Confessions of an Economic Hit Man

Bruno Zambotti had accepted a high-level position at the Inter-American Development Bank. He agreed to serve on the IPS board and to help finance the fledgling company. We received backing from Bankers Trust; ESI Energy; Prudential Insurance Company; Chad-bourne and Parke (a major Wall Street law firm, in which former U.S. senator, presidential candidate, and secretary of state Ed Muskie, was a partner); and Riley Stoker Corporation (an engineering firm, owned by Ashland Oil Company, which designed and built highly sophisticated and innovative power plant boilers). We even had backing from the U.S. Congress, which singled out IPS for exemption from a specific tax, and in the process gave us a distinct advantage over our competitors.

In 1986, IPS and Bechtel simultaneously—but independently of each other—began construction of power plants that used highly innovative, state-of-the-art technologies for burning waste coal without producing acid rain. By the end of the decade these two plants had revolutionized the utility industry, directly contributing to new national antipollution laws by proving once and for all that many so-called waste products actually can be converted into electricity, and that coal can be burned without creating acid rain, thereby dispelling long-standing utility company claims to the contrary. Our plant also established that such unproven, state-of-the-art technologies could be financed by a small independent company, through Wall Street and other conventional means.¹ As an added benefit, the IPS power plant sent vented heat to a three and one-half–acre hydroponic greenhouse, rather than into cooling ponds or cooling towers.

My role as IPS president gave me an inside track on the energy industry. I dealt with some of the most influential people in the business: lawyers, lobbyists, investment bankers, and high-level executives at the major firms. I also had the advantage of a father-in-law who had spent over thirty years at Bechtel, had risen to the position of chief architect, and now was in charge of building a city in Saudi Arabia—a direct result of the work I had done in the early 1970s, during the Saudi Arabian Money-laundering Affair. Winifred grew up near Bechtel’s San Francisco world headquarters and was also a member of the corporate family; her first job after graduating from UC Berkeley was at Bechtel.

The energy industry was undergoing major restructuring. The big engineering firms were jockeying to take over—or at least to compete with—the utility companies that previously had enjoyed the privileges of local monopolies. Deregulation was the watchword of the day, and rules changed overnight. Opportunities abounded for ambitious people to take advantage of a situation that baffled the courts and Congress. Industry pundits dubbed it the “Wild West of Energy” era.

One casualty of this process was MAIN. As Bruno predicted, Mac Hall had lost touch with reality and no one dared tell him so. Paul Priddy never asserted control, and MAIN’s management not only failed to take advantage of the changes sweeping the industry but also made a series of fatal mistakes. Only a few years after Bruno delivered record profits, MAIN dropped its EHM role and was in dire financial straits. The partners sold MAIN to one of the large engineering and construction firms that had played its cards right.

While I had received almost thirty dollars a share for my stock in 1980, the remaining partners settled for less than half that amount, approximately four years later. Thus did one hundred years of proud service end in humiliation. I was sad to see the company fold, but I felt vindicated that I had gotten out when I did. The MAIN name continued under the new ownership for a while, but then it was dropped. The logo that had once carried such weight in countries around the globe fell into oblivion.

MAIN was one example of a company that did not cope well in the changing atmosphere of the energy industry. At the opposite end of the spectrum was a company we insiders found fascinating: Enron. One of the fastest-growing organizations in the business, it seemed to come out of nowhere and immediately began putting together mammoth deals. Most business meetings open with a few moments of idle chatter while the participants settle into their seats, pour themselves cups of coffee, and arrange their papers; in those days the idle chatter often centered on Enron. No one outside the company could fathom how Enron was able to accomplish such miracles. Those on the inside simply smiled at the rest of us, and kept quiet. Occasionally, when pressed, they talked about new approaches to management, about “creative financing,” and about their commitment to hiring executives who knew their way through the corridors of power in capitals across the globe.

To me, this all sounded like a new version of old EHM techniques. The global empire was marching forward at a rapid pace.