FO RU M

The Enron Scandal: Global Corporatism

against Society
Edited by John Gledhill

INTRODUCTION
Old Economy, New Economy; Old Corruption,
New Corruption

John Gledhill

On 2 December 2001, four days after its credit rating had been downgraded to
junk bond status, the Enron Corporation of Houston, Texas, filed the biggest
bankruptcy petition in the history of the United States. On the 14 March 2002,
Enron’s accountants, Arthur Anderson, were indicted by a federal grand jury on
the criminal charge of obstruction of justice for “knowingly, intentionally and
corruptly” inducing employees to shred documents relating to Enron. Enron
was thus both a stock market bubble that burst and a perpetrator of frauds that
involved the complicity of many outside the company itself. The fraud element
turned Enron from a flagship of the “new economy” into a “corporate scandal,”
the first of several. By the end of 2002, the distinction of being the United
States’ biggest bankrupt company had passed to the telecoms giant, Worldcom.
When Worldcom’s accounting fraud was originally identified in June 2002, its
scale was estimated at $3.8 billion. Six months later it was clear that the mis-
reporting was vastly higher, a staggering $9 billion. The New York Times head-
lined the affair thus: “The Latest Corporate Scandal is Stunning, Vast and
Simple” (Eichenwald and Romero 2002).
And so at one level it was. Worldcom simply accounted running costs such
as salaries and materials as if they were capital expenses—such as investment
in a building—whose costs could legitimately be spread over the many years
during which they would be contributing to profits, thus deceiving investors as
to the true profitability of their operations. Enron’s version of smoke and mir-

Social Analysis, Volume 47, Issue 3, Fall 2003

 Introduction 131

rors accounting was somewhat more complicated, since it involved the creation
of nearly three thousand offshore companies (‘Special Purpose Entities’) that
enabled the corporation to hike energy prices1 as well as give a false impression
of profitability and turn its top managers into billionaires. Yet what seems most
surprising with hindsight is that the corporate managers got away with it for as
long as they did. Some will take comfort from the fact that the companies did
finally fail, and that criminal cases have been brought against responsible indi-
viduals such as Enron’s chief financial officer, Andrew Fastow, and his World-
com equivalent, Scott Sullivan. On this reading, what produced Enron and
Worldcom was a “failure of regulatory institutions” that can be corrected and
may possibly even be a purely North American problem.
The conviction behind the discussion offered by the contributors to this
Forum is that such a conclusion would be complacent and wrong. There are
much bigger lessons to be learned from a deeper exploration of what happened
in these cases and from seeing them as less exceptional than their presentation
as “corporate scandals” would suggest. One question it is well worth asking
about Enron and Worldcom is whether the acts that were illegal were actually
any more morally or socially reprehensible than some of the other acts that
were and remain entirely legal. Another key question is where does the heart
of corruption lie: in the social worlds of the corporation, or in government, or
both. Indeed, if we start looking beyond corruption in the strict sense to the
wider social conditions that made Enron possible, there may be even deeper
causes for concern about transformations in which most of us are participants,
albeit often involuntary participants.
Before turning to these wider issues, it is, however, worth noting that both
Enron and Worldcom are sometimes presented as ‘rogue’ enterprises emerging
on the periphery of established metropolitan capitalist institutions. Houston
remains a long way from Washington and New York, even if Enron owed its
transformation under CEO Kenneth Lay from a small and stodgy oil and gas
pipeline company in the 1980s into the much vaunted “market maker” of the
1990s to its consistent cultivation of political patrons at the heart of federal as
well as Texas government, not to mention the consistent hyping its allegedly rad-
ical new business model received from both academic pundits and the financial
press. Worldcom, built up from nothing by Bernie Ebbers in Clinton, Mississippi,
was even more of an outsider game, although Ebbers brought Worldcom into the
center when he acquired MCI for $37 billion in 1997, and then, unsuccessfully
thanks to European and U.S. regulators, went after Sprint. While much of
Enron’s business melted into air with its collapse, in the case of Worldcom a
business of genuine importance to the infrastructure of the “new economy”
remains in existence, and the effort to reconstruct it has been headed, since 2
December 2002, by a figure from the center of the IT industry, former Compaq
CEO and Hewlett-Packard President, Michael Capellas. Capellas’s job is not sim-
ply to restore confidence in Worldcom, but to rebuild confidence in Corporate
America and official regulatory institutions, especially the Securities and
Exchange Commission (SEC). This kind of operation is very much concerned
132 John Gledhill

with covering the backs of the leading ‘insider’ financial companies that became
deeply involved with Enron, such as Merrill Lynch, J.P. Morgan Chase and Cit-
igroup. Merrill Lynch, for example, is now reaching an $80 million ‘settlement’
with the SEC that will secure the agency’s agreement not to release findings that
could be used against the company in lawsuits filed by investors that it allegedly
misled (Johnson and Behr 2003).
There are, therefore, some potential pitfalls in focusing on the apparently
‘peripheral’ or ‘semi-peripheral’ locations of Enron and Worldcom, but Jane
and Peter Schneider avoid these with great skill in their comparison between the
Enron business subculture and “power project” and that of the Sicilian mafia.
Here we can see how Skilling and his team both drew on the new Wall Street
trader model, and at the same time, differentiated themselves as a peripheral
group innovating and showing the center a thing or two, creating a particularly
aggressive mafia-style group that was able to extend its reach not only through-
out Houston’s corporations and law firms, but into the major Wall Street invest-
ment banks themselves. In the end, Kenneth Lay and his firm remained too far
on the periphery of America’s elite business culture to secure a bailout, but their
influence reached deep into the heart of political and economic power.
The Schneiders’ approach enables us to understand both some of the spe-
cific features of Enron’s corporate culture (such as the continuing role of
patronage relations), and its resonance with larger shifts in North American
and global capitalism. At the same time, they pose the bottom-line question of
whether “crime, extortion and illegal trafficking are not fully fledged elements
of the workings of capitalism as such” (enhanced rather than mitigated by its
evolution and achievement of truly global reach). Ananth Aiyer’s analysis
develops this theme further by noting, at the outset, that Enron, far from being
an exceptional case, takes its place in a longer history with many common ele-
ments. Aiyer’s analysis moves out of the domestic U.S. context to focus on
Enron’s role in the global control of key energy resources, as the deregulation
on which Enron capitalized from the outset in the U.S. was extended to the
South and post-Socialist countries. Although the role of Wendy Gramm, as
head of George Bush’s Federal Energy Regulatory Commission (along with that
of her senator husband, Phil), in the initial ascent of Kenneth Lay’s firm is a
well-known chapter of the story, Aiyer’s exposition of the way it developed
globally, with the support of “Washington’s imperial corps” (including the
World Bank) and complicity of southern elites, puts its finger on issues that
have not gone away with the collapse of Enron itself. As Cris Shore also
stresses, Enron’s (scarcely unique) ability to purchase politicians and political
power in the U.S. reveals the hypocrisy of the prescriptions that northern gov-
ernments and NGOs such as Transparency International offer for resolving the
problems of ‘development’ in the South. But Aiyer also directs our attention to
the need to look more carefully at what transnational energy companies and
the states behind them are actually doing in the latter context, in terms of the
social, environmental and human rights consequences of the pursuit of monop-
oly powers and ability to fix prices that remain a goal of the post-Enron era
 Introduction 133

(albeit one increasingly complicated by U.S. efforts to pre-empt potential chal-

lenges from rival geopolitical blocs).
Yet changes within the so-called ‘advanced capitalist countries’ also remain
important. Noting the implications of the fact that more and more working and
middle class families now depend on stock market performance for their pen-
sions and healthcare, Aiyer suggests that the principal impact of the scandals
within the U.S. may be renewed efforts to ensure that the “unacceptable” hap-
pens in a non-domestic “elsewhere.” Yet the elimination of ‘corruption’ in the
center may not be too easy to achieve, as Cris Shore suggests in his compari-
son of U.S. corporate scandals and those surrounding the European political
class in general, and the Commission of the European Union in particular.
Leaving aside the fact that, as Shore shows, there is ongoing debate of fre-
quently staggering casuistry within the “New Europe” about what is or is not
“unacceptable,” Europe’s howls of moral indignation seem, as Shore demon-
strates, to have produced even less tangible results than U.S. responses to
Enron and Worldcom. In Europe it is the “whistle-blowers” who have been
sanctioned; even finding where the money went is vastly more difficult. Shore
argues that the absence of a real “European” public (or press to speak in its
name) creates particularly intractable problems for securing accountability and
probity in public administration in the European Union, although he also notes
the continuing significance of the ties between politics and business manifest
in the Enron affair, for what still seems to be a weak and perhaps weakening
apparatus of regulation in the United States.
The corruption of government is clearly at the heart of this weakness of reg-
ulation, despite President George W. Bush’s apparent failing memory of his
own connections with Kenneth Lay and Enron.2 Although the Republicans fig-
ure most strongly in the Enron story, this is not a partisan but a systemic
issue—Kenneth Lay also got close to Clinton when it mattered.3 Nor is it really
a purely U.S. issue, even though the increasing impasse of the Democratic-
Republican version of formal democracy may offer the clearest expression of
what the underlying problem is. It lies in the escalating financial costs of run-
ning ‘democratic’ party competitive political systems on both sides of the
Atlantic, and in the way that the dominance of the electoral marketeering
machines that account for these escalating costs undermines the possibilities of
genuine alternatives emerging, and perhaps increasingly strips democracy of
meaningful content. Equally discouraging for those who look to improving reg-
ulatory systems is the fact that any client who has sufficient money and busi-
ness to offer is likely to continue to provoke myopia on the part of accountants,
or hushed up internal reports on the part of investment houses.
Yet it also seems to me of the utmost importance to recognize that the con-
tinuing real and present danger represented by Enron does not lie simply in
the factors that led its managers to corrupt practices, and in its capacity to cor-
rupt others.
The money that Enron managers acquired illegally and with zero risk from
the three thousand ‘Special Purpose Entities’ they set up in the Cayman Islands
134 John Gledhill

and other tax havens was actually much less than the fortunes they obtained
in a perfectly legal manner through performance bonuses and share option
schemes, rewards they held in common with the rest of the corporate sector.
When the company went down, the managers had the chance to sell up,
whereas ordinary employees could not rescue the retirement savings that lay in
now worthless company stock. All of this was made possible by the fact that
the Enron share price had been continually boosted by analysts proclaiming the
visionary nature of its business model, and by investment houses that kept
their own assessments of risks away from the public’s attention. Small in-
vestors also increasingly needed to believe that the markets offered them a
chance to share in the gains. Although fraud was needed to prevent the bubble
from bursting more quickly, it was not fraud that created it in the first place, but
neoliberal deregulation (and the political influence that changed legislation
and rules, opening up opportunities to embark on business activities that
allowed a more reckless approach).
What must therefore be questioned here is the entire idea that an economy
driven by the pursuit of ‘shareholder value’ should be underpinning the secu-
rity in retirement of the majority of citizens, or be playing such a prominent
role in shaping an increasingly unequal distribution of income. The conversion
of much of European social democracy to the idea that business models should
take over in many areas previously funded from taxation does not seem like a
step forward in this context, even if the kind of only marginally accountable
politico-bureaucratic alternative embodied in European Union institutions is
equally problematic.
The social rationality of the once much vaunted business models of Enron
and Worldcom can also be questioned on other grounds. Enron’s strategy
forced the cost of energy up, but trading energy derivatives (rather than build-
ing pipelines) could result in huge losses. Despite the assistance it received
from U.S. government agencies to build monopolies abroad, Enron did not suc-
ceed in creating barriers to other metropolitan competitors in its field, so its
own margins were squeezed, creating the conditions that made fraud the only
way out. Many of the new ‘tradables’ and markets created by Enron and
Worldcom were complete failures in terms of profitability, made plausible only
by the climate of euphoria generated around constructions of the ‘new econ-
omy’ as something underpinned by principles completely distinct from those of
earlier phases of capitalism, promising sustained rises in profits without reces-
sions—the ‘End of History’ moment promoted by the collapse of communism.
It is now apparent that while there may be much that is novel in contemporary
capitalism, little changes in the bottom-line. Yet the fantasies spun of late do
have important effects, especially those that represent an extreme fetishization
of the market model, in which miraculous consequences inevitably flow from
extending its borders to include things never previously traded.
One ironic consequence of this neoliberal religion is that types of markets
originally introduced, in the prehistory of capitalism, to reduce and mitigate
risk now function in a completely perverse manner (the current role of hedge
 Introduction 135

funds as well as the evolution of futures and derivatives markets all illustrate
this principle). Driven on by social constructions of the truly audacious and
imaginative trader that cover up the more mundane but fundamental under-
lying transformations of class relations in postindustrial societies, their prolif-
eration poses an increasing threat to the social welfare of people who will
never truly gain from the new economy. What the Enron debacle should have
done is encourage a deeper questioning of the whole neoliberal model, on
both sides of the Atlantic. That it was pushed from the headlines by the fabri-
cation of pretexts for war on Iraq may appear to have been a great political
convenience. But this circumstance can itself be used to highlight the way that
Enron itself revealed the inadequacy of ‘purely economic means’ for pursuit of
any kind of contemporary global power project. The differences between old
and new, in economics and politics (statecraft and corruption) are real, but
should not be exaggerated.

NOTES
1. “When states like California came to Enron to lock in energy contracts Enron would show
them contracts it had signed with its ‘partnerships’ offshore locking in contracts at astro-
nomical prices … Within days of Enron’s bankruptcy California’s energy prices returned
to normal levels …” (http://thedailyenron.com/enron101/) accessed 15 March 2003.
2. See http://thedailyenron.com/enron101/, accessed 15 March 2003, for further details.
According to this source, over fifty high-level members of the George W. Bush adminis-
tration have had “meaningful” ties with the defunct firm headed by the man President
Bush himself called “Kenny Boy.”
3. Worldcom, it is worth noting, was more even-handed in its political contributions and lob-
bying expenditures. Any lawmaker who had a chance to influence the company bottom-line
was in with a shot at corporate backing. For details, see http://www.opensecrets.org,
accessed 15 March 2003.

REFERENCES

Eichenwald, Kurt, and Simon Romero. 2002. “The Latest Corporate Scandal is Stunning, Vast
and Simple.” The New York Times, 27 June.
Johnson, Carrie, and Peter Behr. 2003. “Merrill, SEC agree on Enron Settlement.” The Wash-
ington Post, 21 February.
POWER PROJECTS
Comparing Corporate Scandal and Organized Crime

Jane Schneider and Peter Schneider

The recent unraveling of the Enron Corporation was sparked by the exposure
of unethical and illegal maneuvers, designed to hide debt in specially created
off-balance sheet partnerships. These partnerships, however, hid a much
deeper problem. Indeed, they were created as emergency measures to gener-
ate cash for the corporation, given that various of its undertakings had yet to
prove themselves viable. These undertakings smacked of hubris for a company
whose origins and bread and butter were in the construction and maintenance
of oil and gas pipelines. In his just published book, Pipe Dreams; Greed, Ego,
and the Death of Enron, Robert Bryce, a seasoned and respected Texas muck-
raker, refers more than once to “Skilling’s mafia” as a force behind the hubris.
After many years of trying to comprehend the Sicilian mafia, we too recognize
something mafia-like in the Enron story. The following pages are an effort to
identify what that something is.

First, a Caveat

Before beginning, it is necessary to address the most obvious contrasts. Enron

was a business corporation with headquarters in Houston Texas, worldwide
assets, many divisions and affiliated enterprises, and at its apogee, over twenty
thousand employees. By contrast, the Sicilian mafia is a network of localized
cosche (families) whose members numbered under six thousand in the 1990s.1
Although the Palermo region constitutes a center of gravity for mafiosi, it has
never been a regional, let alone international headquarters. Lacking corporate
assets of its own, the mafia acts as an umbrella, facilitating the diverse activi-
ties of its members and their close associates. Because these activities are often
illegal (racketeering and trafficking are prime among them) the organization
invests a lot of effort in manipulating criminal justice. Most dramatically,
mafiosi regularly employ physical violence and the threat of physical violence

Social Analysis, Volume 47, Issue 3, Fall 2003

 Power Projects 137

to achieve their ends. Enron executives compete in terms of other skills and
resources, above all what they believe is their intellectual and analytic prowess.
Keeping these significant differences in mind, we will examine some parallels
in the formation of organizational subcultures, and the emergence within them
of dominant coalitions that we will refer to as ‘power projects’.

Business Subcultures

Based on our rather innocent fieldwork of the 1960s, amplified by the deposi-
tions of recent justice collaborators, we would cite the following cultural prac-
tices as being salient to the “business subculture” of the Sicilian mafia: selective
recruitment of both kin and non-kin, and their integration into the “fraternity”
through initiation rites and sponsorship by an older, often charismatic “boss,”
a tradition of feasting from which women are not only excluded, but in which
they are also parodied; systematic “conditioning” of well-placed persons in
important institutions, especially the state, through gratuitous hospitality and
favor-granting; and generous “provisioning” of clients throughout society. This
cluster of practices goes hand in hand with the mafia’s representation of itself
as an honored society, a self-anointed elite, superior to normal people and
exempt from normal rules.
In the vast United States economy, subcultural circuits with the greatest
potential for elite formation are anchored by prestigious business schools,
renowned textbook writers, and ‘hot’ consulting firms. One firm, famous for
recruiting the top MBAs, is described in a Forbes profile as “unabashedly” pro-
jecting the “secular image of the Jesuits, gifted intellectuals uplifting the world
of commerce with their vision” (cited in Bryce 2002: 50). Participation in a col-
lege fraternity, membership in exclusive country and city clubs, and undertak-
ing challenging and expensive vacations are among the steps that further a
sense of superiority and entitlement among the anointed.
There are now underway a few anthropological studies of the business sub-
culture of the ‘dot.com’ economy of the 1980s and 1990s, whose high rolling
elitists pioneered new cultural practices that they believed would enhance bril-
liance and creativity, in particular, integrating excitement and pleasure with
work and cultivating extreme or limit experiences (including drug use). It must
be emphasized that no one has studied the Houston business elite in this
regard. Bryce has, however, produced an account of the office culture at Enron,
emphasizing the extra-marital affairs of several of the top executives, the fasci-
nation of some of them with the city’s famous strip bars, and the celebration of
genius by traveling, ideally in one of the corporate jets, to exclusive golf courses
and exotic off-road sites (two top executives hiked on glaciers, another raced
customized motor cycles). What seems mafia-like in such pursuits, and in the
flaunting of non-normative gender relations, is the production of a kind of hot-
house atmosphere in which contempt for ordinary society and its laws can
thrive. Enron executives were also masters at ‘conditioning’ other elites.
138 Jane Schneider and Peter Schneider

Power Projects

Now for the “power projects” that each subculture nourished in response to new
opportunities: the scalata (rise to power) of the Corleonese faction of the Sicil-
ian mafia in the early 1980s, and the take-over of Enron by what Bryce refers to
as the “Skilling mafia” in 1996. In both cases, the aggressor team initially feared
marginalization by more strategically located players within the subculture.
Consider, first, the Sicilian mafia: intense conflict over new urban con-
struction and narcotics trafficking led to the insurgence, between 1979 and
1983, of a particularly aggressive group of mafiosi (the Corleonesi), originally
from the interior town of Corleone. On the periphery of Palermo’s postwar
real estate boom and narcotics trafficking, both of which were dominated by
mafia cosche in the central city, they launched a series of provocative kid-
nappings for ransom (against the mafia’s putative rules), targeting wealthy
construction impresarios who were closely allied to the Palermo bosses.
Beyond this, they assassinated several of the rival mafia bosses, then auda-
ciously killed fifteen police officers, magistrates, and public officials. In 1992,
they organized the savage bombings of two of the most important anti-mafia
prosecutors, Giovanni Falcone and Paolo Borsellino, followed by other bomb-
ings in northern Italy.
In the Enron case, violence was, of course, not the modus operandi, but
other forms of aggression figured mightily. In the late 1980s, Jeffery Skilling, a
self-declared “idea man” with a Harvard MBA, impressed Enron’s president,
Kenneth Lay, by operationalizing the concept of a “Gas Bank.” Attuned to
opportunities in the new economy, emerging as a consequence of deregulation
and the revolution in communications technology, Skilling and those around
him quickly found trading in energy far more interesting and challenging than
the pipelines that had been Enron’s starting point. Lobbying for permission
from the SEC, they promoted a new accounting method called “mark-to-mar-
ket,” which allows anticipated earnings to be factored into present-day ac-
counts—a boon to their trading operations (Bryce 2000: 67).
Wall Street investment houses were the standard for the most prestigious
and sexy operations, and at Enron playing to these houses took off after Skilling
was made CEO of the corporation in 1996. Increased spending and many new
hires heralded a seismic shift: in the first year, capital expenditures and long
term debt doubled, with pay-outs for interest close behind. Seventy-five hun-
dred employees ballooned to fifteen thousand by the end of 1997, and 20,600
by the end of 2000. Recruited from the best business schools, the new hires cost
the company dearly, not only in salaries but in bills for first class air fares and
hotel rooms, limousines, flowers, refurbished office space, an in-house health
club, and of course, bonuses and stock options.
Under Skilling, aggressive trading became “unbridled” (ibid.: 119), enabling
a new “caste” to form within the company. A Performance Review Committee
continuously evaluated managers on their leadership capabilities, skills and
accomplishments. Salaries, bonuses, promotions, even job security increasingly
 Power Projects 139

flowed in the direction of the traders, leaving others behind. According to

Bryce, after 1996, “You had the old pipeliners and you had the New York-type
financial traders.” The former were stodgy “dinosaurs” whereas the latter were
committed to the deal. In the words of one of his interviewees: “traders are
mercenaries. Their job is to kill.” “With traders,” said another, “it’s rape, pil-
lage, and plunder all the time.”
One would imagine, then, that the deals completed and the contracts signed
would, in fact, be the main criteria of the evaluation process, but employees’
experiences suggested that old fashioned patronage was more important. Like
a “pit of vipers,” in the words of one employee, the Performance Review
process operated like a mechanism for managers to reward friends, punish ene-
mies, and stifle dissent. The only way to navigate through it was to acquire a
well-connected ‘daddy’. To quote another: “Though trades and deals were
good, trump cards counted. And everyone knew that the best trump card, the
one that always worked, was having a champion who was either close to
Skilling or close to someone in Skilling’s mafia” (cited in ibid.: 129–130).
The clientelism underlying this ‘mafia’s’ power project extended beyond the
company into many other quarters, most notably other Houston corporations,
law firms, and public concerns, the accounting firm of Arthur Anderson, and
almost all of the major Wall Street investment banks. In each case, Enron had
something substantial to offer: business relations, charitable contributions, vast
sums to hire consultants, and a seemingly bottomless demand for services.
Bryce traces how these relations corrupted the company’s board of directors, its
accounting firm, and the brokerage houses that analyzed its stock. As one
banking executive confessed: “If you ever wanted to do investment banking
with Enron, your analyst had to have a strong buy rating on the stock. It was
borderline extortion.” Said a Merrill Lynch analyst, the banking firm leaders
were “trying to turn the research department into a deal machine … and if you
didn’t do that, you’d get whacked” (cited in ibid.: 251–252).
At the same time—and this strikes us as the most telling parallel with the
Corleonesi mafia—Skilling and his followers were attracted to the Wall Street
buzz surrounding the new economy. Just as the Corleone bosses resented being
marginal to the action in Palermo, this Houston based group seemed hell-bent
on transforming what they perceived as a stodgy old pipeline dinosaur into a
“quasi-investment bank” (ibid.: 209). Significantly, Skilling’s hiring binge after
1996 included raiding Wall Street firms for traders, investment bankers, and
whiz kid programmers, and changing job titles within Enron to mimic such
Wall Street categories as “analyst.” Moreover, he and his following envisioned
extending the business model they had developed for trading in gas and elec-
tricity to an open-ended variety of other fields—water, minerals, and most
remarkably, telecommunications. In the words of one of Bryce’s interviewees,
they “saw the Internet stock bubble and they were pissed off that they didn’t
get to ride the wave [so] this was payback. This was Skilling and the others say-
ing to Wall Street that “This boring old company, this natural gas company is
smarter than all you fucks put together” (cited in ibid.: 192).
140 Jane Schneider and Peter Schneider

And many Wall Street analysts cheered them on. In the end, though, when
such over-reaching brought down the house of cards, Enron executives were
unable to follow the path of John Meriwether of Long-Term Capital Manage-
ment, and negotiate a bankers’ bail out. “Meriwether, despite his faltering
hedge fund, was one of them,” writes Bryce. “They liked and respected him.
Ken Lay and Enron were from Texas, too far from Wall Street to really matter.
The button-down types at the N.Y. Federal Reserve—the arm of the central
bank that orchestrated Long-Term’s rescue—“didn’t care about them. Nor did
it trust them” (ibid.: 325). Like the scalata of the Corleonesi, the power project
launched from the periphery of America’s most elite business subculture ulti-
mately failed, although not without wreaking havoc along the way.
And now, a confession. There was a time when scholars of the Sicilian mafia
understood it as an archaic social form, rooted in the quasi-feudal relations of
the latifundium; with urbanization and capitalist development, it would even-
tually disappear. But the opposite has happened; urbanization, an expanding
real estate and construction industry, and the increasingly globalized traffic in
drugs have constituted a vast new opportunity field, stimulating mafiosi to
become more virulent than ever. One can define their primary means of accu-
mulating, which continues to be violence and intimidation, as a feudal legacy
but this seems lame, particularly in light of the proliferating networks of orga-
nized criminals trafficking in the world of today. By exploring similarities
between the menace of violence and the opportunistic, manipulative deploy-
ment of great wealth on the part of a presumably legitimate corporation, this
paper raises the question whether organized crime, extortion and illegal traf-
ficking are not full-fledged elements of the workings of capitalism, as such.

NOTES

1. For a bibliography on the Sicilian mafia, as well as for fuller descriptions of the structures,
processes, and events touched on in this essay, see Schneider and Schneider (2003).

REFERENCES

Bryce, Robert. 2002. Pipe Dreams: Greed, Ego, and the Death of Enron. New York: Public
Affairs.
Schneider, Jane, and Peter Schneider. 2003. Reversible Destiny: Mafia, Antimafia and the
Struggle for Palermo. Berkeley and Los Angeles: University of California Press.
LIGHTS OUT
Ananthakrishnan Aiyer

Enron Capitalism: You have two cows. You sell three of them to your pub-
licly listed company, using letters of credit opened by your brother-in-law
at the bank, then execute a debt/equity swap with an associated general
offer so that you get all four cows back, with a tax exemption for five
cows. The milk rights of the six cows are transferred via an intermediary
to a Cayman Island company secretly owned by your CFO who sells the
rights to all seven cows back to your listed company. The annual report
says the company owns eight cows, with an option on six more.1
— Anonymous

I predict that in the years ahead Enron, not September 11, will come to be
seen as the greater turning point in U.S. society.
— Paul Krugman, New York Times

An occasion such as Enron (and let us be clear that it is only one of many) to
the extent that it momentarily disrupts the daily savagery of capitalism affords
us the opportunity to engage in reflection on broader issues. Anger and blame
dominate reactions from the global media, investors, U.S. politicians, and reg-
ular folk. Overall, these discourses are based on hyperbole—“the largest bank-
ruptcy,” “massive fraud,” “colossal swindle,” the system needs to change etc.,
a sentiment shared by the likes of Paul Krugman (above) who are wont to over-
state their case. Is Enron really all that new or even startling? Will it lead to a
radical restructuring of the workings of Wall Street and global investment prac-
tices? Does it signal the beginning of the end of capitalist crime? I politely dis-
agree. Such positions are articulated on a regular enough basis that they lack
seriousness. Nonetheless, the Enron affair does expose certain issues that are
certainly worth pursuing insofar as they help us better understand some of the
workings of contemporary metropolitan capitalism.
It should be made clear at the outset that the past twenty years have seen a
dramatic number of high-profile corporate crimes and financial scandals. While
many come to mind, I will only mention one here, the case of Bank of Credit
and Commerce International (BCCI).2 At first glance, BCCI and Enron are quite
different from one another. The former was created and nourished by Third

Social Analysis, Volume 47, Issue 3, Fall 2003

142 Ananthakrishnan Aiyer

World entrepreneurs. It ran ponzi-like schemes, systematically engaged in

bribery, cavorted with the underworld and murderous dictators, had ties to
arms and narcotics smuggling, and was seen as an eyesore by metropolitan
banks. Enron, on the other hand, was firmly based among the white elite of the
U.S. heartland. With close ties to successive U.S. administrations, it was a pub-
licly traded company that brought immense joy to its investors over the years.
Its activities were ‘legal’ for much of the company’s history, and it was lauded
on Wall Street and in global investment circles. But there are also affinities.
Both BCCI and Enron were truly global in their reach. They created parallel
firms and used offshore havens to ensure secrecy. They regularly purchased
their subsidiaries’ shares and assets to hide losses. Accounting firms played a
crucial role in both cases.3 It was only when U.S. investor and consumer inter-
ests were directly affected that lawmakers decided to take action against the
firms. What I want to suggest is that Enron is not an exceptional case by any
means. The ‘scandal’, once again, raises a variety of ethical, legal, and moral
questions that will hopefully be debated once the current war games are over.
But it also raises other broader political and social issues about certain aspects
of metropolitan capitalism that will be the focus of what follows.

Global Logics of Power

A good bit of theorizing and analysis in anthropology and elsewhere continues

to insist that contemporary globalization is different from its predecessors, and
accordingly, we need new approaches and conceptual tools. There is much to
commend in approaches that stress rhizome-like metaphors and transnational
flows and scapes, but in the economic realm, a good bit of what passes for
globalization is underscored by the activities of companies such as Enron that
are certainly more arachnid in nature. Globalization may be decentered and
multi-sited in some instances, but this proceeds in tandem with other processes
that are fundamentally driven by metropolitan interests. Decisions came out of
Houston-Washington D.C., and provided the tune to which localized ballets
were performed.
Enron epitomizes two key factors of globalization: monopoly matters and
flexibility counts.4 Operating in about thirty-two countries, Enron fundamen-
tally focused on the global control of key energy resources—oil and gas, and
electric power.5 The general thrust was the same whether it was California,
India, or the Dominican Republic—ensure that projects are big, contracts are
binding, and overwhelmingly in favor of the company; employ all possible
aggressive strategies and tactics to ensure compliance. More significantly, the
company focused its efforts primarily on trading and distribution activities that
were the source of its astronomical profits. These afforded it tremendous flexi-
bility, both in the delivery of its services (pipelines to online trading) and the
products that it sold (plastics to weather derivatives!). In the end, globalization
may yet prove to be the basis for a renewed mercantilism.
 Lights Out 143

But none of this would be possible had it not been for two simultaneous
processes that have been in play for the past two decades. Successive U.S.
administrations increased deregulation of the financial and energy sectors in
the U.S., as part of a broader neoliberal agenda. Through international lending
agencies, similar pressures were brought to bear upon economies of the South,
including post-Soviet Eastern European countries. While this is a well-known
tale, it is important to underscore institutional and organizational affiliations.
Key to Enron’s acquisition of contracts were not only close ties to Washington’s
political elite, but also the role of organizations such as the Overseas Private
Investment Corporation (OPIC) and others. OPIC is funded by tax-payers, and
is a government outfit that provides insurance to U.S. companies from damages
resulting from acts such as expropriation, annulment of contracts, political vio-
lence, etc. It provided billions of dollars worth of insurance coverage to Enron
projects—even though they might only be on paper—all over the world. Other
organizations include the powerful United States Coalition of Service Industries
(USCSI), which seeks to eliminate all trade barriers to U.S. services exports, the
U.S. Export-Import Bank, the U.S. National Security Council, and so on.
The point I wish to emphasize is that Enron’s global expansion was made
possible precisely because of such institutional and political ties. Its ‘competi-
tive advantage’ was secured under Washington’s imperial corps. Whenever
Enron faced significant opposition or questions about its activities abroad,
politicians and diplomats stepped in to lend a helping hand. Even on the occa-
sional instance when the World Bank, one of Enron’s biggest financial backers,
questioned the viability of Enron’s projects, for example, the Dabhol power
plant in India, significant political pressure was brought to bear to ensure that
the project proceeded and other lending agencies stepped in. U.S. ambassadors
acted like Enron’s clerks, and in some cases, opposition to Enron’s activities led
to threats to cut off U.S. foreign aid (as in Mozambique).
In the end, though, all of the blame cannot be laid on Lay’s minions in the
Houston-Washington D.C. combine. Southern elites are equally to blame. Des-
perate for foreign investment, hoping to attract more, and seeking to ensure a
place for themselves within the Empire, Third World governments accepted
terms set by companies such as Enron even if it meant a significant rise in
energy prices for most poor households. One hoped that U.S. citizens, con-
fronted with the threat of loss of electricity, would see the linkages and share a
sense of solidarity with Dominicans and Croatians. Unfortunately, in the
post–September 11 world that might not come to pass.

It’s the Third World, Stupid!

Much of the debate in the U.S. has been narrowly focused on the loss to
investors, California being held hostage by energy companies, and the need for
greater oversight over Wall Street and offshore havens. It is simply astonishing
how self-absorbed and parochial these debates continue to be. Companies are
144 Ananthakrishnan Aiyer

only seriously worthy of attention when it is metropolitans that are hurting.

Enron’s record in the Third World, like most global corporations, has been
rather dismal, a point that continues to elude mainstream U.S. commentators.
Besides corruption and bribery, which seems to have been actively pursued,
environmental laws were flouted, and at least in one case, India, human rights
abuses were committed by police officers on Enron’s payroll.6
There is profound hypocrisy at work even among those who rightly manifest
indignation and anger at Enron’s demise. No Congressional hearings were held
to investigate price-fixing tactics in Croatia or Poland. No condemnations were
heard when thirty-three people were killed in an explosion at one of Enron’s
subsidiaries in Puerto Rico. No Senate investigations took shape when riots
ensued in the Dominican Republic, Guatemala, and Panama as a direct result
of energy price hikes. No debates ensued when energy companies, including
Enron, urged increased military aid to Colombia in a bid to ensure total control
over energy resources in the region. Congressional hearings were only initiated
after the rolling blackouts and surges in energy prices in the U.S.
This hypocrisy is not an issue that just affects U.S. lawmakers, but is part of
the wider conceptual apparatus and policy prescriptions that emerge out of
Zurich or Davos. Corruption and influence peddling is seen as cultural practice
in the South, but only exceptional in the North. No wonder the U.S. and U.K.
rank so clean in Transparency International’s Global Corruption Perception
Index. The World Bank uses powerful terms such as “state capture” to raise
alarms about companies buying politicians and political power in poor countries.
This is cruel irony indeed! After demanding liberalization and privatization,
‘they’ are now asked to be careful about maintaining economic transparency.
One hopes that Enron’s political influence in the U.S. should give pause to
World Bank policy experts, since no clearer case smacks of corruption or state
capture by the corporate sector.

Invest and Burn

Finally, there is a sadder tale to raise. Millions of U.S. teachers, janitors, union-
ized workers, and soccer-mom investors lost a good bit of their pension funds
and retirement savings in the Enron collapse. This speaks to one of the cruel
facts of metropolitan capitalism, the hegemony of the stock market. Over the
past two decades, millions of working and middle class families have been
cajoled and coerced into investing their savings in the stock market and the per-
formance of companies such as Enron. This is a more complex issue than can
be dealt with here, but it is an important economic reality. Employers force
employees to sign up for retirement packages that are administered by mutual
fund managers who invest most of the money in the share, bond, and financial
markets. Also, individuals see no other way to benefit from ‘higher returns’ than
playing the ‘market’, especially in a context where state funding for the elderly
and for services such as health care and education has dwindled to a minimum.
 Lights Out 145

Thus, there is a bottom-up logic at work here. No one pays much attention as
long as share prices are on the rise and dividends keep coming. It hardly mat-
ters if your company has “offshore entities” or sold contaminated water. Maybe
this is an excessively cynical reading, but I want to suggest that its not just CEOs
who are concerned with maintaining high profit rates. Institutional and individ-
ual investors are equally invested in the process even if this means turning a
blind eye to company practices and as long as it happens ‘elsewhere’.
There are now calls for regulation, but it is unclear what that means in the
case of global entities such as Enron. The absurdity of regulation is already
indicated by the fact that capitalist accounting firms were regulating other cap-
italist firms! Regulation of any serious kind at the global level would be impos-
sible, since this would be a return to a pre-neoliberal world, something which
U.S. politicians have left far behind along with many of their international
counterparts. The drive for profits at all costs will continue spewing newer and
more elaborate capitalist crimes unless a radical global restructuring is at-
tempted. And that is precisely what is happening in the post–September 11
world. The current U.S. agenda is less to prevent corporate crimes, but in fact,
to make the world ‘safer’ for future Enrons. The only hope lies in a renewed
progressive politics in the U.S. that seeks to both undermine the hegemony of
corporate power and simultaneously embrace its global counterparts, espe-
cially from the South. While it was heartening to watch the demonstration of
solidarity during the recent anti-war rallies, it will require a broader coalition
and more sustained commitment to prevent future Enrons. In the meantime, we
shall wait till the lights go out again.

NOTES
1. An appropriate joke circulating on the Internet, author unknown and available from a
variety of sources. This version is available on-line at http://www.konformist.com/
2002/enronomics.htm, accessed 24 February 2003.
2. There was of course the “Savings and Loans Crisis.” Besides BCCI and Enron (and Global
Crossing, Worldcom, Qwest, Tyco), there are other notables—Milken, Bre-x, Nick Lee-
son, Credit Lyonnais, Long-Term Capital Management, etc. The list increased as we
entered the ‘boom’ time of the 1990s.
3. Just like Arthur Andersen, accounting firms also played a role in the BCCI case. Arnold
and Sikka (2001) provide an excellent analysis of the relationship between accounting
firms, nation-states, BCCI, and globalization.
4. Bayliss and Hall (2001) provide some of the best and most thorough analyses of Enron’s
activities. Many of the details I mention come from their report.
5. Enron also aggressively entered the market of water privatization through Azurix, but
results in the U.K., Argentina, and Mexico were less than successful.
6. Report by Human Rights Watch available on-line at http://www.hrw.org/reports/
1999/enron/enron8-2.htm, and Amnesty International, available on-line at http://
www.web.amnesty.org/ai.nsf/index/ASA200311997.
146 Ananthakrishnan Aiyer

REFERENCES

Arnold, P., and P.N. Sikka. 2001. “Globalization and the State-Profession Relationship: The
Case of the Bank of Credit and Commerce International.” Accounting, Organizations and
Society 26, no. 4: 475–499.
Bayliss, K., and D. Hall. 2001. Enron: A Corporate Contribution to Global Inequality. Report
prepared by Public Services International Research Unit (PSIRU). University of Greenwich,
London.
CORRUPTION SCANDALS IN AMERICA
AND EUROPE
Enron and EU Fraud in Comparative Perspective

Cris Shore

The recent wave of corruption scandals has sent a shock wave through corpo-
rate America and beyond, but as the tremors subside there is still no consensus
on what lessons have been learned, and what changes should be implemented
to restore public trust in corporate governance and the accountancy profession.
The only certainty is that people will think twice before making jokes about
boring accountants.
What shocked people was not only the sophistication and complexity of the
Enron/Anderson relationship that had so effectively masked Enron’s true value,
but the fact that most of the devious accounting tricks that had enabled it to
happen were perfectly legal under existing U.S. accounting rules. In June 2002,
as the list of companies mired in what has become the largest fraud scandal in
American business history spread from Enron and WorldCom to Xerox and Tyco,
U.S. Treasury Secretary Paul O’Neill called on people to be “outraged” and
promised stringent legislation to tighten up accountancy rules.1 President Bush,
for his part, told the American people that “corporate misdeeds will be found and
will be punished” and denounced the excessive “greed” of certain individuals
(friends excluded) who had played fast and loose with accepted business norms
and ethics. Never mind the fact that the rules themselves facilitated and encour-
aged such behavior, or that today’s fraudsters, who have robbed thousands of
employees of their savings and pensions, were yesterday’s heroes and celebri-
ties, idolized for their entrepreneurial acumen and lionized on the covers of
American business magazines. Elsewhere we have witnessed the extraordinary
spectacle of chief executives from many of America’s largest companies rushing
to sign notarized oaths attesting that “to the best of my knowledge” their latest
quarterly or yearly returns neither contain “untrue statements” nor “omit any
material facts.”2 While these modern company rituals are designed to reassure
shareholders and public opinion of the integrity of corporate America, this new
image of the CEO as pillar of moral rectitude contrasts starkly with the ruthless

Social Analysis, Volume 47, Issue 3, Fall 2003

148 Cris Shore

corporate raider so effectively portrayed in the figure of Gordon Gekko, the anti-
hero of Oliver Stone’s 1987 film, Wall Street, whose defense of avarice and the
unbridled pursuit of profit still epitomize for many the rationale behind mod-
ern corporate ethics.
But how does this rash of ethical pledges look from a European perspective,
and what comparisons, if any, can we draw between the two continents when
it comes to narratives of corruption and anti-corruption practices? Although the
Enron scandal has precipitated calls in some parts of Europe for accountancy
rules and regulations to be overhauled, the general attitude here is that these
kinds of corporate scandal are a peculiarly American problem, borne of Amer-
ican rather than European values. Leaving aside the question of what exactly
these distinctly ‘American’ values might be (and the observation that politicians
on both sides of the Atlantic have been at pains to stress the unity of Western
values in the post–11 September ‘war on terror’), this is a dubious assumption,
even if the scale of corporate corruption in Europe does not match that of
America. The key difference, perhaps, is that Europe’s major financial scandals
tend to occur in the public rather than private sector, and are less evident
among European business leaders as among Europe’s political elites or classe
politique—the recent corruption scandals surrounding Helmut Kohl, Jacques
Chirac and Silvio Berlusconi being prime examples of this.
The European Union provides an exemplary case in point. In March 1999 the
entire political leadership of the European Commission—the EU’s suprana-
tional civil service—resigned after a damning official Parliamentary report by a
group of independent auditing experts revealed massive evidence of fraud, mis-
management and corruption throughout its services.3 What the report brought
to light, beyond the various small instances of contract fixing, nepotism, and
petty graft within the institutions, was that large sums of money had gone miss-
ing from the EU’s budget, and an estimated £17 billion in structural fund pro-
jects could not be accounted for because the Commission had failed to keep
records of monies spent. As in the Enron scandal, however, many of the illicit
practices exposed by the report were not strictly speaking ‘corruption’ in a legal
sense. For example, Commissioner Edith Cresson may have appointed her per-
sonal dentist and friend, Mr. Berthelet to a highly paid job as scientific advisor
on an EU HIV/AIDs research program (for which he was manifestly unqualified
and did no work beyond running personal errands for her), and she may well
have presided over what the report termed a “dysfunctional organizational cli-
mate,” but as Cresson had not made any “personal financial gain” from her
abuse of public office, this was not classified as “corruption” according to the
standard definition. Indeed, Cresson gave a spirited defense of her actions,
arguing that this so-called “nepotism” was justifiable, and really no different
from what is “standard practice in French public administration.” Furthermore,
as she stated in a press conference, the whole EU anti-fraud campaign was part
of a “right wing” conspiracy designed to damage France, and an “Anglo-Saxon
crusade” against the southern culture of administration.4 In short, an assault on
French culture itself.
 Corruption Scandals in America and Europe 149

As with the Enron affair, political leaders expressed moral indignation, and
promised root and branch reform. With the inauguration of the new Commission
under Romano Prodi, Vice President Neil Kinnock, was given the job of cleaning
up the administration—the “House,” as Commission officials call it. Over the past
five years, Commissioner Kinnock has introduced a raft of new “accountability”
measures and new codes of conduct designed to rationalize staffing policy and
modernize the Commission’s baroque “organizational culture.” Perhaps the most
striking aspect of the reform process—some would say the only aspect—has
been the wholesale import of new acronyms and jargon (such as “Activity Based
Management” and “policy-driven spp frameworks”) borrowed from management
consultants. Five years on, however, it looks increasingly like plus ça change.5 In
August 2002, accounting controls over the EU’s ú98 billion budget were once
again criticized as “insecure” and “unreliable” in a scathing leaked report from
the European Court of Auditors. In its indictment, the report states that “no
account has been taken of generally accepted accounting standards, mainly dou-
ble-entry book keeping.”6 In response, the Commission lamely argued that the
report might never have been published because it contained inaccuracies and
that the “tone of the language was inappropriate.”
At the same time as the leaked report was made public, Marta Andreasen,
the former Commission chief accountant who had been controversially re-
moved from her post in May, gave a press conference in London in which she
accused Mr. Kinnock of trying to cover up lax accounting standards in the EU
budget. Andreasen also alleged that she was harassed and subjected to a cam-
paign of character assassination by senior Commission officials who sought to
prevent her from voicing her concerns.
How does all this compare with Enron? In many ways, EU fraud is worse. As
Marta Andreasen noted: “Unlike the issues surrounding Enron and WorldCom,
where you can at least trace transactions, you cannot do so within EU accounts
as there is no system in place for tracing adjustments. Fraud can therefore lie
hidden within the system undetected and untraced.”7 In other words, we have
no way of knowing how much money that goes into the Brussels machinery
comes out the other end.
If we leave aside the Common Agricultural Policy which accounts for half of
all EU money spent, and which many consider to be a criminal waste of money,
the Court of Auditors estimates that five to eight percent of the EU’s budget is
lost to fraud each year, while another five percent is not spent in the way it was
intended. This is a not insignificant sum by any reckoning, although no govern-
ment official has yet echoed Paul O’Neill in calling upon citizens to be “out-
raged.” As in the case of Arthur Andersen, the company that audited Enron’s
accounts and later instructed its employees to shred incriminating documents,
no individual in the Commission has yet (at the time of writing) been prosecuted
or punished for corruption. Indeed, the only person to be disciplined and sacked
from his post was Paul Van Buitenen, the Dutch audit official and whistleblower
whose weighty dossier of accumulated evidence precipitated the original enquiry
into allegations of fraud and mismanagement in the Commission.
150 Cris Shore

In both the Enron and EU scandals, the most serious complicity and fraud
were perpetrated not by junior staff but by senior officials, thus vindicating the
old Greek and Sicilian folk proverb that “the fish rots from the head downward.”
In both situations too, those responsible for checking the budget or holding their
executive to account, signally failed to do so in part because it was not in their
interests to do so. In the case of the EU, the dereliction of duty was on the part
of the European Parliament (which, ironically, now claims credit for bringing the
Commission to book). For seven years in succession, the Court of Auditors had
refused to sign off the EU’s accounts, and had warned of “grave irregularities”
in the budget. Yet despite these admonitions, the European Parliament (for polit-
ical reasons) had consistently approved them.
One of the key factors noted in both the Enron and Andersen scandals was
the “incestuous relationship” between firm and client, which prevented the
auditors from acting independently. But the relationship between the European
Commission and European Parliament—the body that is supposed to act as its
constitutional watchdog—is equally incestuous (note that the disgraced former
President of the Commission, Jacques Santer, like many former Commissioners,
is now a member of the European Parliament (MEP), thanks to the Party-List
system). The appointment of Neil Kinnock—a veteran of the Santer Commis-
sion—to oversee the clean up of the Commission’s administration might also
raise reasonable questions about conflict of interest.
A third parallel is that in corporate America, as in the EU, corporate pressure
is placed upon employees to show loyalty to their organization. Despite the post-
1999 introduction of an EU whistleblowers charter, those who do blow the whis-
tle are likely to face a range of bureaucratic obstacles and sanctions, including
vilification, harassment and dismissal (the fate of Marta Andreasen and Paul
Van Buitenen are particularly instructive here). Some corporations use ‘gagging
clauses’ to prevent employees from disclosing sensitive or potentially embar-
rassing information about company policy and practice: this is not unheard of
even in British Universities and the National Health Service. In the case of
WorldCom, company executives resorted to outright bribery. By contrast, in the
case of the EU, the Statutes themselves provided the most effective instrument
for inhibiting insider disclosure of malfeasance. Articles 17 to 19 of the old Staff
Statutes expressly forbade officials from divulging any information about the
organization deemed sensitive or damaging, thereby functioning as a kind of
‘official secrets act’. Loyalty to the ‘House’ was thus enshrined in the EU’s cor-
porate ethics and prevailing esprit de corps.
Fraudulent accounting within the EU is not, however, confined to the Euro-
pean Commission. In 1998, there was a great deal of fiddling by those govern-
ments seeking to qualify for membership of the new single currency. To do this,
applicant countries had to demonstrate they had successfully fulfilled the strin-
gent deflationary Maastricht Treaty entrance requirements. Many did so by
‘creative accountancy’ to which the Commission was happy to turn a blind eye.
This flexible use of statistics continues. In the words of the head of the Com-
mission’s Eurostat statistical office, Yves Franchet, the situation is “a bit like
 Corruption Scandals in America and Europe 151

Enron,” as members of the eurozone maneuver to avoid breaching the Stabil-

ity and Growth Pact or the rules on budget deficits and borrowing. For exam-
ple, the Italian and Greek government both tried to borrow money against
future sales of lottery tickets, while the German government successfully bor-
rowed money against the future rents of state owned railway cottages. In the
post-Enron environment, accountants have even invented a new piece of jargon
to describe this practice of inflating a company’s (or country’s) worth and then
vigorously underwriting it: “aggressive actuarial assumptions.”8 In yet a further
twist in the saga of EU corruption, Yves Franchet was suspended in July 2003
following disclosure of major fraud and cronyism at the EU’s Eurostat office in
Luxembourg, including the disappearance of Z5 million of taxpayers’ money
into secret accounts used to fund staff perks.9

Conclusion
For years, the attitude of Western governments to the problem of corruption and
shoddy business ethics has been framed within Eurocentric assumptions that
corruption is essentially a Third World disorder; a pathology endemic to ‘back-
ward’ developing countries with weak civil societies and bloated public sectors.
According to this view, the only effective solution was to introduce painful,
deflationary, neoliberal reforms, and the fiscal and moral disciplines of the mar-
ket. Under the twin banners of “anti-corruption” and “good governance,” the
U.S. government, the IMF, and the World Bank have systematically bullied their
weaker trading partners into accepting the rules and norms of modern corporate
capitalism. It would be encouraging to think that Enron has injected a note of
humility and caution on the part of those self-righteous moral crusaders who,
until recently, saw the export of Western free market ethics and practices as the
panacea to the world’s problems. After all, ‘reflexivity’ is supposedly one of the
defining characteristics of Western modernity according to some sociologists.
But so too are hypocrisy and Eurocentrism. Here again comparisons between
Enron and ‘EU-ron’ are instructive. In July 1999, a small article appeared in the
inside pages of the Financial Times, so small it was barely noticeable. It reported
that the European Union had warned seventy-one African, Caribbean, and
Pacific (ACP) countries that “they must commit themselves to rooting out cor-
ruption and misspending of aid money,” and to the principle of “good gover-
nance” if they wanted to renew the Lomé trade and development agreement.
This came barely three months after the Commission was forced to resign
because of its own documented corruption and mismanagement.
If public cynicism in the ability of political elites to tackle problems of politi-
cal corruption and corporate sleaze is growing, it is hardly surprising. The close
personal ties between the perpetrators of fraud, and those in office that are sup-
posed to prevent such abuse are increasingly apparent. Many members of the
Bush administration come from the same cozy world of crony capitalism as
Enron’s Ken Lay: like the EU’s emergent technocratic elite, they share the same
152 Cris Shore

“habitus.”10 This might explain their reluctance to root out such sleaze. For exam-
ple, under the cover of the ‘war on terror’ and the general anxiety about Iraq,
President Bush has quietly slashed most of the new funding allocated to the Secu-
rities and Exchange Commission (SEC), the agency that oversees the corporate
finance world.11 That agency has itself become embroiled in scandal. On 13
November 2002, its newly appointed head, William Webster—a former federal
judge, FBI and CIA director, and the man brought in to restore integrity to the reg-
ulatory process—resigned, following the revelation that he had been the head of
the audit committee of U.S. Technologies, a company whose finances and deal
making are under federal investigation. Like his predecessor, Harvey Pitt, Mr.
Webster had failed to pass that information on to the other SEC commissioners.12
All this begs one final question: should ‘corporate ethics’ in business be
comparable to those in public administration? Or to put it another way, should
we expect the same standards of probity and accountability from public admin-
istrators as we do from those who manage our investments and pension funds?
Among the public at large, there is today almost an expectation that large cor-
porations put pursuit of profit before ethical considerations—or as Gordon
Gekko put it, “greed is good”—not only because it fuels progress and company
profit, but because it continues to be the bedrock upon which corporate Amer-
ica has flourished. In public administration there is no such excuse. In modern
democracies, administrations are supposed to exist to serve the public inter-
est—and taxation and public spending lie at the heart of the relationship
between citizens and the state. But here again is another interesting contrast;
in the EU there is no European public or a European press that can meaning-
fully claim to represent the ‘public interest’. Paradoxically, that is a role the
Commission claims for itself. Perhaps that is why fraud and mismanagement
have proved to be such intractable problems for the EU; the bodies created to
solve the problem may actually be part of the problem. At least Enron share-
holders have the possibility of voting out their discredited executives.

NOTES

1. O’Neill (2002) calls the accounting scandal an “outrage.”

2. Leader article, Economist, 17 August 2002, 11
3. Committee of Independent Experts. 1999. First Report into Allegations of Fraud, Mis-
management and Corruption in the European Commission.
4. For more detailed analyses of these events, see Macmullen (1999) and Shore (2000).
5. Significantly, this was also what some Commission analysts and insiders had predicted
at the time. See, for example, Spence (2000).
6. Financial Times, 1 August 2002, 1.
7. Cited in Trefgarne (2002: 4).
8. “Enron Scandal—The Burning Issue,” Financial Times (FT Expat.), 1 May 2002.
 Corruption Scandals in America and Europe 153

9. BBC News, 10 July 2003; Times, 26 September 2003

10. See Bourdieu (1990).
11. See Borger (2002).
12. See Michaels (2002).

REFERENCES

Borger, Julian. 2002. “‘ Clean-up’ Swept Under the Carpet.” Guardian Weekly, 7–13 November.
Bourdieu, Pierre. 1990. “Structures, Habitus, Practices.” Pp. 52–65 in The Logic of Practice,
trans. Richard Nice. Cambridge: Polity Press.
Committee of Independent Experts. 1999. First Report into Allegations of Fraud, Mismanage-
ment and Corruption in the European Commission. Brussels, European Parliament.
Macmullen, A. 1999. “Political Responsibility for the Administration of Europe: The Com-
mission’s Resignation March 1999.” Parliamentary Affairs 52, no. 1: 703–718.
Michaels, Adrian. 2002. “Webster Quits after Debacle at SEC.” Financial Times, 13 November.
O’Neill, Paul. 2002. Financial Times, 24 June.
Shore, Cris. 2000. Building Europe: The Cultural Politics of European Integration. London:
Routledge.
Spence, David. 2000. “Plus ça change, plus c’est la même chose? Attempting to Reform the
European Commission?” Journal of European Public Policy 7, no. 1 (March): 1–25.
Trefgarne, George. 2002. Daily Telegraph, 2 September.