Santa's Naughty CEOs

"Ho, ho, ho!"

The sound was clear, even if the video was jumpy. It showed a fat, florid-faced man sitting at a desk with a pad and pencil, talking to himself and making notes. Outside his frosted window, a snowstorm was raging.

"Ho, ho, ho. . .

"John Rigas--his whole family, ho, ho, ho, ho, ho.

"Dennis Kozlowski, Martha Stewart, ho, ho!

"Sam Waksal, another ho!

"So many hos, so many memories. . . ."

The diminutive fellow who gave me the tape was blunt. The man at the desk was his boss, Santa Claus himself, and all that ho-ho-hoing was anything but jolly.

One after another, Santa shouted the names of more tainted members of America's corporate elite--Ken Lay, Bernie Ebbers, on and on, each, in his pimp-talk estimation, a ho.

"Let's put it this way," the visitor said. "It takes one to know one."

According to my little friend, Santa Claus is anything but the benign and bumbling fellow his PR specialists and spin doctors would have you believe. Santa is a chief executive officer, a pioneering CEO in fact, whose ideas of way-way-offshore unaccountability, for example, were copied by his friends in the ranks of high-flying CEOs.

His workshop, my visitor assured me, was the model for the sweatshops some of his multinational cronies had set up throughout the third world.

The tape continued. Santa moved from his desk to a roaring fire, into which he then threw file after file of papers. "This is so much safer than a shredder, no matter what anyone tells you," my visitor, a jittery fellow, said.

He refused to tell me his name, but when he had finished relating his story. I knew what to call him: Deep Elf.

In a nutshell, reports Deep Elf, Santa is worried. Like a lot of his cronies, Santa felt he'd dodged a bullet during the uproar about corporate corruption. Not only did he have links with some of the people who have been in the headlines, but he's also dreading where the calls for reform might lead.

Deep Elf said he'd seen "some heavy shit" during the years he toiled for Santa. As the elf explained it, while nervously lighting his fifth cigarette, Santa had enjoyed the same sort of breaks other CEOs had--including some corporate Capones who deserve to find coal in their stockings instead of stock options.

"Santa has been playing with the same loaded dice that his buddies have used. I mean corporate welfare--and generally accepted accounting practices and all that. Arthur Andersen has been his accountant for years. He has been using his offshore partnerships to play hide-the-profits for the past decade. Where do you think those bozos at Enron got the idea?" Deep Elf asked.

"This year's been really scary. Especially after so many of his friends have turned out to be dirtbags and we all got a peek at the way it really works.

"Santa is in crisis mode. He could be rehearsing for a perp walk himself this time next year." Deep Elf said.

I was familiar with the outrages that so upset my visitor. And I was pleased that he had come to me with his tale of yuletide woe. I have had my eye on the fastspreading slick of corporate corruption for the past year and I've learned never to be surprised when someone new gets covered in oil.

For a while, it seemed as though people were catching on, especially when some of the secrets of the vaunted business success of Vice President Cheney came to light. Cheney, a veteran of Congress, the White House and the Defense Department, improved Halliburton's performance with more that $1 billion in government financing and loan guarantees.

But, to be fair, a Halliburton subsidiary did end up giving a little something back to America--in the form of a $2 million settlement that ended an investigation into possible overbilling of the Pentagon during Cheney's stewardship. In one case, the company may have charged $750,000 for work that actually cost $125,000. Despite the overbilling, Halliburton continued to be awarded big contracts, including a new 10-year deal with the Army that comes with no lid on potential costs. I guess it does help to have friends--and ex-CEOs like Cheney--in high places.

The shady rich had gotten richer through a variety of tricks. I asked Deep Elf if he, for example, had ever heard of monthly income preferred shares, protean securities that turn from debt to equity and back again depending on how you look at them. They were the creations of wizards at Goldman Sachs, and they allowed companies to cut taxes and trim debt using a complex shell game. When the government tried to rain on the parade, Jon Corzine--now a member of the Senate Banking Committee, then Goldman Sachs' CEO--signed an overheated letter to Congress that decried government efforts to "impose completely arbitrary" distinctions between assets and liabilities.

Corzine's demand was tantamount to saying that people should stop making "completely arbitrary" distinctions between right and left, or black and white. Or, perhaps more to the point, right and wrong. Yet it is precisely the distinction between what is debt and what isn't debt that some companies hoped to eradicate. It's as if I went out to dinner and, when the check came, I offered my phone bill as payment.

Deep Elf knew what I was talking about. "Santa invented that little stunt," he said, referring to the MIPs. "Some of his cronies asked him to invent a reallife magic toy that could make real money. He has a good imagination for toys and tricky gadgets. He's crazy about those funny lenticular postcards that show him winking or the Statue of Liberty undressing. So he gave them the basic now-you-see-it-now-you-don't concept and they farmed out the execution to a workshop at Goldman Sachs."

Brilliant, I thought. Santa the CEO dreams up schemes as blatantly dishonest as "heads-I-win, tails-you-lose" and then his cronies fill in the details--and make sure the schemes are officially legal. If you're rich enough to have friends in the right places, such as Congress, Santa can make real magic toys for you.

"Santa has cooked up a million special tricks," Deep Elf continued. "Every year he keeps adding to the generally accepted accounting principles, just to keep the auditors happy. Then there are those top-hat plans, another cutesounding little swindle, that exempt pension plans for senior executives from the rules and (continued on page 189)Naughty Ceos(continued from page 142) regulations that their employees have to follow. It's much easier to get rich if you make up the rules."

Santa is hardly the only CEO who has been a conspicuous consumer of corporate welfare. But, as Deep Elf explained, Santa has special worries this yuletide. The ostensibly cheerful season presents a number of reminders of scandals past and potential future embarrassments for the honcho of the frozen north.

Would this season, for example, be as cruel to people as last year was, when, by some estimates, close to 800,000 U.S. workers were canned between September 11, 2001 and January 1, 2002? Most of them lost their jobs between Thanksgiving and Christmas.

"It used to be that all he had to worry about was PETA--and the funny thing is, he was clean. He only uses the reindeer for ceremonial occasions, and they eat like he does.

"Now there are reminders all over the place. Do you remember what you did last year in the week between Christmas and New Year's?" he asked me.

I did. It was a pleasantly restful time to pick at the leftovers, play board games and wrap presents I wanted to recycle by passing them on to others.

But some had a less relaxing postholiday period. It was easy to recall that one of the more squalid and mysterious episodes of the recent past in the land of corporate Capones took place immediately after Christmas last year when Sam Waksal, the CEO of ImClone, invited his entire family to a feast of illegal stock profits. Waksal was spending that time making a series of frantic attempts to dump ImClone stock before the FDA's ax fell on the golden goose that wasn't--the cancer drug Erbitux. His father made $8 million and his daughter $2.5 million--in what has been reported as insider trading. This year, Dr. Sam is going to need a silver-plated snow shovel to dig out from under the pile of legal problems that have buried him and his family.

Santa himself, Deep Elf said, was at his usual sandy getaway, a Caribbean spot where CEOs were thick as seashells. The story is that the feds have subpoenaed phone logs from the entire island to see if anyone else talked to Waksal last year.

Martha Stewart wasn't there, but she (and her brokers) managed to sell plenty of her ImClone stock just before its value swooned. Exactly what happened is still disputed.

"Santa said that what she really wants for Christmas this year is a paper trail that will get her off the hook," Deep Elf said, snickering.

"Synergy, that's what Santa and Martha had," he continued. I agreed. For years, starting in the waning days of summer, she's been on our case to start winding the evergreen garlands around the staircase banister, renovate our wreath inventory and in general pick up more of her line of ersatz WASP housewares.

This year, Martha has been busy dodging scary-looking mail--definitely not Christmas cards--from the Justice Department and the House Committee on Energy and Commerce. These invitations, to explain her ImClone transactions, are difficult to turn down.

"Santa was always yakking about her and some of his other big-time cronies, bragging about them--especially to Mrs. Claus. That could have been a mistake," Deep Elf said.

"Mrs. Claus?" I asked. "Does she know any secrets?"

"She could put more than one of his pals away, let me tell you," Deep Elf said. "She can read. She reads the papers just like the rest of us. Before the perp walks, all she ever heard from Santa was how great they all were.

"Santa kept telling her that they were all like him--type A personalities, achievers. Once he said, 'It's hard to shop for them. What do you get for the man who has stolen everything?"'

"Is she a threat to Santa?" I pressed.

"One of his mistakes was always telling Mrs. Claus to think outside the box. One day she did--and she asked him for a revised prenup. You know why? Two words: Jack Welch. She has been on the phone and e-mailing Welch's wife for hours at a time. Then Mrs. Claus got on the web and started reading about Santa's great friend Dennis Kozlowski."

I knew plenty about Kozlowski and wondered if Mrs. Claus had ever met the second Mrs. Kozlowski. Her name was Karen Mayo, and the Tyco CEO had met her when she was a waitress at a restaurant near Tyco's Exeter, New Hampshire headquarters. For her 40th birthday Kozlowski threw a party on Sardinia that allegedly cost $1 million. "Two gladiators meet guests at the door," an e-mail from the planning phase, now in the possession of investigators, said. "We have a lion or horse with a chariot for the shock value." The party also had an ice sculpture of Michelangelo's David "which sprayed vodka from its penis," the New York Daily News reported.

Kozlowski, under the influence of his trophy wife, developed an interest in what The New York Times archly called "second-tier work by big-name artists." Deep Elf had not seen that story and was amused by it.

"Santa was always talking about how Kozlowski's tax philosophy was just like his," Deep Elf said. "I heard him say, 'If you give the money to the government, they'll probably go and spend it on something stupid like a soldier's salary or a school lunch program."'

Kozlowski, it turned out, took the slogan for Bush's tax cut--"it's your money"--literally and did not render unto New York authorities the approximately $1 million in sales tax due on the purchase of some of the "second-tier" work.

Kozlowski faced other charges as well and got out of jail on a $10 million bond posted by his forgiving first wife, a woman who seems to understand the true meaning of the holiday season.

I asked Deep Elf why he wanted to talk.

"Remember when Wal-Mart got into that mess for allegedly making people work overtime and not paying them for the extra time?" Deep Elf asked with a mirthless laugh. "That's when I decided to spread the word about him--when he said Wal-Mart's mistake was to pay them anything at all. He said they should play by his rules," he replied.

Did Deep Elf have any predictions? I asked.

"Santa is concerned, but basically he's optimistic. He knows the deck is still stacked, that the basic stuff is still intact and that big bucks will buy influence in Washington, maybe forever."

I fear he's right. Real reform is about as likely as a white Christmas in Panama.

It's still a fat season for the CEO culture. Despite the unpleasantness of the past 12 months, the CEOs are going to have a better Christmas than the rest of us--yet again.

Sure, there have been headlines, arrests and pious blather from Washington. But there are plenty more CEOs out there practicing variations on the schemes that have produced big scandal headlines, and it will stay that way.

Rest assured someone will figure out more devious ways to evade last year's restrictions on soft-money donations to politicians and preserve big business' ability to buy influence inside the Beltway.

So as Santa ho-ho-hos his way across the rooftops of Beverly Hills, Greenwich, Aspen and Palm Beach, let's raise a flute of Cristal to the old devil. And the Ghost of Christmas Present, attended by the ghastly children Ignorance and Want, will be stuck scratching at the window, where he can be safely ignored.

But wait, I told myself. What was I doing? Here I was talking to someone who claimed to be an elf from the North Pole. Could I ask anyone to believe me?

Then I remembered what President Bush said when he promised the country he would do everything in his power to attack the sort of corruption that had been in the headlines--and to reform the way of doing business that he and his own CEO cronies had always enjoyed.

"I believe," he said, that "people have taken a step back and asked, 'What's important in life?' You know, the bottom line and this corporate America stuff--is that important? Or is serving your neighbor, loving your neighbor like you'd like to be loved yourself?" That statement was supposed to bolster Bush's credibility about reform. Who is bullshitting whom here?

As far as I'm concerned, if you believe that Bush will try to make corporate life more honest, you probably believe in talking elves, too.

"Santa was always yakking about Martha Stewart and some of his other big-time cronies, braggins about them--especially to Mrs. Claus. That could have been a mistake," said Deep Elf. "Is she a threat to Santa?" I pressed.

"This year has been really scary. Especially after so many of Santa's friends have turned out to be dirtbags."