The Real Deal
With Catherine Austin Fitts
Flashpoints News Radio, KPFA, Berkeley, USA
Dennis Bernstein's interview with CATHERINE AUSTIN FITTS
“Enron: The Anatomy of a Cover-Up”
Catherine Austin Fitts is a Republican insider who was targeted for her success at reengineering government and
providing information about “how the money works” and about stock market capital available to small businesses and
Dennis Bernstein (of KPFA in Berkeley) recently interviewed her about the ongoing cover-up, by Congress, the Department
of Justice (DOJ) and the Securities & Exchange Commission (SEC), of the Enron criminal enterprise.
Fitts believes that the most damning evidence in the Enron case was allowed to slip away so that political damage to the
current administration could be minimized and money stolen protected from recapture. Fitts believes that it is not too
late for informed citizens to insist on a successful effort to get back both the monies stolen and the insider trading
profits taken by Enron’s board, management and their affiliates, and to prosecute those responsible.
Ms. Fitts is a former managing director and member of the board of directors of Dillon Read & Co, Inc, a former Assistant Secretary of Housing- Federal Housing Commissioner in the first Bush Administration, and
the former president of The Hamilton Securities Group, Inc. Ms. Fitts was offered an opportunity to serve as a governor
of the Federal Reserve Board and declined, electing instead to build a private network committed to the creation of
wealth through a commitment to the rule of law. She is the president of Solari, Inc., an investment advisory firm
created to channel equity capital to solaris (community databanks) and their venture capital affiliates. Solari offers
risk management services through Sanders Research Associates in London.
Dennis: Say a little bit more about the background and the work you did with the Bush administration, and since that
Catherine: I was hired by the first Bush administration to help clean up $100 billion sized financial frauds. These
had to do with Iran Contra, the S crisis, BCCI and the HUD scandal. I was there for 18 months. When I left I was asked to become a governor of the
Federal Reserve Board. I declined and instead started an investment bank and financial software firm. In 1996 and 1997,
I was targeted by the DOJ and learned much more about Washington fraud and the depth of the financial scandals that the
DOJ keeps hidden.
Dennis: Alright Catherine Austin Fitts, do the anatomy of a cover-up for us. If the Justice Department and Congress and
the SEC wanted to nail the Enron bandits and money launderers, what should they have done, first, second and third, that
they did not do?
Catherine: There are five steps that should have been taken. All five are based on two fundamental principles that
you always see working when prosecutors and investigators are doing a competent job.
The first fundamental principle: Make sure you have control of all the data and information about money and how
that money is used in the organization. And then, the second fundamental principle: Use that control (of the data and
information) to gain control of any cash that was stolen or wrongfully used.
It helps to compare financial fraud to a game of basketball. The ball is the cash and you want to keep your eyes on the
ball at all times. Keeping that in mind, let's walk through the five steps of what a competent investigation and
prosecution effort would do in a case of major financial fraud.
Let me emphasize at the outset that what we are dealing with here is very definitely a criminal enterprise. Enron and
their accountants have already admitted to securities violations, gross negligence, and obstruction of justice. So let's
not skirt the issue: we have a self-proclaimed criminal enterprise. I believe that Enron was also engaged in additional
financial fraud and money laundering. When there is even a possibility of something like this, the first thing you do is
establish control of both the records and cash. Given that there was, early on, clear admission of criminal violations,
there was absolutely no excuse for the government not to have promptly exerted this kind of control.
So let's walk through the five steps:
First, a real investigation gets control of all the documents. And by all the documents I mean all the papers and digital records of Enron and its 3,000 subsidiaries and special
purpose entities, both onshore and offshore. You also make sure you get control of all the Enron-related records at
their banks, auditors and other vendors, both onshore and offshore. It's impossible for us to tell, from where we are,
the exact extent of the subpoena or other discovery actions that have been taken, but clearly there's a great deal that
has not been done, particularly offshore, just based on the public record. We know the government has permitted
extensive shredding of documents by Arthur Andersen and Enron, something that is incredibly disturbing because it proves
that months into an investigation, the SEC and DOJ chose not to assert the initial control that was absolutely essential
to the success of any such investigation.
Second, you never allow the transfer of assets before you assert the appropriate controls. That's why the first thing you need to do is gain control of documents and the cash. And yet we've seen the government
readily permit the transfer of Enron Online -- which I believe was a money-laundering and slush fund operation -- to the
Swiss bank, UBS, one of their largest creditors. So now it's very possible that a great deal of information that would
be needed for a proper investigation is under the protection of the privacy laws of a Swiss bank. And by the way, it's
very interesting, and perhaps quite significant, to note that the newest Board member of UBS, the bank that purchased
the Enron Online operation, is the former chairman of Arthur Anderson.
Enron was also permitted to have the gold bullion and gold derivatives trading operation transferred. Understand that to
be able make these two transfers, as quickly and quietly as they were, in the middle of an initial bankruptcy filing,
was nothing short of miraculous based on what I'm told by bankruptcy attorneys. In combination with the shredding, it
permitted the coordination of cover-up of two things: money laundering and a lot of financial fraud between the banks
and the entity itself. But this will probably be kept hidden because one of the banks now controls what is probably the
most likely guilty entity. So that's number two -- the government has allowed the transfer of assets in a way that stops
investigational access to the documents (and employees) they would need for a successful investigation.
Third, you always get document and cash control, if you can, before a bankruptcy filing. Instead, they permitted a bankruptcy filing before assertion of control. A bankruptcy filing gives Enron all sorts of
powers and rights to protect themselves, particularly from the class action lawsuits that, on a private basis, could
eventually dig out some of this data about how the money worked, even if the DOJ and SEC don’t succeed in digging this
out. Watching this process, my question is, Did the DOJ and SEC specifically help Enron get into bankruptcy, so as to
protect the information from the class action investigation?
Fourth, you never permit shredding of documents. There are lots of different ways to work with the attorneys, the accountants and other people to ensure that shredding
doesn't happen. Not only has it happened, but Arthur Andersen and Enron have admitted to what appears to me to be
criminal obstruction of justice, by shredding the documents.
This is even the more shocking because of the government's right to assert control over any federal contract and seize
government payables owed to the guilty parties. Enron, since 1997, has enjoyed substantial federal contracts, and Arthur
Andersen enjoys very significant and sensitive federal contracts. Those contracts can be cancelled for convenience at
the pleasure of the government, and it can be done within the space of 24 hours. I have direct experience with the
government doing this. Cash that is owed under these contracts can be seized as an offset for a variety of things,
whenever probable fraud is evident. Yet the government has not cancelled those contracts and has not seized the cash. We
need to ask why this didn't happen.
You can imagine how much this investigation is costing taxpayers, yet the government has neglected to take any of these
basic steps. So I would ask: If Enron and Arthur Andersen by their own admission are guilty of criminal violations of
destroying evidence, of cooking the books, and you have Enron board members saying that Arthur Andersen and the
management lied, then on what basis should they not be immediately disbarred from doing business with the federal
government? Why on earth would we let companies that behave that way continue to control our government's most sensitive
information systems and share its responsibilities?
Fifth, you assert control of all the company cash, both onshore and offshore. (Example: When Noriega was sent to jail, my understanding is that we used the PROMIS software system to sweep offshore
bank accounts and seize back $2 billion of his money.) You can also assert control of all the capital gains that were
made on insider trading or probable insider trading. You do not need to have an indictment, or to prove fraud, to assert
control over those stock market profits made by the Enron board and management and their affiliates.
You and I have talked about the lead Harvard money manager (Highfields Capital) making an extraordinary amount of money
shorting Enron stock in a pattern that is very typical of a pump and dump fraud -- and . . .
Dennis: What is a “Pump and Dump”?
Catherine: A “Pump and Dump” begins when you pump up a stock -- you do a series of things that make its value go
up. And money laundering is one of the things you can use to pump up a stock. Then, when you are finished running money
through the company (i.e. laundering the money through it), you let the revenues drop and that's the dump. You make
money trading the stock on the way up, and you make money when you are prepared to dump it -- you short the stock on the
The chairman of the Enron finance committee is a member of the Harvard Corporation, which runs Harvard's $19-billion
endowment, one of the largest investors in the country. And while acting as the chairman of the Enron finance committee,
Herbert S. Winokur ("Pug" Winokur), insisted that he was lied to and tricked, and knew nothing of things going wrong. In
his hat as Harvard Corporation board member, he was a person who was intimately involved in the Harvard investment
operation on a day-to-day basis. He was also involved with his own firm, which invests along side Harvard. So Harvard's
largest money manager (Highfields Capital), managing $2 billion of Harvard’s $19-billion investment, has a huge short
position and makes what appears to be a great deal of money. Therefore, it is very interesting that Mr. Winokur, as the
chairman of Enron finance committee, didn't know there was a problem, and yet Mr. Winokur, as member of the Harvard
Corporation, had a money manager who is an intimate part of that operation who clearly knew that something was very
wrong. How to explain this?
Interjected clip from Enron hearings held by the Senate Commerce Committee:
(Exchange between Senator Ernest Hollings and the Texas college professor, Mr. Powers, who did the investigation for the
Enron Board of Directors, after they installed him on the Board. It would appear that there's an attempt at obfuscation
by Professor Powers. Discussion between Dennis and Catherine follows.)
Hollings: Let me ask you -- you said that on January 16th some 12 of you met with Mr. Kenneth Lay to take his
testimony as to what went on, isn't that correct?
Professor: Yes, I was at that interview.
Hollings: We lawyers always have a stenographer present to take down what was said. Do you have those notes for
Professor: We did not use a stenographer. We made a memorandum based on that -- I think it was a 17-page
single-spaced memorandum -- I think we had been working with the staff to provide those results of all of our interviews
to the committee.
Hollings: Well wait a minute. You say you didn't take just one set of notes? So all of you were making different
notes, from time to time, as he (Lay) testified, were you not?
Professor: Somebody took notes.
Hollings: Can you furnish those notes to us?
Professor: Well, we turned those notes into a draft into the memorandum…
Hollings: I understand that, but did you . . .
Professor: So we did not keep the notes.
Hollings: Good gosh, so you shredded the notes?
Professor: Senator, there is nothing that is not in the report, and this was the standard accepted way that has
been worked by many investigators over a long period of time to do internal investigations . . . is to use the procedure
that we used.
Hollings: You're saying that the standard procedure is not to take down the testimony of the gentleman that you
are investigating, and otherwise, while you took some notes, to destroy the notes. Is that your testimony?
Professor: We used those (notes) to prepare a very detailed -- within 24-hours in all but a very few cases -- very
careful, accurate, complete description of what went on in those interviews. I do think that is standard practice in
investigations of this sort.
Hollings: Well, uh, thank you Mr. Chairman.
Dennis: (Commenting on the exchange between Professor Powers and Senator Ernest Hollings): "Standard practice, huh? Well
maybe it is standard practice."
Catherine: It's called SOP -- and I will tell you how I learned that term. SOP stands for “Standard Operating
Procedure.” When my company was targeted regarding our work for the Clinton administration, we had several situations
where the DOJ and their investigators tried to falsify evidence or destroy evidence. I was dealing with a criminal
syndicate . . .
Dennis: You mean the US government, right? A criminal syndicate?
Catherine: Correct. We got an affidavit documenting the efforts to falsify -- I mean pure criminal falsification of
evidence by the DOJ investigators -- and we took it to a court trustee and he looked at it and he said that this was
"SOP." I asked one of the retired auditors, "What is SOP?" He replied, "That is standard operating procedure -- you just
try to frame on obstruction of justice and that is how you get an indictment.” Everyone seemed to think that was "SOP."
Well, if I was to write a book called "How To Cover Up A Financial Fraud," tactic #22 would be to get a white shoe
commission, appoint some serious very respectable guy who is totally naïve about what is really going on, and do a
report. Basically, whether it takes two weeks or two months or two years, what it does is keeps everybody busy. It burns
up time and resources, it complicates things, and it muddles things. During the time that he (Powers) has got everybody
busy and entertained, you’ve got Arthur Andersen shredding the documents and you're transferring the money laundering
operation over to the Swiss bank. So it’s basically a holding action -- you're buying time while you do all the things
you have to do to destroy the money trail, so that you get to keep the cash.
Dennis: Well we’ve got a bunch of things I want to go through, and we only have about 10 minutes left, so let me ask you
about this. There was a very interesting press release that came out of the Cayman Islands. Talk about why that was
Catherine: That was interesting because it happened very shortly after they neatly got Enron Online tucked away
inside the Swiss mountain range -- and then some very important news slips out of the Cayman Islands. It is a press
release from the Cayman Islands. Enron SEC filings indicate that there are approximately 700 Enron subsidiaries in the
Cayman Islands. (This is a huge number of subsidiaries for a company to have -- in one of the great offshore money
havens of the world.) The government of the Cayman Islands says, in this press release, that it would be delighted to
cooperate with U.S. investigators and prosecutors on an investigation of Enron, but as of this date they have not yet
received a request for assistance. So there was and is no effort to assert control of the data about the money, period.
Meanwhile, keep in mind that you have Congress doing all this screaming and ranting and raving that really makes them
seem like they are doing something significant. And so I'm sitting, listening to all this stuff, and having a feeling of
-- as Yogi Berra said, “its déjà vu all over again.” Here they are covering this up, exactly the way they covered up the
S stuff, which was a very similar situation. It was a bunch of guys from Houston and New York Fed member banks and Wall
Street who got together and stole a couple of hundred billion dollars. It is the same network -- so here we go again --
and Congress is playing the same cover-up game, again.
Dennis: Before, you were alluding to Herbert "Pug" Winokur. This is somebody who chairs the finance committee of Enron's
board, who was a member of this investigation. He is also on the board -- I believe he is the former Chairman -- at
DynCorp. Talk about Herbert Winokur and DynCorp and why the senators, when they had him in front of them and he was
saying, "I don't know nothin'," why that was apparently a lie, and why they might be afraid to ask him serious
Catherine: Winokur used another "Standard Operating Procedure" in this situation, which is to get the guy who is
basically in charge off the hook. (As chairman of the Enron finance committee, he is the person on the board who is in
charge of making sure the company is run on a financially sound basis.) Anyway, Winokur asserted the "I know nothing"
SOP. It's like the guy in Stalag 17 who copped the plea, "I know nothing." Herbert was saying the same thing: he knew
nothing, because of a cover-up that had been carried out without his knowledge -- which is absurd on the face of it,
because here is Winokur essentially saying, "I'm incompetent -- I hired auditors (Arthur Anderson) who lied. So
therefore I am not responsible. They lied to me and they tricked me."
Meantime, Winokur is the chairman of the compensation committee, and member of the executive committee, of DynCorp, a
government contractor, and he continues to use Arthur Andersen as his auditor on DynCorp. Now if an auditor lied and
tricked you and caused the largest bankruptcy in history, I dare say you'd fire them in your other capacity. So we know
that Winokur's story doesn't sort.
So we must ask this question: Why would the Congress let Winokur get away with saying, "It's not my fault, I'm not
responsible because I was incompetent and negligent"? Well the DOJ and the SEC, from everything that I can read from the
public record, has not asserted control of Enron's documents. But what is interesting is that Winokur in his DynCorp
hat, has asserted control of the DOJ and SEC documents, and let me explain why. DynCorp is the information computer
system provider to the SEC. Presumably that includes SEC enforcement, and they (DynCorp) provide a substantial amount of
computer and information systems for the DOJ and the FBI, including some of the groups who are investigating Enron . . .
Dennis interrupts: and the CIA and the DEA, and on and on and on -- yes?
Catherine agrees: -- yes, and on and on. So basically, DynCorp, as a day-to-day practical matter, has asserted control
over the DOJ and SEC records, even though the DOJ and SEC have not asserted control over Enron's records. Pug is a
person who has access to an extraordinary amount of data, because the American taxpayers pay Pug and his company to
collect and manage data on all of us.
Dennis: So it would be like in olden times when J. Edgar Hoover gave testimony before Congress, and various congressman
had many things to hide, and were understandably somewhat timid about asking Mr. Hoover -- in this case Mr. DynCorp, if
you will, (Herbert "Pug" Winokur) -- serious and probing questions.
Catherine: For the rest of my life -- I'm going to be 80 years old and telling people about Dennis Bernstein's
brilliant insight that Pug Winokur is the new J. Edgar Hoover. But that's exactly right: if my understanding is correct,
DynCorp uses the most advanced version of the PROMIS software system. Theoretically they have access to everybody's bank
account, onshore and offshore. Therefore, Pug may well have a list in his pocket on how much is in the offshore accounts
of all those senators and congressmen who are grilling him.
For those of your listeners who have seen the movie “Enemy of the State,” DynCorp is one of these operations that has
the ability to take an honest person like the lawyer played by Will Smith in “Enemy of the State,” and set them up, and
within a week or two have everybody including their family believing they're living way outside the law. This is done
with falsification of database and bank records around town, (physical harassment and surveillance) and smear campaigns
in the papers. I know that they can do it because I've played Will Smith in real life. I've lived through that
experience. So I know that these are very dangerous people.
Dennis: Finally, in the last two minutes that we have, talk a little bit about Enron Online and why it would be
significant to focus on that and why you are paying so much attention to that.
Catherine: I came at Enron from a backwards way. I came at Enron because I was looking for $3.3 trillion, which is
missing at (federal) agencies like the Department of Housing and Urban Development (HUD) -- agencies that are managed in
part by Pug and his pals. In 1996, a decision was made to run a covert operation to get rid of all the honest people
(working for or at HUD) in the investigation that targeted me. This included getting rid of my company and me. Keep in
mind that the ultimate internal financial control is to have honest people running things. This is why they had to get
rid of us.
And then a group of contractors who run HUD (where billions of dollars are now missing), Lockheed, DynCorp, J.P.
Morgan-Chase and Arthur Andersen, turn up as massively present at Enron. (Winokur, from DynCorp, as well as a Lockheed
board member, Frank Savage, are on the Enron finance committee and board; JP Morgan-Chase is an Enron creditor, Enron
Online trading partner, and investor in special purpose offshore entities; Arthur Anderson is the auditor who is
shredding documents and cooking books; and Pug’s partner Dudley Mecum is on the board of DynCorp and on the board of
Citigroup, another Enron creditor and Enron Online trading partner.)
We had a huge amount of money disappear from the accounts of all these federal agencies: General Accounting Office (GAO)
(and Inspector General) reports and testimony document that $59 billion was missing from HUD in fiscal 1999, and $17
billion was missing in fiscal 1998, and they refused to say how much was missing in fiscal 2000. So I was trying to
figure out how you could launder hundreds of billions of dollars (stolen from the federal government) starting in the
fall of 1997, because that is so much money that you can't just run it (launder it) through a pizza restaurant. You are
talking about a huge amount of money and you are talking about something that JP Morgan, Lockheed, DynCorp and Arthur
Anderson would have to be part of.
So, in the fall of 1997 there is an explosion of revenues (at Enron Online), and nobody can explain where the revenues
came from. They just say it's very complicated, it's "derivatives," you know. Well that's ridiculous. In my experience,
if you can't explain something, then something is wrong. So I'm looking for the missing money: there is over $3.3
trillion missing from federal government agencies over a 3-year period, and my big question is, “Is Enron the
laundromat," and is that why Congress is covering this up?
Dennis: Well there are many, many, questions and we are going to tell people how they can, for a donation to KPFA, get a
2-CD set of "Enron: The Anatomy of a Cover-Up," in which we go much more deeply into this with you, Catherine Austin
I want to thank you for joining us. There's a lot more to say and we will definitely invite you back. And I want to
remind people that you are the former Assistant Secretary of Housing-Federal Housing Commissioner, you served in the
first Bush Administration, and you raised lots of money for them (George H. W. Bush and the Republican Party) at some
point, and also that you are the past managing director and member of the board of the Wall Street investment bank,
Dillon Read & Co. Inc.
To listen to Catherine Austin Fitts’s interviews by Dennis Bernstein for Flashpoints on Radio KPFA: Enron: Anatomy of a
Cover Up, see real audio archives for February 12, 13, 15, 26, 28th, March 6:
Summary: February 28th, start 17 minutes in at:
To order the two CD set available from KPFA in Berkeley for a $100 donation, “Enron: Anatomy of a CoverUp, call
For more on Enron and laundering from Catherine Austin Fitts:
Narco Dollars, published by Narco News:
Hold the Line:
Harvard Watch's "Trading Truth: A Report on Harvard's Enron Entanglements"
The Hijackers of Harvard: A Name and Address:
Enron: Let's Play 20 Questions:
To join the Solari Action Network: