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For The Record  

FTR #362 Networking: Enron, Saudi Arabia and 9/11

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MP3 Side 1 | Side 2
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1. The first side of the pro­gram (and the first part of the sec­ond) con­sists of the read­ing of two doc­u­ments from John Lof­tus con­cern­ing the role of Enron as a bro­ker on behalf of U.S. ener­gy com­pa­nies nego­ti­at­ing with the Tal­iban for a pro­posed pipeline across Afghanistan. The doc­u­ments are self-explana­to­ry. In the con­text of Mr. Lof­tus’ analy­sis, recall some points con­cern­ing the com­pro­mis­ing of U.S. intel­li­gence in con­nec­tion with the attacks. (This should not be mis­un­der­stood as con­sti­tut­ing an endorse­ment by Mr. Lof­tus for the work­ing hypoth­e­sis pre­sent­ed in For The Record pro­grams con­cern­ing 9/11.) The law­suit referred to in the Lof­tus pieces is dis­cussed in FTR 357.

2. The first arti­cle is titled “What Con­gress Does not Know about Enron and 9/11.”

3. The sec­ond arti­cle is titled “The Enron Pipeline Con­nec­tion to 9/11.” Note the role in this sit­u­a­tion of the late John O’Neill, and recall reflec­tions made upon his career in ear­li­er broad­casts.

4. Next, the pro­gram high­lights ex-CIA offi­cer Robert Baer’s alle­ga­tions con­cern­ing the unwill­ing­ness of the author­i­ties to move on Bin Laden’s orga­ni­za­tion. (See No Evil; by Robert Baer; Copy­right 2002 [HC]; Crown Pub­lish­ers; ISBN 0–609-60987–4.)

5. Baer alleges that Khal­di Shaykh Mohammed (believed to be the mas­ter­mind of the 9/11 attacks) could have been appre­hend­ed. It appears from Baer’s account that he had been tipped off. “When he [Baer] had been work­ing as chief of police in his gov­ern­ment, he had become aware that his gov­ern­ment was har­bor­ing an Osama bin Laden cell. The two main mem­bers of the cell, he said, were Shawqi Islam­bu­li, whose broth­er had assas­si­nat­ed Anwar Sadat in 1981, and Khalid Shaykh Muham­mad, whose area of exper­tise was air­plane hijack­ings. The prince went on to tell us that when the FBI attempt­ed to arrest Muham­mad and Islam­bu­li, his gov­ern­ment had equipped them with alias pass­ports and spir­it­ed them out of the coun­try; both even­tu­al­ly set­tled in Prague. Get­ting out of the spy busi­ness proved a lot hard­er than I thought it would be. As if I’d nev­er left, I passed every­thing I had learned from the ex-police chief back to the CIA in ear­ly 1998. Not sur­pris­ing­ly, there was no fol­low-up. No response.” (Ibid.; p. 270)

6. Sau­di Ara­bi­a’s cul­pa­bil­i­ty in the attacks is high­light­ed by Baer’s descrip­tion of his attempts to warn about 9/11. “It was­n’t until three years lat­er, in the ear­ly sum­mer of 2001, that an asso­ciate of my prince, a mil­i­tary offi­cer still work­ing for his gov­ern­ment, informed me he was aware of a spec­tac­u­lar oper­a­tion about to occur. He also claimed to pos­sess the name of Osama bin Laden oper­a­tives in Yemen and Sau­di Ara­bia. He pro­vid­ed us with a com­put­er record of hun­dreds of secret bin Laden oper­a­tives in the Gulf. In August 2001, at the mil­i­tary offi­cer’s request, I met with an aide to the Sau­di defense min­is­ter, Prince Sul­tan bin’Abd-al’Az­iz. The aide refused to look at the list or to pass them on to Sul­tan.” (Ibid.; pp. 270–271)

7. A spate of recent arti­cles report that Khalid Sheikh Moham­mad is sus­pect­ed of mas­ter­mind­ing the 9/11 attacks. (“Key 9/11 Plan­ner Is Named” by Josh Mey­er; Los Ange­les Times; 6/5/2002; p. A1.)

8. “ ‘It looks like he’s the man, quite hon­est­ly,’ one Bush admin­is­tra­tion offi­cial said of Khalid Shaikh Mohammed, a key lieu­tenant to Osama bin Laden.” (Idem.)

9. In the con­text of the Lof­tus arti­cles on Enron and 9/11, it is inter­est­ing to con­tem­plate the tim­ing of Enron CEO Jef­frey Skilling’s deci­sion to resign. It was on August 14, 2001. It was in August of 2001 that the Tal­iban nego­ti­a­tions col­lapsed. (“Greed and Fear Return;” by Andrew Hill; Finan­cial Times; 6/8/2002; p. 8.)

Discussion

One comment for “FTR #362 Networking: Enron, Saudi Arabia and 9/11”

  1. Well that’s sort of per­fect in an awful way: for­mer Enron CEO Jef­frey Skilling was released in Feb­ru­ary of this year. And he’s appar­ent­ly not let­ting his past get in the way of a new future in oil and gas trad­ing. So what does Skilling have in mind for his next act? Blockchain tech­nol­o­gy, the tech­nol­o­gy of choice for con­tem­po­rary finan­cial fraud­sters.

    Specif­i­cal­ly, he has appar­ent­ly already held meet­ings with for­mer senior col­leagues from Enron to gen­er­ate sup­port for a new blockchain-based ven­ture that would be a “dig­i­tal plat­form con­nect­ing investors to oil and gas projects”. Yep, Old Enron exec­u­tives + blockchains + oil and gas trad­ing. That’s the plan. What could pos­si­bly go wrong?:

    The Finan­cial Times

    Enron’s Jeff Skilling: out of jail and on the cryp­to trail

    By: Jemi­ma Kel­ly
    March 25, 2019

    It takes a cer­tain kind of per­son to open their arms to a man who’s just spent more than 12 years in US fed­er­al prison, hav­ing been con­vict­ed of secu­ri­ties fraud, con­spir­a­cy, insid­er trad­ing, and mak­ing false state­ments.

    But accord­ing to the Wall Street Jour­nal, who cite “peo­ple famil­iar with the mat­ter”, for­mer Enron CEO Jef­frey Skilling has not only been hold­ing meet­ings with for­mer senior col­leagues at the col­lapsed ener­gy com­pa­ny, but also “oth­ers”, to gar­ner sup­port for a new busi­ness ven­ture: a “dig­i­tal plat­form con­nect­ing investors to oil and gas projects”.

    So what kind of “oth­ers” might be pre­pared to go into busi­ness with a man who was embroiled in the moth­er of cor­po­rate scan­dals — bring­ing down an account­ing firm in the process — and who only got out of prison last month?

    Accord­ing to the Jour­nal:

    Mr. Skilling has met with indi­vid­u­als who spe­cialise in cryp­tocur­ren­cy, blockchain and soft­ware devel­op­ment in recent weeks.

    Ah! Mais bien sur.

    The Jour­nal also quotes a pro­fes­sor at Wayne State Uni­ver­si­ty Law School, who sug­gests that cryp­toland might pro­vide an ide­al sec­ond chance for some­one like Skilling:

    “It’s an area with­out a long mem­o­ry,” he said. “In the cryp­tocur­ren­cy space, no one is going to care too much about Enron.”

    ...

    ———

    “Enron’s Jeff Skilling: out of jail and on the cryp­to trail” by Jemi­ma Kel­ly; The Finan­cial Times; 03/25/2019

    “But accord­ing to the Wall Street Jour­nal, who cite “peo­ple famil­iar with the mat­ter”, for­mer Enron CEO Jef­frey Skilling has not only been hold­ing meet­ings with for­mer senior col­leagues at the col­lapsed ener­gy com­pa­ny, but also “oth­ers”, to gar­ner sup­port for a new busi­ness ven­ture: a “dig­i­tal plat­form con­nect­ing investors to oil and gas projects”.

    So is any­one going to actu­al­ly want to trade on a plat­form cre­at­ed by the crew behind one of the biggest finan­cial frauds in his­to­ry? We’ll see, but you have to be amused by this pre­dic­tion: Enron was long ago no one is going to care:

    ...
    The Jour­nal also quotes a pro­fes­sor at Wayne State Uni­ver­si­ty Law School, who sug­gests that cryp­toland might pro­vide an ide­al sec­ond chance for some­one like Skilling:

    “It’s an area with­out a long mem­o­ry,” he said. “In the cryp­tocur­ren­cy space, no one is going to care too much about Enron.”

    ...

    And that is kind of a valid point: if there was any area of finance where some­one with Skilling’s back­ground might not have to wor­ry about being neg­a­tive­ly judged for his fraud­u­lent past, it’s cryp­tocur­ren­cy. After all, most of the cryp­tocur­ren­cy indus­try at this point is built on some com­bi­na­tion of fraud and/or facil­i­tat­ing crim­i­nal­i­ty so Skilling’s will fit right in. Case in point: a new study found that almost all of the trans­ac­tions on the largest unreg­u­lat­ed Bit­coin exchanges are fake:

    CNBC

    Major­i­ty of bit­coin trad­ing is a hoax, new study finds

    * Nine­ty-five per­cent of spot bit­coin trad­ing vol­ume is faked by unreg­u­lat­ed exchanges, accord­ing to a study from Bit­wise this week.
    * The firm ana­lyzed the top 81 cryp­to exchanges by vol­ume on indus­try site CoinMarketCap.com. They report an aggre­gat­ed $6 bil­lion in aver­age dai­ly bit­coin vol­ume. The study finds that only $273 mil­lion of that is legit­i­mate.
    * “Peo­ple looked at cryp­tocur­ren­cy and said this mar­ket is a mess; that’s because they were look­ing at data that was manip­u­lat­ed,” says Matthew Hougan, glob­al head of research at Bit­wise.

    Kate Rooney
    Pub­lished 11:58 AM ET Fri, 22 March 2019 Updat­ed 12:12 AM ET Sat, 23 March 2019

    New research is cast­ing even more doubt on the legit­i­ma­cy of bit­coin trad­ing.

    An analy­sis pub­lished by Bit­wise this week shows that 95 per­cent of bit­coin spot trad­ing is faked by unreg­u­lat­ed exchanges. The sur­vey, first report­ed by The Wall Street Jour­nal, echoes con­cerns by reg­u­la­tors that cryp­tocur­ren­cy mar­kets are still ripe for manip­u­la­tion.

    Bit­wise, an asset man­ag­er in the process of try­ing to list the first-ever bit­coin exchange-trad­ed fund, said it met with the Secu­ri­ties and Exchange Com­mis­sion on Tues­day to dis­cuss its appli­ca­tion. As a part of the process, it sub­mit­ted analy­sis that could help reg­u­la­tors cut through the noise.

    “Peo­ple looked at cryp­tocur­ren­cy and said this mar­ket is a mess; that’s because they were look­ing at data that was manip­u­lat­ed,” said Matthew Hougan, glob­al head of research at Bit­wise. “When you cut away the echo cham­ber of these non­sense num­bers, it should be an effi­cient, well-arbi­traged mar­ket.”

    The analy­sis showed that “sub­stan­tial­ly all of the vol­ume” report­ed on 71 out of the 81 exchanges was wash trad­ing, a term that describes a per­son simul­ta­ne­ous­ly sell­ing and buy­ing the same stock, or bit­coin in this case, to cre­ate the appear­ance of activ­i­ty in the mar­ket. In oth­er words, it’s not real.

    Those exchanges report an aggre­gat­ed $6 bil­lion in aver­age dai­ly bit­coin vol­ume. The study finds that only $273 mil­lion of that is legit­i­mate.

    “The idea that there’s fake vol­ume has been rumored for a long time; we were just the first peo­ple to sys­tem­at­i­cal­ly look at which exchanges were deliv­er­ing real vol­ume,” Hougan told CNBC.

    The San Fran­cis­co-based firm com­pared at Coin­base Pro, which reports about $27 mil­lion in aver­age dai­ly vol­ume in bit­coin. Its medi­an “spread,” or dif­fer­ence between the price a sell­er wants and the price a buy­er wants, for bit­coin was about 1 cent. That sce­nario passed Bit­wise’s test for hav­ing real vol­ume.

    But in anoth­er stark com­par­i­son, Coin­Bene — the biggest report­ed exchange on CoinMarketCap.com — has a near­ly $15 spread. Hougan said they found oth­er extreme exam­ples of exchanges with a spread of more than $300.

    “It is sur­pris­ing that an exchange with almost 18 times the vol­ume of Coin­base Pro would have a spread that is 1,500 times larg­er,” Bit­wise said in the report.

    Exchanges may have an incen­tive to report fake vol­ume. Bad actors may look to attract list­ings for new ini­tial coin offer­ings, or ICOs, who want their cryp­tocur­ren­cy on an exchange where more trad­ing goes on, Bit­wise said. Those fees can run from $1 mil­lion to $3 mil­lion per list­ing, accord­ing to data from Autonomous Next.

    U.S. reg­u­la­tors have tak­en a cau­tious approach to mak­ing bit­coin main­stream for traders. The SEC high­light­ed the risk of manip­u­la­tion as rea­son for reject­ing appli­ca­tions for oth­er cryp­tocur­ren­cy ETFs. The office of New York Attor­ney Gen­er­al also flagged the issue in a recent report warn­ing that exchanges are vul­ner­a­ble. Because most cryp­tocur­ren­cy trad­ing plat­forms don’t use the same mon­i­tor­ing tools as stock exchanges, SEC Chair­man Jay Clay­ton has warned that investors may not get a fair assess­ment of bit­coin’s price.

    ...

    Hougan said this also explains why trad­ing vol­ume for reg­u­lat­ed bit­coin futures has seemed weak. Chica­go-based CME and Cboe began list­ing bit­coin deriv­a­tives at the end of 2017 but have had much low­er vol­umes than the $6 bil­lion report­ed by unreg­u­lat­ed exchanges.

    “When you real­ize the size of the real bit­coin mar­ket, the CME starts to look a lot more sig­nif­i­cant,” Hougan said.

    ———-

    “Major­i­ty of bit­coin trad­ing is a hoax, new study finds” by Kate Rooney; CNBC; 03/22/2019

    An analy­sis pub­lished by Bit­wise this week shows that 95 per­cent of bit­coin spot trad­ing is faked by unreg­u­lat­ed exchanges. The sur­vey, first report­ed by The Wall Street Jour­nal, echoes con­cerns by reg­u­la­tors that cryp­tocur­ren­cy mar­kets are still ripe for manip­u­la­tion.”

    95 per­cent of bit­coin spot trad­ing is fake. That’s based on an analy­sis of 81 dif­fer­ent cryp­tocur­ren­cy exchanges. And for 71 of those 81 exchanges “sub­stan­tial­ly all of the vol­ume” was just some­one simul­ta­ne­ous­ly buy and sell­ing bit­coins that sim­ply cre­ates the appears of active trad­ing. Sur­prise!

    ...
    The analy­sis showed that “sub­stan­tial­ly all of the vol­ume” report­ed on 71 out of the 81 exchanges was wash trad­ing, a term that describes a per­son simul­ta­ne­ous­ly sell­ing and buy­ing the same stock, or bit­coin in this case, to cre­ate the appear­ance of activ­i­ty in the mar­ket. In oth­er words, it’s not real.

    Those exchanges report an aggre­gat­ed $6 bil­lion in aver­age dai­ly bit­coin vol­ume. The study finds that only $273 mil­lion of that is legit­i­mate.

    “The idea that there’s fake vol­ume has been rumored for a long time; we were just the first peo­ple to sys­tem­at­i­cal­ly look at which exchanges were deliv­er­ing real vol­ume,” Hougan told CNBC.
    ...

    So are these exchanges aware that almost all of their trades are fake? Well, con­sid­er­ing that peo­ple pre­sum­ably have to pay the exchange a cut for these fake trans­ac­tions it seems like a good bet that the exchanges are active­ly man­ag­ing these fake trades them­selves (in which case they would have to wor­ry about the trad­ing costs). And as the arti­cle notes, exchanges have a incen­tive to fake vol­ume: the high­er the vol­ume, the more like­ly an exchange is to be select­ed for a poten­tial­ly lucra­tive “ini­tial coin offer­ing” (ICO).

    ...
    Exchanges may have an incen­tive to report fake vol­ume. Bad actors may look to attract list­ings for new ini­tial coin offer­ings, or ICOs, who want their cryp­tocur­ren­cy on an exchange where more trad­ing goes on, Bit­wise said. Those fees can run from $1 mil­lion to $3 mil­lion per list­ing, accord­ing to data from Autonomous Next.
    ...

    So that’s the kind of mar­ket­place Jef­frey Skilling and his for­mer Enron senior col­leagues are get­ting into. The kind of mar­ket where almost every­thing is fake. In oth­er words, the per­fect mar­ket for for­mer Enron exec­u­tives:

    BBC

    Enron ‘cre­at­ed fake trad­ing room’

    Thurs­day, 21 Feb­ru­ary, 2002, 06:08 GMT

    Enron cre­at­ed a fake trad­ing room in order to impress Wall Street ana­lysts, a for­mer top exec­u­tive at the firm has admit­ted.

    Four years ago, the com­pa­ny built a com­mand cen­tre for its Enron Ener­gy Ser­vices (EES) pow­er sup­ply arm, and ordered staff to pre­tend they were doing deals as ana­lysts gath­ered in Hous­ton for their annu­al meet­ing with the firm.

    EES lat­er went on to be an active part of the busi­ness, but for­mer chair­man Ken­neth Lay and ex-pres­i­dent Jef­frey Skilling rehearsed staff in look­ing busy, in the hope of con­vinc­ing investors that it was already a going con­cern in 1998.

    The rev­e­la­tions come in an inter­view with Joseph Phe­lan, an ex-direc­tor of EES, pub­lished by the Reuters news agency.

    They are not the first time that for­mer staff have alleged being per­suad­ed to fake activ­i­ty when vis­i­tors dropped by Enron’s Hous­ton head­quar­ters.

    Pre­tend prof­its?

    EES was intend­ed to be the pow­er­house of Enron’s busi­ness.

    It promised to man­age the ener­gy needs of large cor­po­ra­tions for a flat fee, an area that was seen as high­ly promis­ing.

    Although EES even­tu­al­ly became prof­itable, it had only a tiny hand­ful of cus­tomers and staff in 1998.

    Mr Phe­lan said that staff were brought in from oth­er floors to the EES “war room”, and tele­phone calls into the cen­tre were sched­uled in order to cre­ate a buzz.

    The whole oper­a­tion was care­ful­ly chore­o­graphed in order to pro­vide the most buoy­ant impres­sion on ana­lysts.

    Probes per­sist

    Reg­u­la­tors, inves­ti­ga­tors and politi­cians are cur­rent­ly try­ing to piece togeth­er exact­ly what was fact, and what fic­tion, in Enron’s busi­ness prac­tices.

    Although the decep­tions alleged­ly prac­tised at EES were not ille­gal, they are seen as part of a cul­ture of dis­hon­esty that cul­mi­nat­ed in the mis­lead­ing account­ing that ulti­mate­ly brought the firm down last year.

    The failed fir­m’s crit­ics argue that Enron was an organ­i­sa­tion rot­ten to the core, where mal­prac­tice was incul­cat­ed by Mr Lay and Mr Skilling.

    ...

    ———-

    “Enron ‘cre­at­ed fake trad­ing room’ ”; BBC; 02/21/2002

    “EES lat­er went on to be an active part of the busi­ness, but for­mer chair­man Ken­neth Lay and ex-pres­i­dent Jef­frey Skilling rehearsed staff in look­ing busy, in the hope of con­vinc­ing investors that it was already a going con­cern in 1998.”

    Yep, Jef­frey Skilling actu­al­ly rehearsed with his employ­ees the act of stag­ing a busy ener­gy trad­ing room to impress investors and ana­lysts:

    ...
    EES was intend­ed to be the pow­er­house of Enron’s busi­ness.

    It promised to man­age the ener­gy needs of large cor­po­ra­tions for a flat fee, an area that was seen as high­ly promis­ing.

    Although EES even­tu­al­ly became prof­itable, it had only a tiny hand­ful of cus­tomers and staff in 1998.

    Mr Phe­lan said that staff were brought in from oth­er floors to the EES “war room”, and tele­phone calls into the cen­tre were sched­uled in order to cre­ate a buzz.

    The whole oper­a­tion was care­ful­ly chore­o­graphed in order to pro­vide the most buoy­ant impres­sion on ana­lysts.
    ...

    And now he wants to cre­ate a blockchain-based oil and gas trad­ing plat­form. So as we can see, Skilling clear­ly has the nec­es­sary skill sets for this mar­ket. The future is bright for Skilling. Maybe not so much for his even­tu­al investors. Or any­one who actu­al­ly uses his new trad­ing plat­form.

    Posted by Pterrafractyl | March 27, 2019, 3:02 pm

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