Friday, November 6, 2009

'Enron John', Diamond Jim and Lying Steve

After learning that the Harper government has signed on to changes that will allow corporations to legally defraud unsuspecting citizens, I thought it might be time to update this story on John Baird and Anderson Consulting, of Enron fame.

John Baird's attempt to privatize social services when he was in Mike Harris's Ontario government, resulted in one of the worst scams ever perpetrated in this province. A handful of people got very rich by exploiting Ontario's disabled and disenfranchised. And Ontario taxpayers were left with the bills.

Anderson Consulting (now called Accenture)

Arthur Andersen of Anderson Consulting, was once the accountant for Halliburton, and a close personal friend of Dick Cheney's, George Bush's VP. Cheney even used Anderson's firm in a promotional video, showing how good accounting firms do business. (1) Not long after, Anderson's firm was charged with fraud.

But at the time, John Baird hired them to revamp our welfare system. According to the Polaris Institute:

Social Services outsourcing for State and Provincial Governments, especially in the area of Welfare services, is one of [their] focus areas ... This outsourcing for government includes computer systems design and network creation and management. [Their] history of social services outsourcing, which often amounts to privatization of major parts of social services delivery under a certain time period, has often been very problematic. The problems have been especially serious in the U.S. states of Ohio and New York and the Canadian Province of Ontario ... (2)

Anderson Consulting would later change it's name to Accenture and Mike Harris would find his way to it's board as a "consultant". This was called:

...the fastest, most expensive re-branding effort in history as everything was changed to fit the new logo in a matter of days. It is Arthur Andersen that is in so much legal trouble for allowing Enron to cook their books and destroying Enron's documents as Enron collapsed. While Accenture states that because it is no longer tied to Andersen it is not implicated in the Andersen/Enron scandal, the Wall Street Journal reported that Accenture might have some legal exposure to the Enron scandal ... (2)

In October of 2001, Halliburton and Accenture announced a major expansion of their longstanding relationship with the signing of an alliance between Accenture and Landmark Graphics Corporation, a wholly owned business unit of Halliburton which is "the world's leading supplier of software and services for the upstream oil and gas industry.

And while Haliburton and the newly branded Anderson Consulting was announcing that major expansion, they were being investigated for another accounting fraud.

According to Halliburton's current CEO, David Lessar, Cheney was aware of the accounting changes. While the SEC (Security and Exchange Commission) hasn't interviewed the vice president yet, the nonpartisan and conservative watchdog group Judicial Watch has filed a shareholder suit against Cheney and Halliburton claiming that because Halliburton overstated its earnings by $445 million from 1999 through 2001, shareholders lost their shirts when the fraud was revealed and the stock tanked in response. Despite Halliburton's troubles since Cheney left there for public office, he has stonewalled the press on every related subject—whether his stock sales, or asbestos liability assumed after Halliburton acquired Dresser Industries, or the SEC accounting investigation—and refers all questions to Halliburton, which conveniently declines to comment. (1)

Sound familiar?

Political Contributions

One thing that became public throughout the investigations of Anderson, Enron and Halliburton, even in the early days, was how generous these companies had been to George W. Bush and the Republicans.

One energy company stands above the rest in terms of its political influence. That company met with task force members six times and with Vice President Cheney at least three times. Its name: Enron, a donator of $1.1 million to the GOP in 2000 and another $300,000 for the Bush inauguration. According to Secret Service logs, Cheney had two additional meetings with Enron chairman Ken Lay in the spring of 2001. What resulted from all these get-togethers? An independent evaluation of the Bush energy bill by American Family Voices, an advocacy group for middle- and low-income Families, showed that seventeen different policy initiatives included in the plan directly benefited the rogue corporation. (3)

Meanwhile in Ontario:

Accenture has a huge, problem-filled contract, to 'streamline' the delivery of welfare in Ontario . In 2000 and 2001, Accenture gave $20,000 Canadian to the governing Tories. Interestingly, they started making donations to the Tories only after the Tory government's Accenture contract was given a scathing review by the Provincial auditor, and they were forced to renegotiate the contract. Said Deputy Liberal Leader Sandra Pupatello: "They [Accenture] were fearing that they were going to lose the contract altogether because the government was taking far too much heat on this contract. Then, suddenly, they started contributing to the PC Coffers" (Hamilton Spectator ['Briefly' Section] "Tory Welfare Donations Under Fire" October 25, 2001; "Consulting Firm Boosts PC Coffers, Liberals Say" Richard Brennan, Toronto Star, October 25th, 2001) (4)

And two years later, those donations were still paying off:

In May of 2003 - The Province of Ontario's Workplace Safety and Insurance Board (WSIB) offered Accenture a $500 000 (CND) contract to review the board's operations. The contract did not go through a formal public tendering process.

And now another Harris boy, Jim Flaherty, has just legalized this, so there will be no legal recourse to those who become victims of corporate fraud.

John Baird, Halliburton, Anderson, Enron

Baird's attempt to privatize social services was costly, not just in terms of the enormous cost to taxpayers, but also a human cost, as thousands were bumped from the system.

The Canadian Province of Ontario's contract for social services delivery, essentially privatized welfare during the duration of the contract (which was to be for 4 years, but has gone over that limit by more than a year). As of March 2002, Accenture has been paid $246 million (CND) to do this "overhaul of the Ontario welfare service", even though the original estimate was $50 - $70 million and the project was eventually capped at $180 million. At one point, Accenture billed taxpayers $26,000 in unreceipted out of pocket expenses and Accenture management was paid up to $575/hour. In 1999, a year after the Auditor General of Ontario put out a scathing report on the contract, hourly rates paid to Accenture management actually rose (3%), rather than being cut. After this, the government was forced to finally renegotiate a cut to Accenture's billing rates. The Ontario government cut welfare payments to $355.71 per child in poverty and fired massive numbers of social service workers, making this contract essentially a transfer from those in need to those in Accenture.

In 2001, many more critiques of the system were brought forth from labour, the Provincial opposition Liberals, and again from the Provincial Auditor. In September 2001, union and welfare activists picketed government offices in Hamilton, Brantford, St. Catherines and Simcoe. The employees of the Ontario Disability Support Program said that workers were frustrated by the Accenture created system because, in the words of union representative Paul Statham, "It's not working and needs to be fixed and we want the public to know. It means clients are phoning up and yelling at us for system errors that we have no control over...

When all is said and done the government is going to pay out $180 million and it doesn't work." The Hamilton-Niagara region, in the first four months of its use of the Accenture contract for social assistance delivery, has been plagued by such problems as blank cheques for recipients and missed drug and dental benefits.

In October 2001, the opposition Liberals called the Accenture contract for the welfare system a "boondoggle" at the expense of Provincial taxpayers, citing computer crashes and ministry staff which duplicated the work of Accenture management because of the need to double check the faulty work at Accenture. An Ottawa Citizen Editorial in October 2001 decried the fact that Accenture received millions of dollars before any savings occurred; that the government can't yet clearly say what the final cost, or savings, will be; that it is unclear that any savings will come from this at all; that computer crashes have been rampant. The editorial came to the conclusion that high-priced consultants are just that - high priced, and that "if a service truly needs to be provided by government, then government should do the job. The government defended the scheme, saying that though there were problems in the first two years, those problems have been dealt with and the contract is running smoothly, providing a huge windfall for taxpayers according to Social Services Minister John Baird.

In December 2001, the Provincial Auditor laid waste to the claims that the contract has been running smoothly over the previous two years, saying that the cost ratio of having Accenture do the work rather than public servants was 6 to 1 and that in 2000 the Province realized savings of $89.5 million [much of this from the continued gutting of access to welfare payments], but the government had paid Accenture $193 million. This statement of the Auditor General was part of a larger condemnation of the Tory government's overuse of private consultants throughout its Departments.

While the Ontario Government believes that the system is working and that they are addressing the issues raised by the Auditor General's reports with Accenture, the Auditor General's 2002 report again condemned Accenture and the Ontario Government's Business Transformation Project. The December 2002 report stated that the system, implemented across Ontario between May 2001 and January 2002, "was seriously flawed and was characterized by its principal users as being, in many respects, a step back from what had been available to them previously." (Auditor General's 2002 report). The Auditor reported that the service-manager staff were concerned that the Business Transformation Project had not been tested adequately and that it was essentially a work in progress rather than a finished product when it was released.

In terms of payments to Accenture, the Ministry has paid, as of March 2002, $246 million to the Accenture, significantly higher than the original $180 million payment cap. The Ministry paid Accenture $66 million dollars outside of the original $180 million payment cap, of which $22 million is related to work the Ministry had agreed to do but in the end was performed by Accenture. This, along with the fact that savings attributed to the Project and to Accenture were exaggerated, prompted Auditor to believe that the basis for the above cap payments continue to be questionable.

The Ministry's response to the Audit stated that "it is the Ministry's view that savings attributed to the overall business transformation are substantial and substantial future savings will continue to accrue to taxpayers from this transformation." Upon release of the report, Auditor General Erik Peters commented on the Ontario Government's willingness to respond to the report: "What worries me the most is really the slowness of taking action."

The report also noted that the Ministry had essentially abandoned the original principle of sharing risk and rewards with Accenture by guaranteeing Accenture full payment for its out-of-cap work. This comes after a January 2001 contract amendment that provides for the extension of the two-year period for benefit accrual after the end of the contract. It was noted in the audit that most out-of-cap expenditures came after the initial system release in May 2001. Many of the items in this category can be attributed to failures in the new information technology system which required design changes and increased technical support.

The Auditor believes that many of the changes should have been corrected under Accenture's warranty provision agreement with the Ministry. The Report stated that, "in our view, the willingness of the Ministry to pay for these items outside the agreed-to payment cap appears questionable and unnecessary."

The Accenture designed and implemented system has also been reported as having made unexplained errors. The Auditor General explained that the errors "do not inspire confidence and raise the possibility that other significant problems may go undetected." In one case the system inexplicably produced 7,110 discretionary benefit payments totaling $1.2 million to recipients who were ineligible for assistance.

The Auditor noted in an interview with the Toronto Star that due to the failure of meeting the obligations of their first contract with the Ministry, Accenture was granted a further $38 million contract to make sure that the system they have put into place operates properly.

The Corporate Party of Canada, made up of the old Reformers and Mike Harris cronies, headed by Stephen Harper, is now sticking it to us on a larger scale.


1. The Book on Bush: How George W. (mis) Leads America, By Eric Alterman and Mark Green, Penguin Books, 2004, ISBN: 0-670-03273-5, Pg. 68

2. Anderson Consulting and Accenture, Polaris Institure, June 2003

3. Alterman/Green, 2004, Pg. 18-19

4. Tories ignored computer warnings, By Trish Hennessey and Peter H. Sawchuk, University of Toronto Press, July 13, 2004

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