News
Intelligence Analysis
Fraud Traced to the White House
How
California’s energy scam was inextricably
linked to a war for oil scheme
______________________
By Katherine Yurica
This story begins with the California energy
crisis, which started in 2000 and continued through the early
months of 2001, when electricity prices spiked to their highest
levels. Prices went from $12 per megawatt hour in 1998 to $200
in December 2000 to $250 in January 2001, and at times a megawatt
cost $1,000.
One event occurred earlier. On July 13,
1998, employees of one of the two power-marketing centers in
California watched incredulously as the wholesale price of $1
a megawatt hour spiked to $9,999, stayed at that price for four
hours, then dropped to a penny. Someone was testing the system
to find the limits of market exploitation. This incident was
the earliest indication that the people and the state could become
victims of fraud. The Sacramento Bee broke the story three
years later, on May 6, 2001.
Today, Californians are still paying the
costs of the debacle while according to state officials the power
companies who manipulated the energy markets reaped more than
$7.5 billion in unfair profits.
During those early months of the Bush administration,
and even during the prior transition period, Dick Cheney was
deeply involved in gathering information for a national energy
policy. The intelligence he gathered would provide justification
for a war against Iraq but would also place White House footprints
all over a fraud scam. This is how it all happened.
Enter the Lead Villain
That Ken Lay, the former chairman of Enron,
enjoyed a long and close relationship with George Bush senior
is a well-known fact. What isn’t so well known is that George
W. Bush also benefited from a close relationship with Lay. No
one supported the younger Bush quite like Lay. Enron executives
contributed more than $2 million to George W. Bush’s political
campaigns since 1999, earning Lay an open door to the governor’s
office. Lay was also Bush’s number one choice for Treasury
Secretary. A study authorized by Rep. Henry Waxman reveals that
Enron had 112 known contacts with the Bush administration in
2001. This figure does not include seventy-three disclosed contacts
between former Army Secretary Thomas White and his former colleagues
at Enron. (Secretary of Defense, Donald Rumsfeld, recently fired
White.)
Significantly,
Ken Lay was also a close friend to Dick Cheney who is a former
Enron shareholder. It should come to no one’s surprise that
given the relationships, Ken Lay was selected to work on the
Bush energy transition team under the chairmanship of Cheney.
Lay’s easiest assignment? He interviewed potential candidates
for the Federal Energy Regulatory Commission, an agency that
would oversee his company (and months later lead a slow, long
investigation into Enron’s role in the California energy
debacle). The President picked Lay’s nominee, Pat Wood,
to serve as chairman of the agency.
Ken Lay was a very useful and a very knowledgeable
man to have around. He knew, for instance, of the holes in the
California power market that could be exploited. He tried to
warn officials about the problem in 1994 when Enron testified
at a Public Utility Commission hearing. Unfortunately his advice
was ignored. Enron then went with the flow. It reversed itself,
endorsed the system, and lauded the politicians for setting up
what Enron knew was an exploitable and faulty infrastructure.
As events would unfold, the dark side of
Enron got part of its comeuppance when the Justice Department
began investigations of Enron’s role in the California energy
disaster.
Along with Dynegy and other power brokering
companies, Enron employees were subject to federal criminal charges.
One Enron employee pleaded guilty to wire fraud while Dynegy
agreed to pay $5 million in fines.
Enter A Little Damning Document
In April of 2001, Ken Lay handed Dick Cheney
a two-page memorandum recommending national energy policy changes.
The memo contained Enron’s positions on specific, rather
technical issues, which were presented as a “fix” for
the California crisis. (Enron brazenly advised the administration
not to place price caps on energy, which would be precisely the
request California officials made to the President, and which
the President and the Vice President would just as brazenly deny
until public pressure forced them to capitulate.)
According to a
special report prepared for Rep. Henry A. Waxman, over seventeen
energy policies recommended by Enron made their way into the
official White House National Energy Policy report.
Congress awoke from its somnambulism, having
become alarmed at Enron’s close association with the Bush
administration. Congressional committees asked Dick Cheney for
the names of those who advised him and the reports he relied
upon in drafting the nation’s energy policy. Cheney bluntly
and adamantly refused to reveal those facts. After months of
standoff, the General Accounting Office (GAO) filed a suit against
the Vice President in an effort to obtain the requested information.
The White House then developed a fascinating legal strategy that
helped them triumph over the legislative branch.
Defense attorneys from the civil division
of the Justice Department should have been assigned to the case.
However, in an unprecedented move, the Bush administration required
the services of the nation’s number-one-gun, Theodore Olson,
the Solicitor General, who normally only makes appearances before
the Supreme Court. Olson, his Assistant Solicitor General, and
a handpicked group of Justice Department lawyers formed a special
“trial defense task force” to defend the Vice President.
This act telegraphed to the court, press, and public that this
was no ordinary case. The move paid off, a federal judge found
for Mr. Cheney and the GAO declined to file an appeal. That,
more or less, marked the end of the story. But then something
happened.
Enter Obscure News Article
On October 6, 2002, a newspaper in the UK
published a little known article about Mr. Cheney’s advisers.
According to Neil Mackay, an award-winning journalist, writing
for Scotland’s Sunday Herald, Dick Cheney commissioned
an energy report from ex-Secretary of State, James Baker III.
The time of this “commission” is not reported, but
since the members of the appointed task force held three videoconferences
and teleconferences in December, January, and February 2000-2001,
Cheney therefore logically contacted Baker some time prior to
the December 2000 meeting—during the presidential transition
period.
Enter the Man Who Gets Things Done
James Baker was uniquely situated to fulfill
Cheney’s commission, for among the many hats he wears, he
is legal counsel to the Carlyle Group, one of the nation’s
largest defense investment firms whose board consists of former
high level government officials, including George Bush senior.
Baker was also the “hired gun” for George W. Bush’s
campaign in Florida, along with Karl Rove. But among the hats
he wears, none is more valuable than his ability to become invisible
and leave no fingerprints behind. James Baker courts the press
and is hailed a statesman; he also serves as the honorary chairman
of the James Baker III Institute for Public Policy at Rice University,
a think tank that was involved in aiding the George W. Bush presidential
transition teams.
Equally intriguing is the fact that Baker
has ties with both the Bushes and Ken Lay. Years earlier, in
1993, after Baker stepped down from his stint as Secretary of
State, he and Robert A. Mosbacher—Bush senior’s commerce
secretary—signed a joint consulting and investing agreement
with Enron. The two men began a lucrative career making joint
global investments with Enron on natural gas projects. Baker
Botts LLC, James Baker’s law firm, flourished in its specialty
of international oil and gas counseling.
Since Baker walked in their circles, when
he set out to select an energy team to advise the White House,
he filled it with leaders of the oil, gas, and power industries.
Three appointees stand out: Kenneth Lay from Enron, who was working
on the Bush Energy Transition team under Dick Cheney at the time;
Chuck Watson, the then Chairman and CEO of Houston’s Dynegy
Inc., and Dynegy’s General Counsel and Secretary, Kenneth
Randolf. Both firms were deeply involved in illegally manipulating
the California energy market at the time and eventually faced
criminal investigations.
The oilmen selected for the task force were
Luis Giusti, a Shell non-executive director, formerly CEO of
Petróleos de Venezuela, S.A.; John Manzoni, regional president
of British Petroleum; David O’Reilly, Chief Executive of
Chevron/Texaco; and Steven L. Miller, Board Chairman, CEO and
President of Shell Oil.
In his Sunday Herald article, Neil Mackay
links another Fellow of the Baker Institute to the document,
Sheikh Saud Al Nasser Al Sabah, the former Kuwaiti oil minister.
The Baker Institute’s report on energy was funded through
Khalid Al-Turki and the Arthur Ross Foundation.
Sometimes a mystery is hidden in a loaded
detail that most of us would rather skip over. A case in point
is this: the Baker task force report shows a forty-one member
task force, but the press release gives fifty-one as the number.
This of course, could be just a typo. But when we look at the
structure as revealed in the report, it shows the Baker energy
task force team was divided into three separate groups. First
came the names of the forty-one-all-star task force. Secondly,
came the names of nine observers. And thirdly, there was an unknown
number forming a group of “reviewers” whose identities
were not disclosed, but who collectively had “broad academic,
economic, and energy expertise.” According to the acknowledgements
these “individuals reviewed drafts of the report at various
stages and participated in the Task Force meetings.” Perhaps
the most telling admission is that the final version was “greatly
enhanced” by this shadowy group.
Enter Major Document No. 1
The Baker energy task force produced a report
titled, Strategic Energy Policy Challenges for the 21st Century,
dated April 2001. There is no mistaking the fact that reasonable,
detailed and important expert advice is meted out to the new
president. However, this amazing 107-page report strikes a drumbeat
for action that grabs the reader as it propels a picture of a
naked, energy-scarce nation, subject to energy shortages and
price fluctuations, across its pages. Contrasting the state of
what is, against what should be, and mercifully making powerful
recommendations that will “save our economy,” it offers
warnings such as: a sharp rise “in oil prices preceded every
American recession since the late 1940s.”
The California energy crisis is raised again
and again, along with the prophecy that America can expect “more
California-like incidents” in the future. There’s even
a connection made between the California crisis and the Middle
East, which according to the report, “will remain the world’s
base-load supplier and least expensive source of oil for
the foreseeable future.” With that prophetic utterance,
the stage is now set for a new actor, a new villain, and a new
energy policy.
Enter Saddam Hussein
According to the Baker report, Saddam Hussein
became a swing oil producer by turning Iraq’s oil taps “on
and off” whenever he felt that it was in his interest to
do so. During these periods Saudi Arabia stepped up to the plate
and provided replacement oil supplies to the market to keep California
type “disruptions” and scarcity from occurring in America.
Hussein, the report says, used his own “export program to
manipulate oil markets.” The report’s implications
are clear: the national energy security of the U.S. was now in
the hands of an open adversary and the Saudis might not make
up the difference in the future. The Baker report recommends:
“The United States should conduct an immediate policy review
of Iraq, including military, energy, economic and political/diplomatic
assessments…. Sanctions that are not effective should be
phased out and replaced with highly focused and enforced sanctions
that target the regime’s ability to maintain and acquire
weapons of mass destruction.” Military intervention is listed
as a viable prospect.
According to Neil Mackay in the Sunday Herald
article, James Baker delivered the report to Dick Cheney in person
in mid April 2001.
The subsequent events of September 11, 2001
helped take the world’s eyes away from the notion that an
invasion of Iraq is for oil, but according to Mackay’s sources,
the Bush cabinet agreed to military intervention in Iraq six
months earlier, in April of 2001.
Enter Major Documents No. 2 and 3
A haunting familiarity exists between the
Baker energy report and another policy paper that could negatively
impact the Bush administration. The style of the two reports
is similar, particularly in discussions on national security;
their task force methodologies are essentially the same; they
share the repeated use of a relatively rare term; they share
similarly constructed phrases; they both name Iraq as an adversary
and they both attack problems in the same manner. There is a
possibility that one writer served on both task forces.
A little background is necessary: In
June of 1997 a group of former republican administration officials
launched The Project for the New American Century, a think tank
offering research and analysis on a “revolution” in
modern military methods and military objectives. Like the energy
task force, the passionate neo-conservative authors endowed their
Principles with hard-hitting force, calling for the necessity
of “preserving and extending an international order
friendly” to America’s “security, prosperity and
principles.” The founders wrote: “The history of the
20th Century should have taught us that it is important to shape
circumstances before crises emerge and to meet threats before
they become dire.” In fact, on pages 51 and 67 of the institution’s
intellectual centerpiece, Rebuilding America’s Defenses,
the authors lament that the process
of transforming the military would most likely be a long one,
“absent some catastrophic and catalyzing event—like
a new Pearl Harbor.” (How unfortunate for Americans, they
got their needed event on September 11, 2001.)
The signers to the “principles”
read like a who’s who of the Bush administration plus a
chorus line of supporters: Dick Cheney, I. Lewis Libby, Donald
Rumsfeld, Paul Wolfowitz, and Elliott Abrams, plus world famous:
William Bennett, Jeb Bush, and Dan Quayle, among others.
The signers endorsed two other dynamic enabling
policies: increased military spending, and the necessity of challenging
“regimes hostile to America’s interests and values.”
The seventy-six-page Rebuilding America’s
Defenses was published in 2000. With a lot of expositional
swagger, the authors created not only the ideal military preparedness
level for their goal of global domination, but they identified
a new kind of warfare that requires far less “force”
than the military was accustomed to accept. What’s more,
they identified the “hostile regimes” mentioned in
the “Principles” to be none other than Iraq, North
Korea, Iran and Syria.
The report credits Thomas Donnelly, a military
writer, as “principal author,” and lists twenty-seven
participants, some of whom contributed a “paper” to
the discussion. The list of participants includes Dick Cheney’s
present chief of staff, I. Lewis Libby as well as Paul Wolfowitz.
The two documents clearly show that before
George W. Bush took office, key officials of his future administration
not only listed Iraq, Iran, and North Korea as “adversaries”
who “are rushing to develop ballistic missiles and nuclear
weapons as a deterrent to American intervention in regions they
seek to dominate,” but endorsed an alien concept, the doctrine
of pre-emptive strikes against those nations believed
to have hostile intent against the U.S. before such intent
is manifested.
Enter Document No. 4
On May 16, 2001, Dick Cheney officially
handed the National Energy Policy (national report) to
George W. Bush. Ostensibly the cabinet members that formed the
National Energy Policy Development Group (NEPDG) were its authors.
But a careful study and comparison of the national report with
the Baker report reveals the Baker report provided the skeleton
framework upon which the national energy policy was hung. However,
the skeleton was broken up into unrelated parts: the skull in
the middle, the thigh bone on top.
When it was all unraveled, almost every
major policy action in the Baker report was incorporated into
the national report. The tedious process of comparing the two
reports with each other occasionally revealed a subtlety. For
example, the Baker report says, “The U.S. must have a strategic
energy policy based on energy security.” The national report
subtly changes this to: “The NEPD Group recommends that
the President make energy security a priority of our trade and
foreign policy.” This foreign policy change led
to the discovery that an important topic is missing from the
national report.
Although every other oil producing country
was discussed in the national energy text, two countries were
glaringly omitted from even a mention: Iraq and Iran. There’s
an explanation for the omissions: First, in reading the Baker
report one is struck by the strategic military information provided,
which would be odd and inappropriate in a report on energy. Secondly,
the Baker report is divided into two sections: the first part
focuses on strategic steps the new administration should take
immediately. The second part focuses on long-range energy policy.
“Taking care of Iraq” is listed as an immediate step
in the Baker report. The national report, however, focuses solely
on long-range policy.
Enter Incriminating Statements
One of the most striking facts about the
national report is that it makes 110 references to California’s
energy crisis, which was ninety-nine more than the Baker report
makes. Clearly, someone in the White House needed an impressive
energy crisis to tout. How unfortunate that the crisis cited
was fraudulently induced. Like the Baker report, the national
report states, “The California experience demonstrates the
crippling effect that electricity shortages and black outs can
have on a state or region.” Warnings abound: “America
in the year 2001 faces the most serious energy shortage since
the oil embargoes of the 1970s.” The 110 repetitions of
the word “California” linked with words like “energy
crisis,” and “energy shortages and price spikes,”
could turn the national energy report into an ad man’s prized
primer.
Notwithstanding its importance as an example
of what could happen to other states, the author of a passage
(at page 5-12) of the national report suddenly yields to an impulse
to relate what really happened in California. In doing so, he
completely contradicts at least 105 references to California
throughout the report. The significance of this contradictory
entry into the National Energy Policy must not be underestimated.
In the process of reversing the carefully
construed “California experience,” the author’s
grasp exceeds his knowledge in that his understanding
of the events in California go beyond what he should have reasonably
known at the time of its writing. For he wrote, “The risk
that the California experience will repeat itself is low, since
other states have not modeled their retail competition plans
on California’s plan.” This is an astounding statement.
If the California crisis was caused by a supply shortage as the
author claims a line above this sentence, surely other states
could suffer similar shortages. But no, the author is actually
making an admission here: he is admitting the energy crisis in
California can’t be replicated in other states because certain
market means do not exist in the other states. How could the
author know this? The writer of that sentence would have
to be someone intimately involved in the California system; know
the real cause of the state’s crisis; and be familiar with
all the other state rules and market infrastructures.
But our knowledgeable author is not done.
In trying to amplify what he just revealed, he tried to hide
the true actors in the next sentence by misdirecting the reader
away from the culprits to blame the state. This is a formula
for incoherence. Nonetheless, the writer’s sentence found
its way into the national energy report where it spoke for the
Bush administration: “California’s failure to reform
flawed regulatory rules affecting the market drove up wholesale
prices.” If this sentence is read literally, it asks the
reader to believe that a state’s experience of failure to
amend its rules, along with the flawed rules themselves, somehow
had an independent power to “drive up wholesale prices,”
without an intervening acting agent. The only sensible reading
left to us is that the flawed rules allowed power brokers to
manipulate the system. But how could our author and his administration
editors know this to be true without being in collusion with
the wrongdoers? If they were not in collusion they would have
reported the crime. But if they remained silent when they had
a duty to report or stop the commission of a crime, they became
accessories.
Continuing his unexpected analysis, the
author tells us, “Actions such as forcing utilities to purchase
all their power through volatile spot markets, imposing a single-price
auction system, and barring bilateral contracts all contributed
to the problems that California now faces.” This is nothing
more than the author, and through him the White House, attempting
to throw responsibility for any wrongdoing by energy companies
in California squarely at the feet of the state.
Many people were blaming the state at the
time, including the Federal Energy Regulatory Commission. The
Hoover Institution jumped into the fray and released a book by
James L. Sweeney, The California Electricity Crisis, which
promotes and assigns blame like this: “After political leaders
mismanaged the electricity crisis, California now faces an electricity
blight while it struggles to recover from its self-imposed wounds.”
Not until the Sacramento Bee broke
its story, “How Californians got burned” on May 6,
2001—ten days before the national report was released—did
the public receive the first concrete signs the crisis may have
been caused by manipulation. There was finger pointing in the
media at the time, and accusations, but there was simply no proof.
But after criminal convictions for federal wire fraud came thundering
down, everything changed.
Enter the Federal
Regulators
Following a two-year staff investigation,
on March 26, 2003, the Federal Energy Regulatory Commission (FERC)
released findings that impacted this article in the above “Incriminating
Statements” section. FERC’s latest investigation was
to determine whether Enron or any other sellers manipulated the
electricity and natural gas markets in California. In its report,
“Price Manipulation in Western Markets” (Findings at
a Glance) the FERC made the following finding:
“Staff concludes that supply-demand imbalance,
flawed market design and inconsistent rules made possible significant
market manipulations as delineated in final investigation report.
Without underlying market dysfunction, attempts to manipulate
the market would not be successful.”
Amazingly, the finding eerily echoes our
unknown author’s statements published in the National
Energy Policy document (the national report) at page 5-12.
The questions I raised above are even more significant now: How
could the author and the editors have inserted an accurate assessment
of the causes of the California energy fraud in May 2001 without
having inside knowledge and or without being part of the scam,
when it took the FERC two years of investigation to release virtually
the same findings as those published in the national energy report?
Enter the Question, “Who Done It?”
In a letter to the Vice President dated
January 25, 2002, Rep. Henry Waxman outlined the information
he gathered on how the National Energy Policy was written:
passages not included in the draft of the national report, appear
to have been added to the plan during the final revisions made
under the direction of the White House. The White House energy
plan was first drafted, Waxman says, by a “workgroup composed
of staff from various agencies led by the Executive Director,
Andrew Lundquist,” of Dick Cheny’s staff. Each chapter,
according to Waxman, “was drafted by one of the participating
agencies,” and those copies “were then circulated among
all of the workgroup members.” The workgroup then met to
discuss each agency’s comments before submitting the drafts
to the White House.
Waxman wrote, “Any further changes
in the plan were made under the direction of the White House.
No subsequent versions of the White House energy plan were circulated
to the interagency workgroup.” Assuming this description
of the process applied to all the chapters of the national report,
it appears the White House had the final word and made the final
insertions and changes to the report.
In trying to answer the question, “Who
done it?” our Sherlock Holmes people will have to look at
the top levels of the White House and the Bush administration,
and ask, “Who had sufficient knowledge of electricity markets
in California and other states to have written the incriminating
statements?”
Few if any names come to mind. Secretary
of Energy, Spenser Abraham just doesn’t fit the profile.
He was a one-term defeated junior senator from Michigan who is
mainly known for never missing a roll-call vote and for his support
of abolishing the same Department of Energy he now heads. Many
people held the belief that Abraham’s appointment was a
clear signal that Bush and Cheney would make all the energy decisions.
Andrew Lundquist, however, is another cup
of tea. He was formerly the chief of staff for the Senate Energy
Committee where he served brilliantly. Bush appointed him to
be the Executive Director of the NEPD Group, chaired by Dick
Cheney; however, he may never have seen the final changes.
Beyond Cheney and Lundquist and perhaps
I. Lewis Libby, Cheney’s chief of staff, or perhaps Pat
Wood, Chairman of FERC, who may fit the profile, one runs out
of names.
However, another player does come to mind:
he was a lone outsider who insinuated himself into a position
of power in Bush’s White House. He is one man who by far
is the most knowledgeable and capable power-market-man in the
country, and he also happened to know how the marketing system
in California could be rigged. His name is Kenneth Lay, the former
chairman of Enron.
Enter Ken Lay Act Two
Indeed, Rep. Henry Waxman’s Minority
report on Enron found more instances of Ken Lay’s input
transferred into recommendations to the President on pages 5-11
and 5-12 than any other portion of the national report. However,
the recommendations don’t show the style and form of a contributing
writer.
So the question is, are there any correlations
between relevant passages in the text with other documents written
by Ken Lay?
In a comparison of the two-page memo we
know Lay submitted to Cheney, the passages attributed to the
unknown author reveal similarities of vocabulary, including the
identical use of words, a similar style of writing, and a correspondence
of ideas expressed. It appears that Ken Lay may have written
more of the national report than was previously suspected. So
what about Dick Cheney as a suspect?
Although Mary Matalin, who was then serving
as an adviser to the vice president, told a San Francisco
Chronicle reporter that Cheney’s energy plan included
input from many sources, “Just because some of the things
are included in the plan doesn’t mean they were from the
talks between Cheney and Lay.”
However, Mary Matalin may not have known
what we now know: She apparently did not know that Ken Lay wrote
his memo down on paper and submitted it to the Vice President.
In fact, there may have been more than one memo submitted by
Lay to Cheney, which might explain why the vice president went
to such extremes to keep congress from viewing those documents.
It’s shocking to realize that at the
same time the author’s incriminating admissions were being
submitted to Dick Cheney, then read, edited and approved for
publication by the White House, the fraudulent acts they referenced
were being executed. This fact may have serious criminal justice
implications for the White House. For in the spring of 2001,
California was reeling from rolling blackouts and brownouts and
the price of electricity was breaking through the sky like a
con trail from a speeding jet.
It may be time to paraphrase Senator Howard
Baker’s famous questions during the Watergate hearings,
“What did the President and Vice President know and when
did they know it?” At the very least, congress and the people
of this country need to know who wrote the incriminating passages
and who read them.
Enter Documents No. 5, 6 and 7
The New American Century Project’s
writings were not the only brainy papers that were read and studied
by conservatives before George W. Bush gained the presidency.
We know the Baker Report went directly to Cheney. But other reports
from Conservative think tanks like Stanford’s Hoover Institution,
the American Enterprise Institute, and the Heritage Foundation
had the ears of the group of neo-conservatives who favored using
America’s great military power to not only carve out an
empire but to set America on a course to global domination. One
report, “Using Power and Diplomacy to Deal With Rogue States,”
written in the mid 90’s by Thomas H. Henriksen, a senior
fellow and associate director of the Hoover Institute is an analysis
of the world following the end of the cold war. The report favors
power over diplomacy. What is so striking about the paper is
its wild-west, tough cowboy style.
Henriksen was worried about a few countries,
“If left unchecked, rogue states like Iraq, North Korea,
Iran, Libya, and others will threaten innocent populations, undermine
international norms, and spawn other pariah regimes, as the global
order becomes tolerant of this political malignancy.”
His solution? “America must act not
like a policeman but like a sheriff in the old Western frontier
towns, acting alone on occasion, relying on deputies or long-standing
allies, or looking for a posse among regional partners. .
.[America] cannot allow desperadoes to run loose without encouraging
other outlaws to test the limits of law and order.” (Surely,
given the president’s performance in his first two years
in office, this sentence must have been inserted into George
W. Bush’s play book.)
Newt Gingrich, the former Speaker of the
House and the then-soon- to-be-appointed member of the National
Defense Policy Board echoes this simple, lone star imagery, in
an address to the Overseers Meeting of the Hoover Institution.
“Somebody on horseback with a satellite phone and a laser
designator connected directly with a B-2 bomber or a B-52 with
smart weapons has a level of power unthinkable ever before in
human history.”
Then there are the sensible folks of the
Council on Foreign Relations, advising the new president in June
of 2001, “Saddam Hussein and his regime pose a growing danger
to the Middle East and the United States. The regime cannot be
rehabilitated. Therefore, the goal of regime replacement should
remain a fundamental tenet of U.S. policy options.”
The paper, written by Geoffrey Kemp and
Morton H. Halperin, with sixteen other participants, advises
the president there are three red lines describing actions that
Saddam Hussein might possibly take. If he crosses any one of
the three, the report states, we will gain the support of the
Arabs and the Turks against him:
“First, Iraqi military threats or attacks
on allied forces.
Second, Iraqi threats or attacks on neighboring
states.
Third, Iraqi acquisition and deployment of weapons
of mass
destruction or their use, including nuclear, chemical and biological
weapons.”
Note the tense of the third sentence: it
is present or future tense as opposed to the past tense. Judging
from the subsequent actions and words of the president, it appears
that the third red line in Kemp-Halperin paper may have played
a large role in the administration’s attempts to gain allies
in its war against Iraq.
Newt Gingrich’s address before the
Hoover Board of Overseers was titled, “National Security
Initiative, the Transformation of National Security,” and
was an attempt to describe a new kind of military that called
for a new kind of military education. He advised dropping the
“concept of exit strategies,” which he said was a “fetish
that grew out of the Vietnam War.” As for Saddam Hussein,
Gingrich said, “We need to immediately replace him.”
Pulling his words out carefully, Gingrich
revealed a stunning use of psychological intimidation and warfare.
He elevated coercive verbal bullying to weaponry status. He said,
“You cannot change Saudi Arabia as much as we need to change
Saudi Arabia until you have an Iraq which is an American ally.
And you need an Iraq that’s an American ally [because] it
has a larger oil reserve than Saudi Arabia does.”
Gingrich unveiled how coercive a threat
an American-Iraqi friendship would have over the Saudis: the
bi-national friendship would destroy the Saudi’s sense of
their reality that they alone are the one single
source for the world’s reserve supply of oil. “The
morning they see that we are that serious and we are that determined,
they will negotiate with us in a very different way.” In
other words, once there are two sources of cheap oil, it isn’t
likely the Saudis will thumb their noses at a U.S. president’s
offer to buy reserve oil at two dollars a barrel. It’s either
two dollars a barrel or it’s nothing. (Since this speech,
Gingrich has become an adviser to Donald Rumsfeld, the Secretary
of Defense.)
Enter Document No. 8
By December of 2002, “an Independent
Working Group” led by two Ambassadors, Edward P. Djerejian
and Frank G. Wisner, wrote a report for the president to guide
him on what comes after the war. They created a “perfect”
war on paper: The war was presumed to have occurred. It was a
fast, smooth war. It ended nicely. There were no complications.
The report does not address the problems of a war that bogs down
in urban street fighting or in mass demonstrations against the
United States or any other messy possibility.
Titled, “Guiding Principles for U.S.
Post-Conflict Policy in Iraq,” the report is cosponsored
by the Council on Foreign Relations and the James A. Baker III
Institute for Public Policy of Rice University.
The President and his advisers are greeted
with constraints such as “uphold the territorial integrity
of Iraq.”
Addressing the motives of the U.S., the
report tells the president, “Western anti-war activists,
the Arab public, average Iraqis and international media have
all accused the United States of planning an attack on Iraq not
to dismantle weapons of mass destruction but as a camouflaged
plan to ‘steal’ Iraq’s oil for the sake of American
oil interests.” The solution: any repairs, future investments,
oil exports and sales of oil must be made transparent and involve
both international and Iraqi oversight.
The report gets most interesting when it
talks about oil—the lure and the reality. While there is
great potential, “it will require massive investment.”
($28 billion.) The president is told, “Iraq has the second
largest proven oil reserves in the world (behind Saudi Arabia)
estimated at 112 billion barrels with as many as 220 billion
barrels of resources deemed probable. Of Iraq’s 74 discovered
and evaluated oil fields, only 15 have been developed.”
In the western desert “there are 526 known structures that
have been discovered, delineated, mapped, and classified as potential
prospects in Iraq of which only 125 have been drilled.”
It must be very difficult for some individuals and nations to
let go of such a vision. We know the president and his men could
not.
Enter
Painful Conclusion
When John DiIulio, a high-level Bush administration
official, left his job at the White House, he sent a letter to
Ron Suskind at Esquire, describing his experiences working
in the administration. DiIulio gave the world an insider’s
view into the secret center of power. “There is no precedent
in any modern White House for what is going on in this one: a
complete lack of a policy apparatus.”
DiIulio wrote, “The Clinton administration
drowned in policy intellectuals and teemed with knowledgeable
people interested in making government work.” DiIulio said
simply that intellectual work wasn’t “Bush’s style.”
In “eight months,” DiIulio continued,
“I heard many, many staff discussions, but not three meaningful,
substantive policy discussions. There were no actual policy white
papers on domestic issues.”
What Mr. DiIulio may not have known is what
the Yurica Report discovered: the policy papers were written
for this administration—and not by this administration.
The National Energy Policy like the Baker report drills
into the reader’s mind that devastating “California-like”
crises can and will be repeated unless the administration and
congress choose to take prescribed steps to regain control over
energy supply-lines. Control or insurance is spelled out as w-a-r
against Iraq. Something intervened, however, that made energy
crises unnecessary as a justification tool for war. That something
was another Pearl Harbor on September 11, 2001.
This story ends as it began: with unrequited
lies, deception and fraud. Three sentences inserted into the
National Energy Policy report reveal: 1) the White House
knew the California crisis was man-made; 2) knew the power companies
were manipulating the market in California; 3) and knew these
facts at the time the people of California were being fleeced
by the scam; 4) yet the Bush White House did nothing to stop
the fraud.
A special prosecutor should be appointed
by Congress to investigate this whole matter as well as what
Mr. Bush and Mr. Cheney knew and when they knew it.
________________________
Documentation & Links
1. San Francisco Chronicle,
“Memos show makings of power crisis,” May 10, 2002.
http://sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/05/10/MN24643.DTL
2. The Sacramento Bee,
Special Report: “How Californians got burned” May 6,
2001.
http://www.sacbee.com/static/archive/news/special/power/050601california.html
3. The two page Ken Lay Memo (Go to this
page and click on the "Memo" photo-icon at the top
of the article):San Francisco Chronicle, “The
Enron Collapse”, January 30, 2002. http://sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/01/30/MN46204.DTL
4. Bush Administration Contacts
with Enron, Prepared for Rep. Henry A. Waxman by the Minority
Staff Special Investigations Division Committee on Government
Reform, U.S. House of Representatives.
http://www.house.gov/reform/min/inves_admin/admin_enron.htm
If the above link does not work click here
for The
Yurica Report copy.
5. How the White House Energy Plan
Benefited Enron Prepared for Rep. Henry A. Waxman by the
Minority Staff Committee on Government Reform.
http://www.house.gov/reform/min/inves_admin/admin_enron.htm
If the above link does not work click here
for The
Yurica Report copy.
Also see the following documents: How
High Energy Costs Profitted Energy Companies.
6. Neil Mackay’s article in the Sunday
Herald:
http://www.sundayherald.com/print28285
7. The Baker Report Press Release:
http://www.rice.edu/projects/baker/Pubs/reports/Pubs/bipp200107/bipp200107_03.html
Editor's Note: The Yurica Report has learned
that the Baker Institute at Rice University has removed the Press
release from their web site. For those interested for research
and vital information purposes, we have placed a copy on our
web site at:: Task Force Issues Recommendations
for Energy Policy.
8. Document No. 1: The Baker Report,
Strategic Energy Policy Challenges for the 21st Century:
http://www.rice.edu/projects/baker/Pubs/workingpapers/cfrbipp_energy/energytf.htm
Editor's Note: You may also read the report
from our PDF
file linked here.
9. Document No. 2: Project for the
New American Century “Principles”:
http://newamericancentury.org/statementofprinciples.htm
10. Document No. 3: Rebuilding
America’s Defenses
http://newamericancentury.org/publicationsreports.htm
11. Document No. 4: National Energy
Policy report:
http://www.whitehouse.gov/energy/
12. FERC Findings and Report:
http://www.ferc.gov/industries/electric/indus-act/wem/03-26-03.asp
13. San Francisco Chronicle,
“The Enron Collapse”, January 30, 2002.
http://sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2002/01/30/MN46204.DTL
14. Letter from Rep. Waxman to Dick Cheney,
dated January 25, 2002. http://reform.house.gov/min/inves_energy/energy_cheney.htm
15. Document No. 5: Using Power
and Diplomacy to Deal With Rogue States: http://www-hoover.stanford.edu/publications/epp/94/94a.html
16. Document No. 6: Newt Gingrich,
“National Security Initiative, The Transformation of National
Security.” A speech to the Board of Overseers Meeting, Hoover
Institution, July 18, 2002. http://www-hoover.stanford.edu/research/conferences/boo2002july.html
17. Document No. 7: A Report on
U.S. Policy Options Towards Iraq by Geoffrey Kemp, Morton
H. Halperin, Council on Foreign Relations: http://www.cfr.org/publication_print.php?id=3990&content=
18. Document No. 8: Guiding Principles
for U.S. Post-Conflict Policy in Iraq Edward P. Djerejian
and Frank G. Wisner, Co-Chairs http://www.rice.edu/projects/baker/Pubs/workingpapers/iraq/index.html
19. Esquire, “Why
Are These Men Laughing?” January, 2003. “The DiIulio
Letter” October 24, 2002,
Katherine Yurica was educated at East Los
Angeles College, U.S.C. and the USC school of law. She worked
as a consultant for Los Angeles County and as a news correspondent
for Christianity Today plus as a freelance investigative
reporter. She is the author of three books. She is also the publisher
of the Yurica Report.