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India: Few in U.S. Noticed Enron's 'Aggressive Behavior' in India

by Maria Recio and Jennifer AutreyDallas/Fort Worth Star-Telegram
March 24th, 2002

Nowhere were Enron's efforts to wield power overseas more obvious than in its marquee project: a $3 billion power plant in Dabhol, India.

"In the Dabhol project, you've got everything," said Joshua Karliner, executive director of CorpWatch, a think tank opposed to corporate globalization.

From the moment the plant was on the drawing boards to its shutdown in June, the Enron-led project was the subject of constant political turmoil with local and national Indian officials.

Enron executives agree that the Dabhol project has been unusually contentious.

"There are a lot of people who are not comfortable with the concept of foreign investment in the country, and this is the largest private investment that's been made in India," said John Ambler, Enron vice president of international public relations.

Enron initiated the project in 1992, which was to supply power to the Maharastra state, whose capital is Bombay, and ended up with a 65 percent stake in a joint venture known as the Dabhol Power Co., with Bechtel owning 10 percent, General Electric 10 percent and Maharastra holding the remaining 15 percent.

The project quickly drew controversy. The World Bank questioned the high cost of power that the state government was to purchase. Allegations of corruption swirled.

Villagers told researchers for Human Rights Watch that land was appropriated without notifying or compensating the landowners. When the project was challenged in court, Enron put most of India's leading lawyers on retainer to prevent their working against it, according to Human Rights Watch's 1999 report.

The situation worsened when Phase I of the two-part project began to operate. The plant's need to circulate about 8,000 liters of water per minute meant that local fresh water supplies were diverted from farms. Enron eventually agreed to bring in water by tankers to the villages.

The controversies prompted weeks of sit-in demonstrations, hunger strikes and arrests.

On June 3, 1997, state police entered the homes of several women and dragged them into police vans, beating them with sticks, said Amnesty International, which investigated the incident.

Thirteen men and 26 women, including one who was pregnant, were arrested.

"Except in one case of stone-throwing and another incident where a water pipeline was broken, the opposition did not resort to violence. ... Yet they were met with serious, sometimes brutal human rights violations carried out on behalf of the state's and company's interests," Human Rights Watch reports.

Human Rights Watch condemned Enron for not speaking out against the beatings and criticized it for paying the abusive state forces for the security.

"It was very aggressive behavior without proper thought," said H.D. Vinod, an economics professor at Fordham University's Institute for Ethics and Economic Policy.

But Ambler said the company was concerned about the violence against the protests.

Part of the problem stemmed from an agreement that any time the state police stepped in to halt protests over the Enron project, the company was required to reimburse the cost. Enron's own security guards were not involved in the violence, Ambler said. Moreover, after the human rights abuses were criticized, Enron often asked the state police to show restraint against protests.

Throughout the turmoil, Enron management worked through official U.S. channels in the Clinton administration but also relied on a network of former Bush administration officials to help it navigate the murky political seas.

Within weeks of leaving their Bush administration posts in early 1993, former Secretary of State James Baker and former Secretary of Commerce Robert Mosbacher signed on as Enron consultants. Baker wrote up his analysis of the Indian political climate for Enron chief Kenneth Lay.

Dabhol came to dominate U.S.-India business relations.

"Dabhol was the biggest power plant in the world," said Michael Clark, executive director of the U.S.-India Business Council. "It became the emblem of all foreign investments. It was a barometer of India's attitude toward foreign investment. You couldn't say 'India' without saying 'Dabhol.' "

Thomas "Mack" McLarty, a Clinton counselor who was part of the team pushing for resolution of the Dabhol problem, said the project was important to Clinton's administration.

"Our administration was committed to U.S. investment, and India was the world's largest democracy," McLarty said.

The Clinton administration brags about the Dabhol project as a success for its Trade Advocacy Center, established in 1992 to lobby on behalf of U.S. companies abroad. Ironically, although its Dabhol success story is still on the agency's Web site, the plant is now idle and for sale.

Despite critical reports by Amnesty International and Human Rights Watch, Enron's activities in India have only recently received U.S. attention.

Daphne Wysham, a fellow at the liberal-leaning Institute for Policy Studies, said such incidents are the reason why so many countries are leery of multinational corporations.

"It's ironic that it takes such a gargantuan collapse for us to pay attention to what these companies are doing on the other side of the planet," she said. "But maybe it's the wake-up call that will force Americans to pay attention."

Jennifer Autrey, (817) 390-7126 jautrey@star-telegram.com

Maria Recio, (202) 383-6103 mrecio@krwashington.com





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