Puppets of Enron

This is the story of Rs. 6,000 crore, a greedy and desperate company, and a prime minister and power minister determined to prevent the second from grabbing the first. They succeeded, and thus it was that Kenneth Lay failed in pulling off a magician’s trick — pulling out over a billion dollars from India’s turban...

On September 11, 2001, four planes were hijacked, and the United States awoke to the bloody reality of terrorism. All Americans, we were assured, had suddenly forgotten everything else, united in a grim determination to revenge themselves.

All? Well, that might have been hyperbole. On September 14, a mere three days after the World Trade Center came down, Kenneth Lay had more pressing matters on his mind. The boss of Enron was penning a letter to the prime minister of India, rudely demanding compensation for the 65 per cent stake which Enron held in the Dabhol venture.

I said “rudely”, and meant just that. The wording was certainly not that normally used by one gentleman writing to another, leave alone in an epistle addressed to the head of government of the world’s largest democracy. It should have been thrown into the wastepaper-basket on that account alone.

The subject matter was as astonishing as the manner in which it was presented. Enron was trying to blackmail the Government of India into presenting it with “compensation”. The American firm claimed its 65 per cent stake was worth US $ 1.2 billion, Rs. 6,000 crore in Indian currency. (The other stockholders in Dabhol are Bechtel with 10 per cent, General Electric with 10 per cent, and the Maharashtra State Electricity Board with 15 per cent.) Enron also wanted the Government of India to stipulate that the firm would not be held responsible for any debts incurred by Dabhol, external or internal. Lastly, Enron wanted dollars, and wanted them immediately.

This letter followed public threats from Enron officials as well as their supporters in the American government. In one interview, Kenneth Lay accused India of seeking to “expropriate” Enron’s property by acquiring Dabhol’s assets below cost. “There are,” he said, “US laws that could prevent the US government from providing any aid or assistance to India going forward if, in fact, they expropriate property of US companies.”

Everyone in Washington — and Delhi and Mumbai too — knew this was no idle talk. Enron, a Texan firm, had been the single largest contributor to George Bush’s presidential campaign. Vice-President Cheney is a former oilman with extensive links to his old friends in that industry.

Even if Indian officials were ignorant of all this — and their homework was surprisingly lax if they did not know — they would have been rudely reminded of it. Several high-ranking Indians toured the United States in 2001. According to reports released under the US Freedom of Information Act, many — bureaucrats and politicians, those linked to the BJP and those to the Congress (I) — came under intense pressure from some of the highest officials in the United States.

My American friends insist at least five top officers in the Bush administration relentlessly pushed Enron’s case to every visiting Indian. (They stopped short only at President Bush raising the issue with the prime minister himself.)

I am not interested in naming names (though they have already appeared in the American media). At this point, I am interested solely in the effects of this pressure — especially in such places as the prime minister’s office and the Union ministry of finance. If there were pro-Enron men in Washington, there were also pro-Enron men in Delhi.

As I understand it, there was a move by the prime minister’s office to bring the ministry of finance and the power ministry to see reason — on Enron’s terms, of course. The ministry of finance apparently raised no objection. Mercifully, the power ministry proved tougher. Even more happily, the prime minister put his authority behind the Union power minister.

At this point, I should point out that there had never been any independent appraisal of the value of the shares held by Enron. Nor had the issue been debated by the Union Cabinet. From beginning to end, it was an attempt to settle the issue on Enron’s terms!

With both the prime minister and the power minister opposing it, this should have been an end to any further tricks by Enron. But Kenneth Lay then got his supporters in Delhi to back another proposal. This time, Enron suggested US $ 800 million (Rs. 4,000 crore) as a fair price for its assets. Again, certain bureaucrats agreed — and again I am sure that valuation was not independently assessed.

By this time, it was a little too late for Enron. News of its impending bankruptcy had become common knowledge, which meant even its most ardent supporters were seeking shelter. But can we end here?

Only the watchfulness of the prime minister and his power minister had prevented the National Democratic Alliance government from a huge scandal — and India from suffering a huge loss. I don’t care if the entire Bush administration were in bed with Enron; but it is a different matter if that firm influenced men in Delhi.

Who were — note the plural — powerful enough to try an end-run around the finance ministry and the power ministry? Who backed the move to pay Enron US $ 1.2 billion without any appraisal? Finally, who decided that US $ 800 million was a fair price once the original proposal was rejected?

The United States House of Representatives and Senate have started independent investigations into the Enron scandal. Enron, its auditors, members of the Bush administration — all these shall come under scrutiny. But why should senior officials in India get away after dancing to Enron’s piping?

Several men were a little too anxious to please Enron, even at the cost of throwing standard financial processes and mandatory accounting procedures to the winds. The haste to gift the American firm US $ 800 million at the eleventh hour was unbelievable! Can we entrust our economy to such officers?

References have been made in the American Press to men in the prime minister’s office itself, and it is only a matter of time before the Enron issue becomes an open scandal in India too. I hope the prime minister intervenes directly — to squash the allegations, or to chastise the guilty.

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