a governor like the muscle guy in the Speedos.

  And so it came to pass that, in 2003, quiet Gray Davis, who had the cojones to stand up to the electricity barons, was thrown out of office by the voters and replaced by the tinker-toy tough guy. The “Governator” performed as desired. Soon after Schwarzenegger took over from Davis, he signed off on a series of deals with Reliant, Williams Company, Dynegy, Entergy and the other power pirates for ten to twenty cents on the dollar, less than you’d tip the waitress. Enron paid just about nothing.

  Power Outage Traced to Dim Bulb in White House

  Arnold’s agreeing to the sweetheart deals for the state would not prevent the federal government from ordering a larger refund. Lay had prepared for that possibility years earlier. The agency that could order the refund is the Federal Energy Regulatory Commission, FERC. Its Chairman was Pat Wood III, former chairman of the Texas utility commission, a job Wood picked up after Governor-elect George W. Bush received this note in 1994:

  Ken Lay asks Santa George to wrap him a utility commissioner for Christmas.

  The Public Utility Commission appointment is an extremely critical one. We believe that Pat Wood is best qualified…. Linda joins me in wishing you and Laura and the whole family a joyous holiday. Sincerely, Ken.

  That’s chutzpah; first, because Ken Lay is claiming the right to pick the guy who will regulate his company; and second, because “Ken” uses a very familiar tone with the Governor-elect despite Bush’s statement, years later, that at that time he didn’t know “Kenny-Boy” Lay. Someone is fibbing, but let’s not dwell on it. The key thing is, Ken Lay wished it, and it was so: Wood got the job as Texas’s chief power industry regulator.

  Under Lay’s handpicked regulator and, for that matter, handheld Governor, Texas electricity customers got whacked for a special $9 billion surcharge collected by the state’s power companies, one of many electricity price hikes that resulted from the Lay-Wood-Bush “deregulation” of the Texas power market.

  But Christmas was not yet over for Lay and Enron. In 2000, weeks after Bush won the White House, the Enron Chairman secretly requested that Wood move to the chief regulatory post in Washington. And again, it was done. That put Ken Lay one up on Al Capone. Little Caesar had to buy off the top cops; Ken Lay simply had them appointed. Chairman Wood may have been as honest as the day is long, but on his watch, Enron and the industry treaded through the power market like Godzilla through a kindergarten. For example, one California utility commissioner fumed to me that Federal Regulator Wood had winked at a little game called “kilowatt laundering,” in which power companies would pretend to send power out of California, then “import” it back to the State (on paper) at a higher price. And there was “Ricochet,” the game played between Enron and its market playmate, Public Service Company of New Mexico.

  Lay had more wishes for his fairy god-president. In letters to Bush and Cheney, he recommended, as an alternative to Wood, industry favorites Nora Brownell and Joseph Kelliher. Bush wowed Kenny-Boy by appointing all three.

  What’s so evil about Lay getting his people on the regulatory commission? If the mob picked all our judges, there’d be a bit of retice
nce by courts to punish criminals. Lay’s favorite regulators re-created the commission in a manner most pleasing to the industry. A FERC “law judge” ruled that California consumers should receive nothing and their victims should pay the companies a few billion more.

  But the utility magnates still fretted. You can name the commissioners who enforce the law, but the law remained on the books. Most troublesome was FDR’s Public Utility Holding Company Act that banned speculation in the power market and—horrors!—outlawed political donations by the biggest utility corporations. So Lay and the industry set out to fix that too—a political heist done under cover of darkness…

  On August 14, 2003, a third of the nation, from Ohio to New York, went black.

  The three power companies that blew out the lights were the Ohio and Pennsylvania units of a holding company called “First Energy,” and a New York operator called Niagara-Mohawk Power (“NiMo”). It happens that, some years ago (1986–92), I investigated all three companies at the request of the three state governments. The issues were gross financial mismanagement—there was plenty—and, in New York, NiMo was also accused of fraud and conspiracy.25 So I’m not surprised that the Three Stooges of the power industry knocked their heads together and blacked us out. What’s surprising is that the U.S. media kept America in the dark about how Larry, Moe and Curly blew out our nation’s electronic lifeline and how they were rewarded for it.

  The Great Blackout of ’03 began with a power surge at First Energy Corporation’s Ohio unit, which, short staffed, did not react quickly enough to shut off the correct systems. The surge passed to its Pennsylvania sister company, also short staffed, which passed the surge to Niagara-Mohawk Power Corporation (NiMo), which, shorthanded as well and unable to cope, simply shut down and took out the entire New York State power grid. Why was everyone “shorthanded”? In NiMo’s case, the company was recently bought by a foreign outfit that sliced maintenance budgets, got rid of 800 workers and pocketed most of their wages—a $90 million windfall carted off to European stockholders. “Creating value,” as Ken Lay would call it.