Power politics - Labour and Enron

As the US Justice Department's criminal investigations continue into Enron, are nerves jangling among Labour's leaders?

The Feds may not be about to raid Millbank but it wasn't just President George Bush who had a close relationship with Enron. The company was also one of new Labour's closest business pals.

With Enron the largest US bankruptcy in history, many thousands of workers in Europe and the US looking at a future of unemployment, and pension plans wrecked, the Financial Times asked "why did the ratings agencies fail to smell a rat when there was an obvious stench?"

It might equally be asked why Labour's leaders also failed to smell a rat and spent years accepting money from, and dispensing friendship and favours to, the company.

Many people are aware of the close relationship that existed between Enron and President George Bush. But fewer know that Enron is also one of new Labour's closest pals in the world of business.

For years Labour has refused to acknowledge the appalling record of a company that, as long ago as 1995, was described by US-based Multinational Monitor as "one of the 10 worst corporations in the world".

Enron's finances were notoriously difficult to unravel. Fortune magazine described them as 'mind-numbingly complex'. That may let the market analysts off the hook but there can be no excuse for Labour fawning all over them. It's not as though Enron's record on human rights, industrial relations or the environment was a closely guarded secret.

In July 1997, just after Labour came to office, Amnesty International published a report on Enron's activities in Dabhol, India (the first and only time Amnesty has reported on a corporation rather than a country). Amnesty said that in response to local protests against an Enron power station, "the police, including the Special Reserve Police on the site of the company, have routinely used excessive force to suppress the protests and whilst arresting villagers and protestors, and those arrested have been held in conditions amounting to cruel, inhuman and degrading treatment." Amnesty also accused the police and security of being in "collusion" with Enron.

In that same year, during Enron's bid to buy Portland General Electric, Enron boss Jeffrey Skilling told an industry conference that electricity companies need to "cut costs ruthlessly by 50 or 60 percent", "get rid of people", because "they gum up the works."

None of this seemed to bother Labour.

Before the 1997 election, Labour was opposed to the 'dash for gas' that had been pushed by the Conservatives. So in 1998 Enron hired lobbyist Karl Milner to bring Labour round. Milner, a former aide to Chancellor Gordon Brown, boasted to an undercover reporter of how he could dodge around Labour's moratorium on gas plants: "The way you go about it is that you play on the existing prejudices within the cabinet for coal, you play on the existing prejudices within the cabinet for competition, and you play the forces off against each other. It's intimate knowledge of what's going on that produces results in the end."

In 1999 the successful lobbying resulted in the relaxation of the ban and Enron was allowed to build a gas-fired power station at Teeside in the northeast. In November 2000, Stephen Byers (then Trade Secretary) waved a final goodbye to the coal industry and lifted the moratorium completely. Enron gained consent to build another gas plant on the Isle of Grain in Kent.

At the 1998 Labour conference, Enron paid £15,000 to sponsor the Labour party's gala dinner. At the time, the government was considering whether to try to block Enron's planned takeover of Wessex Water. Shortly afterwards, ministers decided not to refer the Wessex Water acquisition to the Monopolies Commission.

In 1997 and 1998, Enron was a regular donor, giving around £27,500 to Labour. This government is very keen on preaching 'value for money', but Enron could teach everyone a thing or two about that. In the USA, Enron put millions behind their Republican friends. It wasn't necessary in Britain. This gives a whole new meaning to cheap Labour.

And their love-in with Enron continued - despite everything. In January 1999, Human Rights Watch accused Enron of complicity in serious human rights abuse in India:

"the Dabhol Power Corporation's responsibility, and by extension that of the consortium and principally Enron, goes beyond a failure to speak out about human rights violations by the state police. The company, under provisions of law, paid the abusive state forces for the security they provided to the company. These forces, located adjacent to the project site, were only stationed there to deal with protests. In addition, contractors (for DPC) engaged in a pattern of harassment, intimidation, and attacks on individuals opposed to the Dabhol Power project. When the victims of these acts attempted to file complaints with the police, they were met with official silence. Police refused to investigate complaints, and in several cases, arrested the victims for acts they did not commit. When these activities were brought to the company's attention, the Dabhol Power Corporation refused to acknowledge that its contractors were responsible for criminal acts and did not adequately investigate, condemn, or cease relationships with these individuals."

In 2000 and 2001, Enron made huge profits from the Californian energy crisis following the disastrous 'liberalisation'. Electricity prices (and Enron profits) went through the roof.

California governor, Gray Davis, blamed "the price-gouging energy companies, many of whom reside in Texas" for the power cuts and price hikes. Bill Lockyer, the state Attorney General offered whistle-blowers huge rewards for evidence of illegal price manipulations. The American media reported that his public enemy No. 1 was Enron chairman, Kenneth Lay.

However, new Labour was obviously more impressed by the fact that Fortune magazine described the company as the most innovative company in the USA. So, in the 2001 New Year's honours list, Ralph Hodge, head of Enron Europe, was awarded the rank of Commander of the British Empire for "services to the power generation and gas industries."

Perhaps Labour's leaders should have listened to the president of the Ontario Power Workers' Union when he said that he believed Enron was anti-union, and that 'if you have lousy labour relations standards then in the longer term that business is probably not a good business investment."

Instead in March last year, Enron was one of a select group of companies chosen to accompany Nick Raynsford, then planning minister, on a trade mission to Egypt.

Last August an explosion killed three people at Enron's Teesside power station. This was not the first explosion at one of its UK plants. There have also been explosions at other Enron plants around the world - the most devastating was in Puerto Rico in November 1996 in which 33 died and 69 others were injured.

But neither human rights, industrial relations, environmental nor health and safety concerns were allowed to stand in the way of Enron and Labour. After all, they didn't want to upset a company whose CEO, Jeffrey Skilling could boast a year ago: "There is a very reasonable chance that we will become the biggest corporation in the world" .

Finally, this year's honours included an MBE for Wessex Water director Gareth Jones "for services to environmental quality" (in 2000 Wessex was sixth in the Environment Agency's league of shame for multiple prosecutions).

Charles Secrett of Friends of the Earth described the close tie up of Labour and companies like Enron as exposing "the seamy underside of new Labour's attempt to reinvent itself as the party of business".

Now the US Justice Department has joined accountants and financial lawyers in investigating Enron, will Labour pull the plug on the close links with all their dodgy big business friends?

Don't hold your breath.

Steve Davies

[An version of this article first appeared in the February 2002 issue of Red Pepper]