The Enron Scandal: Part 5, The Twin Pipeline

The Twin Pipeline
A Saudi-backed, US-led consortium sought in the 1990s to bring Caspian oil and gas through Turkmenistan down through Afghanistan to Pakistan, and ultimately to other Asian markets. The gas line would go to Multan in central Pakistan. The oil line would go to Gwadar, on the coast. The line would benefit Enron in two ways, through its investment in the line and in Caspian fields, and by getting gas to Dabhol. Initially Unocal led the project. In December, 1998, Unocal claimed it was abandoning its Afghanistan pipeline project. Al Qaeda had bombed two US embassies in Africa, and President Clinton had retaliated by striking Osama bin Laden’s camp and lobbing some bombs at Kandihar. The Afghan civil war continued. It appeared that the Afghanistan pipeline project had been scrubbed because the US had shifted its attention to a plan that would run lines through Azerbaijan to Turkey.


According to the National Enquirer, a not very reliable tabloid, Enron had shown interest in an Afghanistan pipeline before and after Unocal’s announcement, had invested in a feasibility study and had made payments to the Taliban to win their friendship. The Associated Press reported that the firm gave the Taliban millions in bribes between 1996 and 2001. The pipeline had to cross Pashtun country, which was controlled by the Taliban, so the Americans were inclined to favor the Taliban.


The National Enquirer accurately reported that about twenty former CIA agents were on Enron payroll to handle such foreign operations, a fact reported elsewhere. The Enquirer quoted Atul Davda, once a high-ranking officer in Enron’s International Division, as stating: "Enron had intimate contact with Taliban officials. Building the pipeline was one of the corporation's prime objectives." In recent years, the quality of the Enquirer has improved dramatically, but this report cannot be trusted unless the mainstream press verifies it. To date, no effort has been made to verify it. If Enron were indeed still interested in the Afghanistan pipeline in 2001 as a means of saving its venture in northern India, the second Bush administration’s repeated efforts to interest the Taliban in an American-sponsored pipeline would make more sense. ( )
However, a US intelligence source told two London Guardian journalists that “There were always constraints on investigating the Saudis,” but that these were considerably tightened after Bush became president. One reason, the Guardian was told, was that the “hands off” order was necessary to prevent it from becoming public that some Saudis were paying protection money to bin Laden. According to Greg Palast, an American journalist working in London, “A group of well-placed sources -- not-all-too-savory spooks and arms dealers--told my BBC team that before September 11 the U.S. government had turned away evidence of Saudi billionaires funding Osama bin Laden’s network --.we got our hands on documents that backed up the story that FBI and CIA investigations had been slowed by the Clinton administration, then killed by Bush Jr.’s when those inquiries might upset Saudi interests.” Another reason was allegedly “Arbusto” and “Carlyle”, terms that refer to the Bush business ties with Saudis. Palast and The Guardian later learned that the George W. Bush administration ordered the intelligence agencies to “back-off” Clinton’s investigation of Khan’s nuclear operations in Pakistan. Perhaps this was because Saudi money trails might turn up.

John Loftus claimed that Vice President Cheney ordered the FBI and intelligence people to avoid investigating Al Qaeda activities in the US because such probes could damage negotiations with the Taliban over the twin pipelines. John O’Neill learned that the firm was dealing with Taliban, and Loftus claims he found paperwork that confirms this. Enron had initially been hired to determine if the pipeline deal was feasible, then Enron took the lead in the proposed deal in 1998. . The gas pipeline was to terminate in a Pakistani port city and a line was to connect it to the Enron power plant in northern India.
The Guardian obtained FBI documents that indicated there were restrictions on investigating possible terrorist plots. Shown on the BBC television program Newsnight, the file was coded “199,” which was a designation for national security cases. The material indicated the FBI could not investigate two of bin Laden’s relatives who lived in Falls Church, Virginia. Abdullah and Omar bin Laden were associated with a suspected terrorist organization, the World Assembly of Muslim Youth (WAMY) that had an office there. Abdullah was the director of the US branch of WAMY. Two of the September 11 hijackers used a false address several blocks away from the office. Apparently under Saudi pressure, the Clinton administration had limited the investigation of this organization. FBI sources disclosed that the restrictions became much worse under the Bush administration and that several investigations were effectively shut down. The restrictions were lifted after September 11. The French investigators Brisard and Dasquie claimed that powerful elements in the Saudi royal family support bin Laden and were able to pressure the US into shutting down the FBI investigation.
The Guardian team that reported on the Bush administration’s negotiations with the Taliban concluded that the attacks of September 11 were a preemptive strike on the part of Al-Qaeda. In view of the fact that these strikes were long planned actions, a better conclusion would be that the threats made by American negotiators might have had some influence on the timing of these tragic events. They probably would have occurred anyhow. One wonders what might have occurred if the FBI investigators had not been ordered not to pursue some aspects of potential terrorist activity.

John O’Neill, the most active FBI agent in investigating Al Qaeda, resigned soon the second Bush took power. He told two respected French investigators “All of the answers, all of the clues allowing us to dismantle Osama bin Laden’s organization, can be found in Saudi Arabia.” O’Neill was extremely frustrated by the Bush administration’s approach to terrorism, claiming the administration had also made it more difficult to investigate Saudis. O” Neill was aware of the Mohammed Atef document. He thought concerns about oil led the administration to prevent investigations of Saudi activities in the US. John O’Neill resigned shortly after an article criticizing him appeared in the New York Times. He had already been removed from the fast career advancement track, and he thought that interim director Tom Pickard planted the article because incoming director Robert Mueller wanted to replace O’Neill with a minion of the Bushes. O’Neill became director of security at the World Trade Center and died trying to save lives on September 11. The full truth of O’Neill’s claims about the Bush administration’s quashing of anti-terrorist activities may have gone to the grave with him. An American intelligence source told the Guardian that the “hands off” order was necessary to prevent it from becoming public that some Saudis were paying protection money to bin Laden. According to Greg Palast, an American journalist working in London,

A group of well-placed sources -- not-all-too-savory’spooks and arms dealers ’told my BBC team that before September 11 the U.S. government had turned away evidence of Saudi billionaires funding Osama bin Laden’s network Wee got our hands on documents that backed up the story that FBI and CIA investigations had been slowed by the Clinton administration, then killed by Bush Jr.’s when those inquiries might upset Saudi interests.

Another reason was allegedly “Arbusto” and “Carlyle”-- terms that refer to the Bush’s business ties with Saudis. John Loftus, a former federal prosecutor who claims to have sources within the intelligence community, claimed that Vice President Cheney ordered the FBI and intelligence agencies not to investigate Al Qaeda from January to August because these probes might endanger efforts to negotiate a pipeline deal with Afghanistan. Loftus also reported that Enron was involved in these investigations. Unfortunately, we only have the former prosecutor’s word for all this.

We do know that after the brief US War in Afghanistan that the pipeline project was again live and well and slated to terminate at a Pakistan city not too far from an Enron power plant in India that was in desperate need of cheap fuel . The public statements of two Chicago-based FBI men indicate that from the late 1990s on there was a policy of not opening criminal investigations of potential Islamic terrorists or the financial networks that supported them. ( )

It seems clear that the White House had put counterterrorism planning on the back burner, the Bush administration sharply reversed U.S. policy with respect to Afghanistan. Whether the new approach to diplomacy with the Taliban was related to the administration’s somewhat relaxed approach to counterterrorism cannot be known. Contacts with the Taliban were reopened and a vigorous carrot and stick approach was pursued in an effort to have Bin Laden turned over and set in motion a coalition government there. A coalition government, would open the door to the proposed twin pipeline across Afghanistan. The Afghan government would benefit from fees paid for construction rights and later for sending oil and natural gas through the lines. Through the U.N. sponsored A6 plus 2" talks, the United States left the strong impression that the Afghan government had a choice between a carpet of gold or a carpet of bombs. Brisard told an interviewer in Paris that the US representative said “either you accept our offer of a carpet of gold, or we bury you under a carpet of bombs,'" ( )

Laili Helms, niece by marriage to former CIA director Richard Helms, quickly arranged for Sayed Rahmatullah Hashimi, an envoy of Mullah Omar, to visit Washington. Helms, whose two grandfathers had been Afghan officials, was a working as a public relations consultant for the Taliban. Not long after that, bin Laden announced in a written statement that he and Omar has sworn baya or blood brotherhood. Dr. Christiana Rocca, who had been a CIA operative in Afghanistan from 1982 to 1997, began working on the Afghanistan problem for the State Department in May.

In that month, State Department representatives met with counterparts from Iran, Italy, Germany, and in Geneva to discuss the matter. In July, the matter was again discussed at the Group of 8 meeting in Genoa. An Indian observer was also present for these discussions and even contributed plans(. ) In a May meeting in Geneva, the US unveiled plans to attack Afghanistan. Representatives of Iran, Germany, and Italy were present. When the Group of Eight met in Genoa in July , war with Afghanistan was again discussed. The US was busy acquiring base rights in Pakistan, Uzbekistan, and Tajikistan. ( )

The 6+2 negotiating process was also in motion with Francesc Vendrell, personal representative of UN Secretary-General Kofi Annan, making five trips to Kandahar and Kabul between April 19 and August 17. There also a stormy UN sponsored meeting in Brussels on May 15 which the Taliban foreign minister refused to attend because Dr. Abdullah Abdullah, the Northern Alliance representative was there. Twenty-one nations had representatives at Weston Park in England in July, where a coalition government under the oversight of former King Zahir Shah was tentatively agreed.

There was a March meeting of the UN-sponsored A group of 6 + 2" in Berlin. The 6+2 meetings were “level-2” discussions because they were attended by former government officials. These former officials tried to reflect the policies of their governments, but their lack of official positions gave their governments a large measure of desirability if something went wrong. Nevertheless, they were useful forums for exchanging ideas that clearly represented the positions of the governments involved. The small US delegation included Tom Simons, former ambassador to Pakistan, and Robert Oakley, a Unocal lobbyist and former ambassador. Another Berlin meeting was held in July. The Taliban was expected to send a spokesman, but he did not appear, probably because the Northern Alliance was represented there. It was later reported in Europe that the US spokesman said that the Taliban could either A accept our offer of a carpet of gold, or we bury you under a carpet of bombs.'' Simons denied that a direct threat was made in these words but conceded that the subject of force may have come up in connection with a discussion of the investigation of the attack on the USS Cole. He also said that “It is possible that an American participant, acting mischievously, after some glasses, evoked the gold carpets and the carpet bombs.” Whatever Simons’ exact words were, people came away convinced that the US was determined employ force in Afghanistan if it did not get its way. A British newspaper later reported that it was said that the bombing could begin as early as October. ( ) Niaz Naik, Pakistan’s former foreign minister , reported back to his government that he was US would resort to force if Pakistan could not persuade the Taliban to come into line. Pakistan passed this information on to the Taliban. It was later reported on French television, “Islamabad and Pakistani military circles were buzzing with rumors of war.” ( )

Christina Rocca, represented the US at its last meeting with the Taliban, which occurred five weeks before September 11 in Islamabad. At that meeting she demanded that the Taliban turn over bin Laden. ( ) In an interview, Brisard commented on the Islamabad meeting:
We believe that when [Rocca] went to Pakistan in [August] 2001 she was there to speak about oil, and unfortunately the Osama bin Laden case was just a technical part of the negotiations. He said, ‘I'm not sure about the pipeline specifically, but we make it clear she was there to speak about oil. There are witnesses, including the Pakistani foreign minister.’ ( )

Journalists outside the United States have discussed these events in detail and raise the possibility that the threat of military action may have had a direct effect on the timing of Al Qaeda’s attack on America. The last US-Taliban meeting occurred five days before 9/11.

Factors Contributing to the Debacle
A number of factors made possible the Enron debacle. The Commodity Futures Commission on January 14, 1993 removed energy futures contracts from regulatory scrutiny. Wendy Gramm wife of Republican Senator Phil Gramm, was chair of Commodity Futures Trading Commission and pressed for this policy. She subsequently took a seat on Enron’s board of directors, and served on Enron’s audit committee. The Commodity Futures Modernization Act of 2000 deregulated the derivatives market. Enron conducted much of its business through 2, 832 subsidiaries and partnerships, 881, which were located in tax havens like the Cayman Islands. The Enron subsidiaries and partnerships that were not located in tax havens were used to hide losses and also generate large bonuses and payouts for Enron executives. Losses were hidden to boost Enron stock prices. There is no way of knowing how much money could be stashed in the tax havens or whether losses were also transferred to them. The use of offshore subsidiaries and accounts is a common practice, and the Center for Public Integrity estimates that the United States loses $195 billion a year in revenues because of them.

The Clinton administration had launched an effort to clamp down on the abuse of tax havens, but the Bush administration announced it was abandoning this effort. Conservative think tanks had done a great deal to prepare the way sharply reducing restrictions on offshore tax havens. Among these foundations were the American Enterprise Institute, the Institute for Policy Innovation( whose founder was Dick Armey), and the American Council for Capital Formation, which had Ken Lay on the board of directors. All of these factors help explain why Enron’s creative bookkeeping and other abuses escaped scrutiny.( )

The Bush administration deflected criticism of its close ties with Enron and efforts to rescue it by coming out quickly with rhetoric about the need for reforms to prevent such a debacle from occurring again. The Justice Department came down very hard on Arthur Andersen, the Enron auditor, but behind the scenes the administration work hard and effectively to prevent legislation that bring about effective accounting reforms. One example of existing accounting problems was how stock options, which amount to about 60% of executive pay, are handled. They are not deducted from corporate profits on statements that influence stock prices, but they are deducted for tax purposes. In 2000, the deduction of options allowed Enron to change the bottom line on taxes from $112 million owed to a $278 million refund. This ploy saved Microsoft $2.06 million in taxes. Efforts to rectify this problem were blocked in 1994 and 1997, and President Bush led efforts to prevent reform in early 2002. His administration even called for a reduction in the number of SEC investigators. Senator Joe Lieberman, a New Democrat, had consistently opposed reforming this accounting rule up to that time, and Senate Majority leader Tom Daschle for some reason found it necessary to shift from support of the reform to a noncommittal stance. Other accounting reforms were also on the track of being left to the accounting industry itself to generate new standards.( )

While Enron executives were unloading their stock, they required employees to retain Enron shares held in their pension plans. There was a public outcry about the injustice of this. President Bush promised pension reform in 2002, meaning a measure that would prohibit companies from locking employee pension plans into company stock, as had happened in the case of Enron employees. The House version of the bill made it easier to under fund pension plans and to strip more employees of pension benefits. There was almost no reporting of the progress of this legislation. Knowing that the final product would be a compromise that would emerge from a conference committee, the Senate Democrats passed a measure that preserved the best features of existing pension legislation. ( )
Sherman Skolnick’s Take

The late Sherman Skolnick insisted that Enron had a partnership with the CIA, the Bush Family, and the Republican party, and that it moved and laundered money for all three. For the Bushs and CIA it handled money from the movement of gold, drugs, and arms. Its 4000 off-shore accounts were used to park Bush and CIA money. J. Clifford Baxter, a high Enron official, was suicided according to Skolnick because he knew too much about the firms work for the CIA. He claimed that Marc Racicot, Enron lobbyist and former governor of Montana, used Enron money to buy off Democratic election officials in southern Florida in 2000. It is known that Enron was peppered with former CIA people, and that its security was handled by Secure Solutions International, which was former by four former CIA agents and an FBI retiree. The CIA also gave several agents leaves of absence so they could work for Enron. Two sources told Tom Flocco that the agency permitted Enron to use the satellite Echelon to gather valuable business information from telephone calls, e-mails, and other electronic communications. ( ) The Punch of Bahrain quoted a CIA source as saying the Enron had employed agents around the world to act as its business agents. The article mentioned Afghanistan as a case in point. ( )

Enron was also accused by Skolnick of using Chicago markets for illegal speculation in soybeans, currency, and much more. As early as 1988, Enron was accused of diverting $142 million to Panama. Ken Lay denied it happened. Skolnick also suggested that the FED siphoned off Enron funds to prop up the Dow Jones Average in 2001 and pointed to a Knight-Ridder story to support the claim. In his view it was a latter day BCCI, it had the same functions and was discarded after it served its purposes. ( )

Maybe Skolnick thought he could believe his sources because he knew about the firm’s involvement in sex videos. That is the sort of thing that intelligence agencies and their proprietaries ( firms that are fully owned by the CIA) have done in the past. He claimed that the CIA and Enron worked through several Chicago banks to loot Vatican holdings, and he added that the same forces brought down the pope’s soy bean corporation. Skolnik detests the church, and his judgment might have been based on the knowledge that someone with vast assets and power had to be involved in these maneuvers. Moreover, the Chicago federal bench has a number of former CIA operatives as sitting judges. As for the claim that the FED found it necessary to commandeer billions of Enron funds, he could have recalled the S &L scandal, in which t he CIA clearly looted many banks. We do know that in addition to CIA proprietary, there are firms the agency uses extensively. Jon Christian Ryter noted, “Before the CIA became interested in it, Enron was just a small, inconsequential American gas and electric reseller that did not interest anyone.” The firm became a major player in the extension of US political and economic influence. DynCorp , which is closely connected to Enron, is a CIA proprietary firm.

The reader should be warned that this last section on Skolnick’s claims borders on being an excursion into parahistory and is necessarily speculative.. We are dealing with matters about which the full record will never be available. It is difficult to assess the extent to which Skolnick was right. Anyone who bothers to looks at the details of J. Clifford Baxter’s death and the subsequent botched investigation would know that the death was not a suicide. The problem is that he stopped naming sources after bad things happened to some of them. He has broken some major stories and done more than anyone else to clean up the federal courts in Chicago. This writer has frequently rejected his stories as outlandish, only to discover later that Skolnick was on track. However, there are still several of his major claims that are rejected by me.





Sherman has written African American Baseball: A brief History, which can be acquired from LuLu Publishing on line.