Wednesday, February 20, 2002

It seems that some folks are concerned that with Enron, the Republicans have all the business scandal action to themselves, and they really think the Democrats should have one too. In that spirit, they offer the Global Crossing mess.

There are similarities. Both are high-profile bankruptcies of large corporations. In both cases, politically connected individuals with ties to the company made money on the stock; in both cases there may have been revolving-door activity between government offices and the board. And of course, in both cases, there were hefty campaign contributions favoring one party --- in Global Crossing's case, the Democrats.

But there's one element of the Enron mess that the Democrats' would-be benefactors are having trouble finding in Global Crossing --- the, uh, payoff for the pay-offs. If you're going to talk about bribery, you should be able to find a quid to go with the quo.

The Enron case offers several, as I've written before: Enron got Bush to personally lobby on its behalf while he was governor of Texas; it also got exactly the government policy it wanted in areas crucial to its business, including the California energy crisis, which affected millions of people, and open access to state power grids. In that last case, when the chairman of the Federal Energy Regulatory Commission wouldn't go along with Ken Lay's policy, the chairman got bounced in favor of a Texas crony of Bush and Lay.

What do the Democrats' benefactors offer for comparison? The best I've seen so far (in fact, the only thing I've seen so far) is this:

Is anybody going to make the connection between Clinton's Secretary of Defense Bill Cohen, who now serves on the Global Crossing board, and the 'grease-skidded' award of a $400 million DOD contract that the Bush Administration canceled due to a faulty bidding process?

I don't want to minimize the seriousness of the accusations here. Surely, if true, this must be the first case of rigged bidding at the Pentagon to have been seen in modern times. But, sadly for the Democrats, their would-be benefactors overstate their case, starting with the value of the contract. The contract awarded was a three-year deal for $137 million, very roughly $40 million a year, which the government could renew, at its option, for another seven years. Only if the government chose to renew for all seven years would the company receive $400 million. (Even the initial $137 million was almost certainly not to be paid up front, but that's a detail).

To put these numbers in perspective, they would be a rounding error in the Pentagon's recent, remarkably generous ten-year lease of 767 airliners for use as tankers, which clocks in at $30 billion total, or $3 billion a year. This deal would be much cheaper if done as a straight purchase, not a lease, not least to avoid the conversion of the planes back to commercial configurations at the end of the lease at government expense. (It was, incidentally, pushed hard by Washington State's Democrat Senators and Representatives; personally, I'm with the Republican, McCain, who denounced it as "corporate wefare"). Or, if you like, you can compare the Global Crossing deal to the $2.4 billion cost of a single B-2 bomber, the plane that stains and can't fly in the rain.

There is, in short, less here than meets the eye.

Still, the folks who are looking into Global Crossing have a point, and it's good to see them acknowledge that close ties between government and industry can create problems --- problems which are only exacerbated by our current campaign finance system, as their focus on Global Crossing's campaign contributions seems meant to show. I look forward to their support and advocacy of proper reform to clean up the mess.


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