Praise for Pigs at the Trough “Hu ngton yanks back the curtains on the ’90s ‘go-go market’ to reveal a portrait of Dorian Greed… wicked gallows humor … Democrats and Republicans sizzle like bacon under her broilering spotlight Scrupulous detail … real porcine heft.” —Christian Science Monitor “A rousing call to action As only she can, Arianna breathes energy and passion into the reform agenda A withering, breath taking, quintessentially controversial book that will inspire, in flame, and educate.” —Senator John McCain “Arianna Hu ngton makes an appealing and compelling argument for the repeal of human nature—that part of it that indulges savage, unconscionable, and despicable greed.” —Walter Cronkite “Even the most worldly activist and most cynical political observers will be shocked by what they read here A powerful book, brimming with wit and sulphurous satire.” —Publishers Weekly “With a passion for the truth and an eye for detail, Arianna Hu ng ton reports on the hijacking of democracy Read it and weep—then head for the barricades We have work to do.” —Bill Moyers “Arianna Hu ngton has written the most entertaining tour guide to hell since Virgil led Dante through the Inferno Crooked CEOs beware!” —Bill Maher Also by Arianna Huffington The Female Woman After Reason Maria Callas: The Woman Behind the Legend The Gods of Greece Picasso: Creator and Destroyer The Fourth Instinct Greetings from the Lincoln Bedroom How to Overthrow the Government On Becoming Fearless … in Love, Work, and Life Fanatics & Fools Right Is Wrong For Isabella, my youngest daughter, with much love Acknowledgments WRITING THIS BOOK was a juggling act—keeping the big themes clear while tracking all the startling details unfolding every day on the front pages of our newspapers Keeping ahead of this moving target could not have been done without a great team Deep thanks go to Billy Kimball, who was shuttling back and forth between L.A and Long Island, and to Peter Abbott, who landed here for a year from Cambridge, our shared alma mater in England, and went back the day after the book went to press I hope that his decision to return to Cambridge to a Ph.D on the use of “terror” in Greek and Shakespearean tragedy was not entirely the result of researching the “pigs.” Additional thanks to Chris Kyle, Moira Brennan, Jon Hotchkiss, Roy Seko , Stephen Sherrill, Victor Abalos, Leslie Borja, Mia Mazadiego, Prof Christopher Gill, and to my good friends Mary Arno, David Booth, Bob Borosage, Marc Cooper, David Corn, Lynda Obst, and Lynn Sweet, who read the manuscript at di erent stages and greatly improved it Many thanks also to my anonymous sources, both at the top of the corporate world and among the recently downsized who provided fascinating leads and key details Like Deep Throat, my inside sources reminded me to “follow the money.” I can’t name them but my thanks go to them all the same I can name, however, Steven Weiss, Scott Klinger, Russell Mokhiber, Robert Weissman, and Micah Sifry All my gratitude to my amazing editor, Emily Loose, whose outrage at the pigs never agged, even after her fourth masterly editorial pass on the same text; and to my incredible agent, Richard Pine, whose involvement embraced every detail from the book’s contract to the book’s content To Steve Ross, who welcomed me back into the Crown fold, Barbara Marks for the enthusiasm she brought to the book’s promotion, and Caroline Sincerbeaux for all the many ways she helped the pigs come to life Many thanks also to Barbara Sturman for her work in creating an attractive design for the book, to Amy Boorstein for her expert management of the copyediting, and to Derek McNally for his efforts to make this book come in on time The book is dedicated to my younger daughter, Isabella, who together with her older sister, Christina, provided constant joyous interruptions P.S My thanks and gratitude go to Whitney Snyder, Nour Akkad, and Roy Seko , as well as my editor at Three Rivers Press, Sean Desmond, for all their help with Pigs at the Trough circa 2009 Contents Acknowledgments Preface to the 2009 Edition INTRODUCTION Twilight of the Corporate Gods PIGS ON PARADE Power, Perks, and Impunity THE BLOODLESS COUP The Corporate Takeover of Our Democracy THE ENABLERS A Conspiracy of Thousands THE BINGE AND THE RECKONING The Chickens Come Home to Roost Epilogue Afterword to the 2009 Edition Preface to the 2009 Edition W HEN I WAS ASKED to reissue Pigs at the Trough in the midst of our current economic crisis, I sat down to reread it and was stunned by how much of what the book speaks to has brought us to our knees in 2009 Sure, the characters are di erent, the accounting gimmicks have di erent names, the sophistication that allows the gimmicks to take place within the law is greatly enhanced, and the numbers have gone from mere billions to hundreds of billions and trillions So, di erent pigs, deeper trough, worse result—but, other than that, the narrative is unchanged: CEOs and others at the top of the corporate ladder engaging in rampant—though often legal—corruption to improve the bottom line and line their own pockets until nally they fall prey to their greed and self-indulgence … only to nd themselves routinely protected from the retribution of their beloved “free market” by their companies, their peers—and, ultimately, by the government “So the stomach-turning revelations of corruption that have come to light,” I wrote in the book in 2003, “are surely only the appetizer for a far larger banquet of sleazy scandals.” Little did I know at the time just how much larger the banquet of scandals would end up being It turned into an all-they-could-eat buffet The corporate crooks of WorldCom, Tyco, Global Crossing, Adelphia, Enron, and others pro led in this book were largely playing with shareholders’ money (small comfort to the thousands who saw their nest eggs scrambled by the likes of Ken Lay, Je Skilling, and Bernie Ebbers) The new villains are playing with taxpayer money, trillions of it During the French revolution, Marie Antoinette and her “let them eat cake” attitude became the symbol of not getting it And just like Marie Antoinette, John Thain, the former Merrill Lynch CEO, didn’t get it even while being led to the corporate guillotine Though Merrill Lynch was hemorrhaging money and preparing to lay o thousands of workers, Thain, reaching new heights of tone deafness, spent $1.2 million redecorating his o ce Lowlights included $80,000 for an area rug and $1,400 for a trash can And even after Merrill Lynch, in a deal brokered by the government and partially nanced by taxpayers, was acquired by Bank of America in October 2008, Thain, sleeping through this wake-up call, asked for a $30-$40 million bonus He was awarded a much more appropriate bonus of $0 But he was not stopped from ramming through $4 billion in bonuses for Merrill Lynch executives just days before the Bank of America merger became official Which brings us to the miserable job Thain did at Merrill, for which he wanted to so lavishly reward himself As one insider told the Wall Street Journal, Thain “didn’t really have a good grasp of what was going on.” But apparently having a grasp of what’s going on isn’t one of the requirements for becoming America’s highest paid CEO, as Thain was in 2007, taking in a package worth around $83 million This disconnect between performance and reward is at the heart of what has plagued our economy and has contributed to the crisis we are living through today In no other industry is this gulf as wide as it is in the industry that most publicly celebrates its belief in the market system Pigs at the Trough deals with the failures both of poorly regulated markets, which were magni ed in the recent years, and of our market system to appropriately reward and penalize executives As Treasury Secretary Tim Geithner put it, “Excessive executive compensation that provides inappropriate incentives has played a role in exacerbating the nancial crisis.” The list of clueless Marie Antoinettes of the meltdown is very long Among them: Gateway Financial Holdings executives Ben Berry and David Twiddy, who received nearly $1 million in bonuses on the same day their bank received $80 million in bailout money Wells Fargo and State Street Both nancial institutions received bailout money ($25 billion for Wells Fargo, $2 billion for State Street), then turned around and increased the amount of money they spent lobbying the government in the last quarter of 2008 Not a bad deal: we give them our money, which they use to pay lobbyists to buy o lawmakers to give them more of our money—a perfect (if very costly) Washington perpetual motion machine Citigroup, which received $45 billion in government bailout funds—but was still about to take delivery on a new $50 million corporate jet that featured a “plush interior with leather seats, sofas and a customizable entertainment center,” until public outrage forced Citigroup to cancel the order Let them eat cake … while sitting on plush leather sofas! Corporate jets, redecorated o ces, lavish retreats, and CEO bonuses may be small potatoes compared to the bailout billions poured into the black hole of basically insolvent nancial institutions But they are emblematic of the tone deafness of those at the top of our crumbling economic pyramid It’s as if nothing has been learned since the Enron days It’s just that the numbers got larger Two days prior to Enron going bellyup, the company gave $55 million in bonuses to senior employees while simultaneously coming out against additional help for the 4,500 unceremoniously red workers There was outrage and recrimination But little did we know it was just a prelude Similarly, in 2002, on the same day WorldCom stunned the world with the magnitude of its accounting fraud, the company’s inner circle began an extravagant, all-expensespaid vacation at the Grand Wailea Resort Hotel and Spa in Maui—a foreshadowing of the $443,000 luxury spa retreat executives of AIG took in October 2008, just days after the government unveiled an $85 billion bailout package for the insurance giant And as outrageous as they were, the $165 million in bonuses paid out by AIG in early 2009 were in keeping with what has come to be expected on Wall Street—and come to be accepted in Washington Which is why the Treasury Department pushed Senator Chris Dodd to put a loophole in the stimulus bill allowing these kinds of bonuses—and why a provision in the stimulus package that would have curtailed bonuses at bailed-out companies was killed in conference after it had passed the Senate “It is the ultimate indictment of what Washington has become,” Senator Ron Wyden, cosponsor of the eliminated provision, said “It’s a place where, again and again, the public interest is An organization of activists dedicated to—you guessed it—holding corporations accountable for their actions Learn “how to overthrow corporate rule in ve not-soeasy steps” at www.corporations.org 1434 Elbridge Street Philadelphia, PA 19149 Tel: (215) 743-4884 E-mail: catalyst@envirolink.org 11 CorpWatch The San Francisco-based group counters corporate-led globalization through education and activism Grassroots mobilization is underway at www.corpwatch.org 2958 24th Street San Francisco, CA 94110 Tel: (510) 271-8080 E-mail: cwadmin@corpwatch.org 12 Friends of the Earth (FOE) An environmental organization, with a liates in 63 countries, dedicated to preserving the health and diversity of the planet for future generations Learn how to influence decisions affecting the quality of your environment at www.foe.org 1717 Massachusetts Avenue Suite 600 Washington, D.C 20036 Tel: (202) 783-7400 E-mail: foe@foe.org 13 Global Exchange Global Exchange has launched numerous campaigns, ghting for corporate accountability, democracy, civil rights, and environmental protection To learn more about becoming a Global Citizen, please visit www.globalexchange.org 2017 Mission Street 2nd Floor San Francisco, CA 94110 Tel: (415) 255-7296 E-mail: volunteers@globalexchange.org 14 Green America Formerly known as Co-op America, Green America helps businesses grow by developing green energy programs and making social investments To get more information on how your business is doing environmentally, visit www.coopamerica.org 1612 K Street, NW Suite 600 Washington, D.C 20006 Tel: (800) 58-GREEN E-mail: info@greenamericatoday.org 15 Natural Resources Defense Council (NRDC) This national advocacy group uses law, science, and the support of more than 500,000 members across the country to ensure a safe and healthy environment for all living things Speak out at www.nrdc.org 40 West 20th Street New York, NY 10011 Tel: (212) 727-2700 E-mail: nrdcinfo@nrdc.org 16 Natural Step A consulting group that assists businesses in rede ning their bottom lines to include social and environmental considerations Please visit www.naturalstep.org SW 2nd Avenue Suite 302 Portland, OR 97204 Tel: (503) 241-1140 E-mail: info@naturalstep.org 17 OMB Watch OMB Watch was created in 1983 to attempt to make the White House O ce of Management and Budget more transparent and accountable Learn how you can have a role by visiting www.ombwatch.org 742 Connecticut Avenue, NW Washington, D.C 20009 Tel: (202) 234-8494 E-mail: ombwatch@ombwatch.org 18 Pension Rights Center The Pension Rights Center is dedicated to protecting and promoting retirement security for all Americans For more information, please visit www.pensionrights.org 1350 Connecticut Avenue, NW Suite 206 Washington, D.C 20036 Tel: (202) 296-3776 E-mail: webmaster@pensionrights.org 19 Program on Corporations, Law and Democracy (POCLAD) Thirteen activists are researching and rethinking corporate America’s in uence on democracy Join the debate at www.poclad.org P.O Box 246 S Yarmouth, MA 02664-0246 Tel: (508) 398-1145 E-mail: people@poclad.org 20 Project On Government Oversight (POGO) To ensure a more open and ethical government, POGO reports on federal government misconduct and corruption To find out more, visit www.pogo.org 1100 G Street, NW Suite 900 Washington, D.C 20005-3806 E-mail: info@pogo.org 21 Public Campaign Public Campaign seeks to create a network with other organizations and citizen groups to increase campaign reforms in order to drastically reduce special interest and big money in uences in American politics Get involved in cleaning up politics at www.publicampaign.org 1320 19th Street, NW Suite M-1 Washington, D.C 20036 Tel: (202) 293-0222 E-mail: info@publicampaign.org 22 Public Citizen Founded by Ralph Nader in 1971, Public Citizen ghts for consumer justice and government and corporate ac count ability The umbrella organization sponsors six watchdog groups, including Congress Watch and Trade Watch Take action at www.citizen.org 1600 20th Street, NW Washington, D.C 20009 Tel: (202) 588-1000 E-mail: member@citizen.org 23 Sierra Club Founded in 1892, the Sierra Club’s environmental grassroots net work is over 700,000 members strong Join the fight at www.sierraclub.org 85 Second Street Second Floor San Francisco, CA 94105-3441 Tel: (415) 977-5500 E-mail: information@sierraclub.org 24 Social Investment Forum A shareholder advocacy organization that promotes socially responsible investing Learn how investors have the opportunity and responsibility to challenge corporate misconduct at www.socialinvest.org 910 17th Street, NW Suite 1000 Washington, D.C 20006 Tel: (202) 872-5319 25 Sunlight Foundation The Sunlight Foundation facilitates citizens, journalists, and bloggers with easy access to digital information about Congress and the federal government The foundation’s goal is a more in formed public and a more accountable government To learn more, check out www.sunlightfoundation.com 1818 N Street, NW Suite 410 Washington, D.C 20036 Tel: (202) 742-1520 26 Taxpayers for Common Sense This Washington-based watchdog group strives to make sure tax payer money isn’t being spent on wasteful government programs For more information on where your taxes are going, visit www.taxpayer.net 651 Pennsylvania Avenue, SE Washington, D.C 20003 Tel: (202) 546-8500 E-mail: info@taxpayer.net 27 TechPresident This bipartisan blog covered how the 2008 presidential candidates and the public used the Web during the campaign Since then the forum has continued to cover how local and statewide campaigns are using the Web—and also how the Obama administration is making the Internet a vital tool in the way it governs Find out how you can get involved by visiting www.techpresident.com 225 Lafayette Street Suite 14A New York, NY 10012 Tel: (917) 359-2426 E-mail: techpres@personaldemocracy.com 28 United for a Fair Economy (UFE) A Boston-based advocacy group that focuses public awareness on wealth inequality Join its activist network at www.faireconomy.org 29 Winter Street Boston, MA 02108 Tel: (617) 423-2148 E-mail: info@faireconomy.org 29 United Students Against Sweatshops (USAS) This international student movement was created after 11 college students spent the summer of 1997 as interns at UNITE, a textile workers’ union Learn about their fight for sweat shop-free labor conditions at www.usasnet.org 1150 17th Street, NW Suite 300 Washington, D.C 20036 Tel: (202) 667-9328 E-mail: staff@usas.org 30 Working Assets Founded in 1985, Working Assets is a phone, credit card and on line services company that has donated over $25 million to groups like Greenpeace, Oxfam, and the Children’s Defense Fund In 2000 alone, Working Assets’ members generated more than 900,000 letters and calls to Congress, the White House and business leaders You too can speak out at www.workingassets.com 101 Market Street Suite 700 San Francisco, CA 94105 Tel: (877) 255-9253 E-mail: info@workingforchange.com EPILOGUE PR POLITICS It’s become a hallmark of the Bush administration Have a big photo op, declare victory, move on, and hope the public will consider the problem solved We saw it with education We haven’t heard much about that since the president signed his prized Leave No Child Behind Act—which has turned out to be more of a Leave Millions of Children Behind, but Hopefully Not Your Own Act We saw it with Iraq The president donned his form tting ight suit, made a memorable tailhook landing of a Navy S-3B Viking on the deck of the USS Abraham Lincoln, and proudly declared: “Mission Accomplished.” I guess that focus-grouped better than “Quagmire Accomplished.” But the body count and the post-occupation price tag continue to soar And we saw it with the tidal wave of corporate scandals documented and dissected in this book The president smiled for the cameras, signed the corporate responsibility bill into law, vowed “No more easy money for corporate criminals, just hard time,” and acted as if the Enrons, WorldComs, and Global Crossings were now a thing of the past Corporate reform was another “mission accomplished.” But a quick survey of the news since then reveals that it’s actually been monkey business as usual on Wall Street Even Fortune magazine, the corporate playbook, adorned its April 28 cover with a CEO with a pig’s head and the title “Oink! CEO Pay Is Still Out of Control.” Clearly, when it comes to learning from its mistakes, corporate America has fallen off the rehab wagon more times than Rush Limbaugh Last spring, high-ranking executives at HealthSouth, the nation’s largest provider of rehabilitative health care services, pleaded guilty to routinely cooking the company’s books And this wasn’t just happening back in the bad old days when everyone was doing it—no, these guys were fraudulently in ating earnings well into 2002, even as Enron, WorldCom, Adelphia, and Tyco were front-page news How’s that for clueless? Next up on the “They Just Don’t Get It Tour” are the good folks at Electronic Data Systems (EDS), with proof of just how little has changed when it comes to corporations rewarding failed execs with massive severance packages After pushing CEO Dick Brown out the cockpit door for overseeing a 50 percent drop in share price over the last seven months of his tenure—as well as for steering the rm into an SEC investigation—EDS handed him a golden parachute worth $37 million So Brown managed to Dick shareholders even past the bitter end Then there was New York Stock Exchange chairman Richard Grasso’s jaw-dropping decision—mercifully stymied by Eliot Spitzer—to appoint scandal-tainted Citigroup chairman Sandy Weill to its board to, I kid you not, represent the public It’s a move that made about as much sense as naming Khalid Abdul Muhammad to the 9/11 Commission Of course, both Grasso and Weill were soon looking for new business cards: Weill stepped down as Citigroup CEO in the wake of the company’s $400 million payment in the landmark Wall Street ict-of-interest settlement, and Grasso was forced to resign after it was revealed that as head of the world’s largest stock exchange he had received a $140 million salary and bene ts payout from the people he was charged with regulating You’d think this country’s CEOs would have gotten the message They have, after all, in the course of the last few years gone from American Idols to America’s Most Wanted —the most stunning transformation since Ozzy Osbourne morphed from a drug-addled, bat-chomping satanic rocker into Americas cuddliest dad But no matter how battered their reputations may be, they still appear determined to rescue themselves instead of their sinking ships For today’s captains of industry, the maxim in a crisis seems to be: “To hell with the women and children—save the lifeboats for us!” Take American Airlines While preparing to make a rough landing in bankruptcy court last year, executives at the dead-broke carrier extracted from workers $1.62 billion in wage and bene t concessions the bosses claimed were needed to keep American Airlines aloft At the same time, the execs secretly gave themselves massive cash bonuses and a $41 million trust fund to guarantee their pensions should the airline crash and burn Even after the secret escape plan was revealed and all hell broke loose, the company held fast to its priorities It canceled the cash bonuses It tossed CEO Don Carty onto the tarmac But it refused to relinquish the fund protecting its execs’ nest eggs In the end, the executives kept their cushy trust fund while the workers were forced to go along with a deal that led to thousands of layoffs and pay cuts of between 15 and 23 percent I guess in today’s business world, that’s what amounts to a compromise Besides making one reach for the nearest airsickness bag, the American Airlines debacle highlights the growing disparity between the ways corporate America is preparing for the golden years of its executives and its rank-and-file employees In the clubby nes of America’s boardrooms, the sky is the limit Compensation committees are working overtime coming up with ever more creative—and devious— ways to boost the earnings of top executives And super-charged pension plans are the hot new trend Among the gimmicks being used to goose the value of these plans is an accounting scheme that can dramatically increase a CEO’s retirement windfall by adding phantom years—even phantom decades—of service to the exec’s pension In theory it works the same way as those jailhouse rules that reward a model prisoner with time o for good behavior—only these guys get rewarded no matter how many employees or shareholders they’ve knifed in the back with a shiv Thanks to this latest innovation in corporate accounting, Leo Mullin, Delta Airlines’ CEO, has had an additional twenty-two years of service tacked on to the less than six he’s actually worked for the company, while US Air’s former CEO Stephen Wolf was given credit for twenty-four years he didn’t put in And this scam isn’t reserved for the high iers of the airline industry When John Snow left CSX Railroad to become Treasury Secretary, he was given credit for having put in forty-four years at the firm, even though he’d actually punched a time clock there for twenty- ve—a little fun with numbers that helped him walk away with a cool $33 million in pension booty Corporate directors, who have come under increasing re from shareholders for approving excessive pay packages for high-level executives, appreciate the fact that these pension plan adjustments allow them to y under the radar while continuing to funnel millions to CEOs Unlike salaries and bonuses, which are regularly reported in the business press, the details of executive pension plans are usually hidden away in the extra-fine print of a company’s SEC filings The picture is far bleaker for those down on the factory oor or crammed inside an o ce cubicle, where ordinary workers are seeing their pension plans slashed or eliminated altogether Less than half of those currently employed in the private sector have any kind of pension coverage And 40 percent of those companies that o er pension plans are exploring the possibility of reducing bene ts Companies are also cutting back on matching contributions to their employees’ 401(k) accounts Some, like Ford, Goodyear Tire, and Charles Schwab, have decided to completely away with matching contributions They probably need the extra cash for their executives Even those workers who are able to hang on to their matching contributions can’t rest easy: It turns out that the vast majority of corporate pension funds are critically underfunded In fact, of the 343 S&P 500 companies that offer traditional pension plans, almost 90 percent of them are running a de cit And we’re not talking about being a few dollars short General Motors’ pension plan is $25.4 billion in the red, while Ford’s has a shortfall of $15.6 billion All told, the S&P companies are $206 billion in the hole; that’s a shift of $457 billion since 1999, when the same pension funds had a collective surplus of $251 billion In just a few short years, the nest eggs of the American worker have gone from sunny-side up to seriously scrambled And shareholders and employees are not the only ones being victimized by the ongoing culture of greed Consider: All across corporate America, high-priced accountants are hard at work helping companies avoid billions in taxes by hiding pro ts in a host of tax-sheltering schemes And they’re doing a bang-up job: Corporations are currently turning over 30 percent less of their pro ts to the tax man than they did twenty years ago Meanwhile, all across the country, state governments, facing the biggest budget crisis since the Great Depression, are being forced to slash programs and cut services Gee, you think there might be a connection? You can bet your vanishing after-school care, prenatal health program, and local law enforcement service there is According to a 2003 study by the Multistate Tax Commission, a nonpartisan coalition of state taxing authorities, corporate tax shelters robbed states of $12.4 billion in desperately needed revenues in 2001—a gure that represents more than a third of the money corporations rightfully owed Companies sheltering their assets overseas are draining another $70 billion a year from the federal Treasury—funds that often make their way back to states through programs such as Head Start and AmeriCorps But as damning as those statistics are, they’re still just abstract gures In order to really understand the devastating impact these lost revenues are having, we need to put esh and bone to the numbers In Florida, for instance, which according to the Multistate Tax Commission lost $554 million to tax shelters in 2001, just $7.7 million would have saved a program that provided glasses and hearing aids for low-income people Oregon is dealing with $80 million in lost corporate taxes, and $14.5 million would have prevented the 19,000-student Hillsboro school district from shutting its doors seventeen days early last year In South Carolina, which also was denied $80 million because of tax shelters, a mere $1.4 million would have stopped the round of budget cuts that cost Traci Young Cooper, the states 2001 Teacher of the Year, her job The honor earned her a trip to the White House to meet President Bush; maybe if she knew what was coming she could have lobbied him to make all tax shelters illegal In Kentucky, which lost $150 million to tax shelters, $2.6 million would have allowed Governor Paul Patton to leave behind bars the 883 prison inmates he released early in a desperate e ort to balance the state’s budget I have a sneaking suspicion that the twenty- ve-year-old woman who was raped by one of these freed inmates just three days after his release would consider that $2.6 million money very well spent And the list goes on and on Vital programs and services cut or eliminated that could have been saved had corporate America just done the right thing and paid what it owed But even with all this damning evidence, the most galling indicator that the corporate culture hasn’t really changed is the aforementioned—and much-ballyhooed—$1.4 billion research settlement agreement between New York’s crusading attorney general, Spitzer, and Wall Street’s investment banks The settlement didn’t include the criminal indictment of a single person or institution That’s right: Not one of the im am men behind the high-level nancial swindles will have to any time behind bars And, perhaps most infuriating of all, it didn’t require any of those involved even to admit to any wrongdoing This kid-glove treatment of Wall Street crooks provides a profound example of how we continue to operate a two-tiered justice system in this country—one for a select group of elites and one for the rest of America When common criminals are allowed to cop a plea, they plead guilty rst as part of the bargain Crooks in pinstripe suits, on the other hand, even those caught red-handed, don’t have to come clean It’s the ultimate privilege—and the ultimate insult to our intelligence What good is nding a smoking gun if the guys who red it are allowed to pay a small ne, step over the bloody body, and reload? Professor Paul Lapides, director of the Corporate Governance Center at Kennesaw State University, describes the sleazegeist thus: “I used to tell my students that if you commit a white-collar crime, the time will come when you will serve your time Now I tell my students, if you commit a crime, commit a big one.” Lapides adds, “If you commit a big enough crime, you’ll probably have to return only some of the money, and you won’t have to any jail time Is America a great country or what?” A magnetic compass should always point north; a moral compass should always point out that lying, cheating, fraud, and icts of interest are dead wrong This is not a question of right or left It is a question of right or wrong But our country’s selfappointed morality czars have been deafeningly silent on this kind of economic indecency I guess Bill Bennett—or as he’s known in Vegas, “The $8 Million Man”—was too busy doubling down to notice How screwed up are the priorities of our business leaders? Well, Adelphia’s John Rigas considered himself so moral that he refused to carry the Playboy Channel on his cable systems—but thought nothing of “borrowing” $3.1 billion from his company’s co ers Frankly I think we all would have been better o if he’d have kept his hands o the money and shown a little skin Or look at Wal-Mart: pulling three men’s magazines o the shelf at the same time that it treats women like second-class citizens, fires workers who try to unionize, is facing the largest sex-discrimination case in history, and is being sued in thirty states for refusing to pay workers overtime Now that’s something worth getting hot and bothered about To me, scantily clad girls are not immoral—cheating your workers is It’s time for our business and political leaders to help rede ne morality beyond sex, drugs, and rock and roll to include lying, hypocrisy, and callous indi erence to those in need That is the kind of leadership we must have if we’re ever going to eradicate the culture of greed, corruption, and unethical behavior that has come to dominate both Wall Street and Washington Afterword to the 2009 Edition W HEN I WROTE Pigs at the Trough, I didn’t know that in just six years America would nd itself in the midst of a slew of fresh corporate outrages—outrages that would lead to a worldwide economic meltdown But I can’t say that I am surprised The reason is simple: the system that allowed the scandals at Enron, Tyco, Global Crossing, and others was never really reformed Yes, there were window-dressing changes, and Band-Aid legislation But the guiding philosophy—that the free market would regulate itself, and that Wall Street always knew best—remained in place Indeed, it was given a much freer rein So it’s been déjà vu all over again With one big di erence that makes this current crisis so frightening: the scale of it all, and the speed with which it accelerated And the devastating—and far-reaching—impact this new round of corporate malfeasance has had Yes, any economic system has its ups and downs, its booms and busts, but the almost unimaginable sums being tossed around in this crisis have awakened people to the fact that this downturn is not part of the normal cyclical nature of a healthy economic system Now, even more than at the beginning of the decade, the orgy of greed, fraud, and theft (legal and otherwise) has been “up” for a few, but “down”—really, really down— for pretty much the rest of the world This rot has spread like a cancer throughout our political and nancial systems And, as with real cancer, treating it with half measures only allows it to mutate and strengthen and wreak more havoc when it next surfaces As we’ve seen, not only is the scale of the destruction worse with each outbreak, the lag time between them is also growing shorter We had only ve or six years between the last remission and the current metastasis—with a short burst of illusory economic expansion in between When I wrote in Pigs at the Trough that I was hopeful that “a critical mass of individuals and groups mobilized by the injustice given esh and blood by the current scandals” would rise up and demand real change, I was not being quixotic or naïve Though I acknowledged that when the people come up against the interests of the established nancial/political class, the people usually lose out, it doesn’t have to be the case But what we learn by taking a look back at the outrages detailed in Pigs at the Trough is that we need to break the cycle Not the bull market/bear market cycle, but the cycle of shock, then outrage, then a few high-pro le show trials, then punishment of a few culprits, then some meaningless reforms, and then we all move on … until it starts again Now we nd ourselves right in the middle of that cycle The nancial bandits know that if they just lay low for a bit, the storm of outrage will blow over They can just wait it out, feed the people a few “reformist” scraps, and then return to plundering In April 2009, Goldman Sachs announced a “pro t” of $1.8 billion dollars This buoyed its stock price and helped boost its plan of raising $5 billion so it could quickly repay the government the $10 billion it had received in bailout money (little mention was made of repaying the $12.9 billion in taxpayer funds Goldman received as an AIG counterparty) So how’d the company it? Good ol’ Wall Street ingenuity Goldman’s scal year used to end in November In late 2008, Goldman began aligning its upcoming fiscal year with the calendar year That meant the report for the rst quarter of 2009 simply omitted December 2008—and the $1.3 billion pretax loss the company suffered that month Everyone on Wall Street wants to return to the pre-meltdown status quo as quickly as possible But we should not let them And we should certainly not allow Wall Street to, as I warned in Pigs at the Trough, “publicly embrace reform while working diligently behind the scenes to undermine it.” In an April 2009 speech, President Obama brought up the biblical parable of one house built on sand, and another built on rock “We cannot rebuild this economy on the same pile of sand,” he said “We must build our house upon a rock We must lay a new foundation for growth and prosperity.” I agree But the presidential parable raises the question of why President Obama has sta ed his economic team with so many people, like Tim Geithner and Larry Summers, who have a long history in building sand castles Around the same time as Obama’s speech, Nancy Pelosi announced plans for a congressional commission that would investigate what happened on Wall Street that led to the crisis It would be modeled on the bipartisan Pecora Commission, which looked into the causes of the crash of 1929 and eventually led to the creation of the Securities and Exchange Commission The purpose of the new commission would be to “make sure it does not happen again.” Forgive me if, for now, I cannot muster a reaction more hopeful than “Well see….” President Obama has listed the “ ve pillars” that will “make this new century another American century.” One of the pillars is “new rules for Wall Street that will reward drive and innovation.” The question is, does the political will to create and implement these new rules exist, or will the result be a series of tough-sounding-but-ultimately-toothless reform measures that allow the cancer of greed and political corruption to recur—and become even stronger? Does our body politic have enough strength left to save itself? Elizabeth Warren is a former professor at Harvard and an expert in bankruptcy and personal nance In 2008 she was appointed to chair the Congressional Oversight Panel for the TARP program Appearing on The Daily Show—the unexpected home to some of the best coverage of the meltdown—Warren o ered a pithy and pointed recap of our recent economic history: We start pulling the threads out of the regulatory fabric, and what’s the rst thing we get? We get the S&L crisis Seven hundred nancial institutions fail Ten years later what we get? Long-term capital management, where we learn that when something collapses in one place in the world, it collapses everywhere else Early 2000s, we get Enron, which tells us the books are dirty And what is our repeated response? We just keep pulling the threads out of the regulatory fabric Well, it’s time to reweave our economic fabric As the similarities between the outrages outlined in Pigs at the Trough and what we’re seeing unfold today make clear, we no longer have the excuse of ignorance or the luxury of naiveté And while looking forward and working to build “another American century,” we need to also look backward to learn how to stop repeating the past Copyright © 2003, 2004, 2009 by Arianna Huffington All rights reserved Published in the United States by Three Rivers Press, an imprint of the Crown Publishing Group, a division of Random House, Inc., New York www.crownpublishing.com Three Rivers Press and the Tugboat design are registered trademarks of Random House, Inc Library of Congress Cataloging-in-Publication Data is available upon request eISBN: 978-0-307-59049-7 v3.0 ... below them The very system that the CEOs have taken advantage of depends upon the premise that the other America follows the other code the one based on laws and morality The scandals at Enron,... result—but, other than that, the narrative is unchanged: CEOs and others at the top of the corporate ladder engaging in rampant—though often legal corruption to improve the bottom line and line their... lose their homes and 401(k)s, it is clear that our leaders are still operating on the basis of an outdated cosmology that places banks and other nancial institutions—rather than people at the