How ALEC Helped Enron
This week, Mila recorded a stellar interview with Columbia associate professor and author Alexander Hertel-Fernandez. Alex recently wrote an illuminating book called State Capture: How Conservative Activists, Big Businesses, and Wealthy Donors Reshaped the American States -- and the Nation. In it, he describes the troika of conservative organizations working to forward pro-business goals, and their essentially unmitigated success. The most famous of these groups, the American Legislative Exchange Council (ALEC), blurs the lines between conservative ideals and corporate agendas—if that line ever existed.
“ALEC correctly recognized that a key weakness of state legislatures now and certainly in the past is that many operate without much in the way of staff support or resources, even salary for their elected officials,” Alex told us in our interview. “If you are a relatively new lawmaker, you don't have that many staff. Well, imagine if an organization came along and said, ‘We know you're generally conservative, but you may not have a good idea of which bills to prioritize. We can come up with those bills for you. We'll even give you the exact text of the bill... And you can simply just insert your state name and introduce it under your own name in the legislature.’”
ALEC receives funding from conservative donors like the Koch Brothers and giant corporations like ExxonMobil and Monsanto. Investing in ALEC can reap huge rewards for companies, because ALEC operates in all 50 states, and helps pass legislation to lower taxes, weaken labor unions, and push back against environmental regulations wherever it can. Instead of employing squads of regional and state lobbyists, a company can donate to ALEC, dictate a policy priority, and sit back as ALEC writes a bill and finds sponsors in statehouses nationwide.
Although many companies enjoy the benefits ALEC provides, few companies got more out of the organization than one-time Wall Street darling Enron. Yes, that Enron.
Today, we know Enron as a paradigm of corporate greed and a chilling reminder of the ways corporations can impact whole market sectors, as well as the lives of thousands of Americans. Enron was an energy trader and supplier that grew to prominence in the 1990s as the national leader in electricity resale. Enron became one of the largest and richest corporations in America, but was ultimately felled by a corrupt board of directors and the massive accounting fraud they orchestrated to hide losses and artificially inflate earnings. Enron investors and employees lost $74 billion in the 2001 collapse, which was the largest bankruptcy in history at the time. The fallout is ongoing, and as late 2017 new lawsuits against Enron’s CEO were filed.
Before its Icarian descent, Enron used ALEC to further its goals. Enron essentially bought and sold energy contracts based on the changing prices of electricity. Enron needed the ability to sell energy across state lines, and to undercut local energy monopolies—but these decisions are controlled by state legislatures. Enron profited through the deregulation of energy markets, and they needed ALEC to deregulate them. So, Enron became one of ALEC’s most prolific donors. The relationship was close, with Enron CEO Kenneth Lay giving a keynote speech at ALEC’s annual conference in 1997.
With Enron holding the reins of ALEC’s Energy, Environment, and Agriculture taskforce, bills aimed at deregulating the energy sector found their way into the halls of almost every statehouse in America. “Enron’s aggressive campaign waged through ALEC paid off,” Alex wrote in State Capture. “Eventually, twenty-four states adopted some form of deregulation between 1997 and 2000 at the behest of ALEC…”
This state-level deregulation was exactly what Enron wanted, it helped them grow to monstrous proportions. In 1999 they created an online energy exchange market, and were doing more than $350 billion in trades by the next year.
Enron wasn’t able to rest on their laurels for long, but the lesson to other companies was clear. The strategy of pushing for policy at the state level worked. “State governments not only set polices that affect corporate bottom lines,” Alex wrote. “Statehouses also represent multiple battlegrounds where businesses have important advantages. For one thing, state legislators are often highly attuned to corporate demands…For another, most Americans do not pay much attention to what happens within the halls of state legislatures.”
Enron is now synonymous with corporate malfeasance, but once it was a darling of ALEC and conservative interests alike. That a company riddled with corrupt officials and illegal business practices commanded so much sway in an organization tasked with providing bills to lawmakers tells us all we need to know. ALEC is primarily concerned with the welfare of its largest and most generous task force members, and we would do well to remember that.
(2003) CFTC CHARGES ENRON WITH PRICE MANIPULATION AND OTHER ILLEGAL ACTS. In: CFTC Press Release 4762-03. https://www.cftc.gov/sites/default/files/opa/enf03/opa4762-03.htm. Accessed 3 Sep 2020
(2016) Enron. In: FBI. https://www.fbi.gov/history/famous-cases/enron. Accessed 3 Sep 2020
(2017) UPDATE 1-Toronto firm may pursue lawsuit over Enron bond sales -U.S. judge. In: Reuters. https://www.reuters.com/article/enron-lawsuit-idUSL2N1H81VT. Accessed 3 Sep 2020
ALEC Corporations. In: SourceWatch. https://www.sourcewatch.org/index.php/ALEC_Corporations. Accessed 3 Sep 2020
Energy, Environment and Agriculture. In: American Legislative Exchange Council. https://www.alec.org/task-force/energy-environment-and-agriculture/. Accessed 3 Sep 2020
Graves L (2015) ALEC Exposed: The Koch Connection. In: The Nation. https://www.thenation.com/article/archive/alec-exposed-koch-connection/. Accessed 3 Sep 2020
Hertel-Fernandez A (2019) State capture: how conservative activists, big businesses, and wealthy donors reshaped the American States-and the nation. Oxford University Press., New York
Home. In: American Legislative Exchange Council. https://www.alec.org/. Accessed 3 Sep 2020
Segal T (2020) Enron Scandal: The Fall of a Wall Street Darling. In: Investopedia. https://www.investopedia.com/updates/enron-scandal-summary/. Accessed 3 Sep 2020
[] What Makes Alec Smart? In: Governing. https://www.governing.com/topics/politics/What-Makes-Alec-Smart.html. Accessed 3 Sep 2020