Newsweek Cover: 'Enron. Burned!'
PR Newswire, 01/13/2002

Enron Chief Misled Employees, Waxman Says Inquiry: Kenneth Lay's e-mails painted a bright future for the firm, even as its stock was faltering.
Los Angeles Times, 01/13/2002

The World: School for Scandal
Trying To Pass Damage Control 101
The New York Times, 01/13/2002

Bush, Enron chief rose out of the same circles of achievement
Associated Press Newswires, 01/12/2002

ENRON'S COLLAPSE
Complex Web of Relationships in Boom and Bust
The New York Times, 01/13/2002

ENRON'S COLLAPSE
Before Debacle, Enron Insiders Cashed In $1.1 Billion in Shares
The New York Times, 01/13/2002

Enron Auditing Firm Destroyed Documents
CNN Sunday, 01/13/2002

USA: US senator - Enron accountant could face charges.
Reuters English News Service, 01/13/2002

Enron Gave $21,933 to Schumer / Donations largest to any Senate Democrat
Newsday, 01/13/2002

Enron echoes past scandals
Chicago Tribune, 01/13/2002

Learning From Enron
The Washington Post, 01/13/2002

THE NATION NEWS ANALYSIS White House's Failure to Sound Alarm Faulted That no warnings were issued as Enron collapsed raises the specter of special treatment, critics charge.
Los Angeles Times, 01/13/2002

Interview With John Dingell, Tom Davis
Fox News: Fox News Sunday, 01/13/2002

Interview With Paul O'Neill
Fox News: Fox News Sunday, 01/13/2002
White House Says it Offered Enron No Assistance
CNN: Sunday Morning, 01/13/2002

Enron-White House Relationship Continues Causing Controversy
CNN: Sunday Morning01/13/2002

Interview: Bennett Roth and David Ivanovich discuss the Enron debacle and how it might affect the Bush administration
NPR: Weekend Edition - Sunday, 01/13/2002
Interview With Michael Weisskozpf
CNN: Sunday Morning, 01/13/2002

Enron Collapse Brings Bush Administration Under Scrutiny
CNN Sunday, 01/13/2002

Cabinet members say they didn't inform Bush about Enron calls for help
Associated Press Newswires, 01/13/2002

O'Neill - I did not discuss Enron case with subordinates.
EFE News Service, 01/13/2002

US regulators probe Enron share-sell sell-off by executives - report
AFX News, 01/13/2002

Report: Enron gave more than $200K to Florida politicians
Associated Press Newswires, 01/13/2002
Enron Gave To Florida Politicians; Pension Fund Lost $300M
Dow Jones International News, 01/13/2002

ENRON INSIDERS' SALES DRAW IRE ; STOCK SHARES SOLD BY EXECUTIVES FROM 1999 THROUGH MID-2001 WERE WORTH $1.1 BILLION.
Orlando Sentinel, 01/13/2002

Insiders at Enron made millions
New York Times News Service, 01/13/2002

Enron `gift' to Democrats for Dabhol project?
The Hindu, 01/13/2002
The Statesman (India) - Dabhol jobless take crime route.
The Statesman, 01/13/2002

AUSTRALIA: Enron Australia book wind-up moves slowly.
Reuters English News Service, 01/13/2002
Former Enron employees deeply angered by their treatment as company went down
Associated Press Newswires, 01/13/2002

Former Enron employees coping with firm's collapse
Associated Press Newswires, 01/13/2002

SEC, UK accountancy watchdog ICA in Enron crisis talks - report
AFX News, 01/13/2002

Resist Revenge
Los Angeles Times, 01/13/2002

Change the system that gave us Enron
The Philadelphia Inquirer, 01/13/2002

POLITICS EMERGE IN ENRON FALLOUT
The Boston Globe, 01/13/2002

CEO'S LONG PATH FROM FARM TO RIG
The Boston Globe, 01/13/2002

Top Bush official savaged over Enron capitalism-as-usual comment by Charles Whelan [Corrected 01/13/02]
Agence France-Presse, 01/13/2002

Firms offering severance, but only if workers agree not to file unemployment / A matter of compensation
Houston Chronicle, 01/13/2002
Enron `players' worked D.C. ties
Chicago Tribune, 01/13/2002

Enron's oily aftermath
Chicago Tribune, 01/13/2002

Clinton link with Enron lowers the heat on Bush
The Independent - London, 01/13/2002

Features - Sunday Comment - They can't pin this on Bush It was Clinton who lavished over $4 billion on Enron.
The Sunday Telegraph, 01/13/2002

ENRON / Shoes keep dropping; let's see the closet
Houston Chronicle, 01/13/2002

Profile: Investigation of collapse of energy giant Enron; Treasury Secretary Paul O'Neill discusses phone calls made to him by Enron; Employees and shareholders are hardest hit by Enron's collapse; Shareholder advocate William Lerach discusses lawsuit being filed against Enron's executives; Former Securities & Exchange Commission Chairman Arthur Levitt discusses who might be to blame for Enron's collapse; Helping athletes break records defeats purpose of athletic competition
ABC News: This Week, 01/13/2002

____________________________________________________________________

Newsweek Cover: 'Enron. Burned!'

01/13/2002
PR Newswire
(Copyright (c) 2002, PR Newswire)

Commerce Secretary Evans Phoned Lay on October 15, the Day Before
The Enron CEO Told Wall Street About the Company's Financial Troubles;
But Both Men Say They Did Not Discuss the Impending Crisis
Enron Bubble Bursting is Emblematic of Wholesale Systemic Failure;
Anderson Errors Could Cut Accounting's Big Five to Four

NEW YORK, Jan. 13 /PRNewswire/ -- Last fall, Commerce Secretary Donald Evans, who was halfway around the world in Moscow on a trade mission, reached out to Enron CEO Kenneth Lay in Houston to discuss with him Enron's disastrously controversial, financially-draining electricity plant in India. Specifically, Evans suggested that Lay consult with Sig Rogich, a veteran Republican PR man (and another friend of the Bush family), who was on his way to New Delhi to pitch his services to the government. Perhaps Rogich could soothe the locals, who had been loudly accusing Enron of price-gouging, report Chief Political Correspondent Howard Fineman and Investigative Correspondent Michael Isikoff. While such calls are typical, what makes this one noteworthy is the date on which it took place, October 15. On that day, Lay knew that his world was about to fall apart.
(Photo: http://www.newscom.com/cgi-bin/prnh/20020113/NYSU004 )
In a conference call with Wall Street analysts the next day, Lay would have to disclose that Enron, the largest energy trading company in the world, had lost an astounding $618 million in the third quarter. More important, he would be forced to admit that Enron had lost $1.2 billion in a labyrinth of partnerships that hadn't been -- but should have been -- counted on the company's books. The company was near collapse. In the January 21 issue of Newsweek (on newsstands Monday, January 14). Fineman and Isikoff write that while Evans was an old friend in the Texas energy business, he and Lay say they did not discuss the impending crisis.
The company, which imploded last December 2, produced the largest bankruptcy in American history and now the shockwaves have moved from Enron headquarters in Houston and Wall Street to Washington. The Lay-Evans call, it turns out, was the prelude to a flurry of others (all initiated by Lay) in which the Enron chief executive emitted increasingly urgent distress signals to Evans, Treasury Secretary Paul O'Neill and Federal Reserve Chairman Alan Greenspan. But Lay apparently got no help, Fineman and Isikoff write. White House officials insist that he never contacted them and they never contacted him, even though he was running (into the ground) the seventh largest corporation in the country and the second largest in Texas. They flatly deny that President George W. Bush or Vice President Dick Cheney (or any aides) had direct knowledge of Enron's predicament. No evidence surfaced last week to contradict their story and the Bushies point out with relief that someone else had called O'Neill on Enron's behalf: Robert Rubin, the highly-regarded (Democratic) Treasury Secretary under Bill Clinton and now a leader of Citigroup, one of Enron's largest creditors. And though Lay and Enron papered the Congress with campaign donations to Republicans and Democrats alike, six committees were planning to investigate.
Lay built his business by getting regulatory relief from Congress - from Republicans, to be sure, but from the Democrats as well. There were silent partners in the myriad Enron off-the-books secret partnerships. They might include, inconveniently, a fair number of the Democrat's top donors. Numerous officials in and around the White House have or had extensive financial ties to Lay and Enron. They include political adviser Karl Rove, economic adviser Larry Lindsay and GOP Chairman Marc Racicot, who last week declared that he would cease lobbying work. Lay is also the biggest individual contributor to President Bush's presidential and Texas gubernatorial campaigns. Investigators will also have numerous contacts to examine. On October 29, Lay called Evans and discussed with him the impending lowering of Enron's credit rating. Lay talked with O'Neill twice, and Enron's president Greg Whalley, had several conversations with Under Secretary Peter R. Fisher. Lay's attorney, Robert Bennett, tells Newsweek that his client was merely "doing the responsible thing" by informing officials of "the possibility of bankruptcy" at Enron.
Enron, writes Wall Street Editor Allan Sloan, turned out to be another bubble. However, unlike a Pets.com or a Webvan, whose implosions did little damage outside of costing dice-rolling speculators some money and techies some jobs, the Enron bubble exploded like a grenade: stockholders and lenders are out tens of billions of dollars; at least 20,000 Enron employees have lost their jobs and many of them have lost their retirement savings too. And the collateral damage keeps spreading. Prominent among the wounded is Arthur Anderson, Enron's outside auditor, which admitted last week that some employees destroyed documents, has been tarnished to the point that the Big Five accounting firms might shrink to the Big Four. Wall Street's credibility has been shattered. Utilities deregulation, for which Enron was the poster boy, is now on the back burner. The spectacle of impoverished, unemployed Enronites has thrown a harsh spotlight on the risks of 401(k) accounts stuffed with company stock. And confidence in financial markets has been shaken too.
Sloan reports that Enron's end is emblematic of a wholesale systemic failure. The multi-layered system of checks and balances that is supposed to keep a company from running amok completely broke down. Executives of public companies have legal and moral requirements to produce honest books and records, but at Enron, they didn't do that. Outside auditors are supposed to make sure that a company's financial reports not only meet the letter of accounting rules but also give investors and lenders a fair and accurate picture of what's going on, but Enron's auditor, Arthur Anderson, failed that test. Regulators didn't regulate and Enron's board of directors didn't direct. In reconstructing Enron's fall, Sloan, who first reported on Enron's demise in the December 10, 2001 issue of Newsweek and again on December 17, 2001, identifies the "too-clever-by-half" financial structures that Enron planted that led to its undoing and how and why those off-the-books partnerships worked for so long without detection.
(Articles attached. Read Newsweek's news releases at
http://www.Newsweek.MSNBC.com. Click "Pressroom.") To George W. Bush, the head of Enron was 'Kenny Boy' - until now. As the shock waves from the largest bankruptcy in U.S. history shake Washington, the scandal machine is cranking up in search of a White House connection. Let the Enron Wars begin.
Lights Out: Enron's Failed Power Play

Commerce Secretary Donald Evans was busy, halfway around the world in Moscow, but not too busy to reach out to Ken Lay in Houston last fall. "Kenny Boy," as President George W. Bush had nicknamed him, was not just any CEO. He was the Big Enchilada of Texas business, head of Enron, the largest energy-trading company in the world -- and the biggest sugar daddy in Bush's political career. So although Evans was conducting a trade mission to Russia (the first trip abroad by a cabinet member after September 11), he took time to call Lay to discuss Enron's money-losing power plant in India. Specifically, Evans suggested that Lay consult with Sig Rogich, a veteran Republican PR man (and another Bush family friend), who was on his way to New Delhi to pitch his services to the government. Perhaps Rogich could soothe the locals, who had been loudly accusing Enron of price gouging.
Ever since there have been Commerce secretaries (nearly a century), they've made such phone calls: strands in a global web of American dealmaking. But what makes this one noteworthy -- and worthy of suspicion to Bush's enemies -- is the date on which it took place, Oct. 15, for Lay knew that his world was about to fall apart. In a conference call with Wall Street analysts the next day, he would have to disclose that Enron had lost an astounding $618 million in the third quarter. More important, it would soon become clear that Enron had lost $1.2 billion in a labyrinth of partnerships that probably should have been -- but weren't -- counted on the company's books. Enron, one of the most innovative and admired companies in the world, was near collapse. Didn't Lay and Evans, an old friend in the Texas energy bidness, discuss the impending crisis? They both say no. But investigators -- at least on Capitol Hill -- will want to ask, preferably in a hearing on TV.
As Enron's beleaguered employees and investors know all too well, the company imploded last Dec. 2, producing the largest bankruptcy in American history. But now the shock waves have moved from Houston and Wall Street to Washington, rattling a White House that had been focused on the popular enterprise of fighting the war on terrorism. The Lay-Evans call, it turns out, was the prelude to a flurry of others (all initiated by Lay) in which the Enron chief executive emitted increasingly urgent distress signals -- and barely disguised pleas for help -- to Evans, Treasury Secretary Paul O'Neill and Federal Reserve chairman Alan Greenspan.
Despite his munificence as a contributor -- perhaps, ironically, because of it -- Lay apparently got no help. White House officials insist that he never contacted them, and they never contacted him, though he was running (into the ground) the seventh largest corporation in the country and the second largest (after Exxon-Mobil) in Texas. They flatly deny that Bush or Vice President Dick Cheney (or any aides) had had direct knowledge of Enron's predicament. No evidence surfaced last week to contradict their story and, as they say in the law, the thing speaks for itself: Enron did collapse. Bushies pointed out with relief that someone else had called O'Neill on Enron's behalf: Robert Rubin, respected Treasury chief under Bill Clinton and now a leader of Citigroup, one of Enron's largest creditors. Lay, who, with Enron, gave $500,000 to Bush in 2000, had become a mere acquaintance. At a press "avail," Bush referred to him stiffly as "Mr. Lay." Over at Commerce, a top aide laughingly called him "Ken Who?"
Still, the collapse of Enron was no laughing matter. In Houston there was growing and justifiable outrage. Earlier in 2001, Enron's brass had feverishly unloaded company stock. But at the very time Lay was sounding his alarms, the rank and file were barred from touching their modest, but Enron-heavy, 401(k) portfolios. Inside the Beltway, the scandal-making machinery -- idled since stripping a gear on the Gary Condit saga last year -- sputtered to life. Though Lay and Enron had papered Congress with donations to Republicans and Democrats alike, six committees were planning to investigate. (The first hearing, later this month, will be led in the Senate by presidential hopeful Joe Lieberman, who got a paltry $2,000.)
The Democrats were aware of the risks. Bush remains genuinely popular. Lay built his business by getting regulatory relief from Congress -- from Republicans, to be sure, but from the Democrats as well. There were silent partners in the myriad Enron off-the-books secret partnerships. They might include, inconveniently, a fair number of the Democrats' top donors. The public, the handlers know, is likely to be disgusted by another partisan auto-da-fe.
Even so, the Dems couldn't resist plunging in. Average workers had been screwed. Wasn't there something the administration should have done to prevent it? The Enron issue seemed aimed straight at the GOP's -- and Bush's -- chief vulnerability: their profile as the party of Texas-based Big Energy and the moneyed class in general. And, arithmetic favored the Democrats: Enron/Lay had given nearly three quarters of its largesse to Republicans over the years. "We don't have to say much," said one top Democratic strategist. "This story will carry itself for quite a while."
At the White House, aides projected an attitude of studied calm. Bush's first mention of the Enron inferno was after Nov. 30, according to counselor Karen Hughes, when he allowed that the seeming callousness toward company employees "really stinks." Aides claimed that neither Bush nor Cheney knew of Lay's distress calls until Evans and O'Neill mentioned them to the president last Thursday morning. "I know you think it strains credulity, but it's the truth," said White House aide Mary Matalin. "Every tentacle of this leads away from the White House."
That will be for investigators -- not spin doctors -- to decide. Numerous officials in and around the White House have or had extensive financial ties to Lay and Enron. They include political adviser Karl Rove, economic adviser Larry Lindsey and GOP Chairman Marc Racicot, who last week declared that he would stop all lobbying work. Investigators will have numerous contacts to examine. Lay called Evans last Oct. 29 and discussed the impending drop in Enron's credit rating with him. Lay talked with O'Neill twice, and Enron's president, Greg Whalley, had several chats with Under Secretary Peter R. Fisher. Enron's attorney, Robert Bennett, told Newsweek his client was merely "doing the responsible thing" by informing officials of "the possibility of bankruptcy" at Enron.
As Bennett knows (he represented Bill Clinton), a Washington scandal is half circus, half court of law. The powerful presence in the latter is the Justice Department where, as usual, there were Enron ties to untangle. Last week the department made the rare decision to run its probe from Washington headquarters. Why? Because the U.S. Attorney's Office in Houston had too many personal ties to Enron employees. Attorney General John Ashcroft had to recuse himself, having taken $58,000 in Enron-related cash for his own failed 2000 presidential campaign. That left the probe to Deputy A.G. Larry Thompson, formerly a partner in an Atlanta law firm that has done extensive work for -- you guessed it -- Enron. (Since he didn't personally represent the company, officials said, he didn't need to bow out.)
The pivotal question is not likely to be about administration actions in the first instance, but its candor about them now. Bush's aides say they have nothing to hide. But they and their boss strained nevertheless to distance themselves from Lay. Just last spring he met privately with Cheney to discuss energy policy and influenced nominations to the Federal Energy Regulatory Commission.
Now, in the White House telling, he was some guy they hardly knew until 1995. In the Texas gubernatorial race of 1994, the president told the press, Lay "was a supporter" of his Democratic foe, Ann Richards. True, but only in the Clintonian sense. In fact, Lay supported Bush the First in 1988 and 1992, organized the GOP Houston convention for him and raised money for the Bush library. Lay gave money to Richards in 1994, but he and Enron gave much more to Bush: $146,000. Much of that money came in after Election Day, a Bush ally recalled contemptuously. So "Ken Who" was never really a friend of George's -- and certainly isn't considered one now.
With Tamara Lipper in Washington
It's the scariest type of scandal: a total system failure. Executives, lenders, auditors and regulators all managed to look the other way while the company ran amok.
Who Killed Enron

Enron was supposed to be the next new thing, a New Economy company with substance to it. Unlike flaky Internet start-ups that substituted ethereal yardsticks like "eyeballs" and "stickiness" for revenues and profits, Enron had real businesses, real assets, real revenues and what seemed to be real profits. It owned natural-gas pipelines and electricity-generating plants and water companies. Not only would it do well, it would improve the planet by substituting the efficient hand of the market for the clumsy hand of government regulation.
And it seemed to work. From humble beginnings as a natural-gas company, Enron rose in a mere 15 years to No. 7 on the Fortune 500, doing $100 billion of business in 2000. Along the way, Enron became one of America's most admired companies, and a perennial favorite on "best places to work" lists. The guys running the show were hailed as magicians with newfound secrets that would change the future of business.
But Enron turned out to be another bubble. Unlike a Pets.com or a Webvan, whose implosions did little damage outside of costing dice-rolling speculators some money and techies some jobs, the Enron bubble exploded like a grenade. Today Enron is a smoking ruin, the biggest corporate bankruptcy in American history. A year ago the stock market valued Enron at more than $60 billion. Its stock has since lost 99 percent of its value -- and still seems overpriced. Stockholders and lenders are out tens of billions of dollars. Many of Enron's 20,000 employees lost their retirement savings when the company collapsed. About 5,000 of them, from computer jocks in Houston to newsprint recyclers in New Jersey, lost their jobs, too. By contrast, chairman Ken Lay made $205 million in stock-option profits in the past four years alone, and other big hitters and board members made out, too. What's especially galling is that a handful of executives and outsiders made millions by investing in off-balance-sheet deals with Enron that played a large role in destroying the company.
The collateral damage keeps spreading. Prominent among the wounded is Arthur Andersen, Enron's outside auditor, which admitted last week that some employees destroyed documents. Andersen's reputation has been tarnished to the point that the Big Five accounting firms might shrink to the Big Four. Wall Street's credibility has been shattered. Utilities deregulation, for which Enron was the poster boy, is now on the back burner. The spectacle of impoverished, unemployed Enronites has thrown a harsh spotlight on the risks of 401(k) accounts stuffed with company stock. Confidence in financial markets has been shaken -- and rightly so. With the action in Afghanistan slowing down, Enron shock waves have finally reached Washington, raising the specter of another 'Gate. L'affaire Enron is becoming a classic Washington scandal: criminal probes, investigations of destroyed documents, pols being asked what they knew about Enron and when they knew it. There's no sex, alas -- but there sure is lots of money.
Life would be simple if we could blame the whole thing on Enron chairman Lay. Or on George W. Bush, who goes way back with Lay, among the biggest individual contributors to Bush's presidential and Texas gubernatorial campaigns. But Enron isn't that simple. It's something far more scary: a wholesale systemic failure. The multilayered system of checks and balances that is supposed to keep a company from running amok completely broke down. Executives of public companies have legal and moral responsibilities to produce honest books and records -- but at Enron, they didn't do that. Outside auditors are supposed to make sure that a company's financial reports not only meet the letter of accounting rules but also give investors and lenders a fair and accurate picture of what's going on -- but Arthur Andersen failed that test. To protect themselves, lenders are supposed to make sure borrowers are creditworthy -- but Enron's lenders were as clueless as everyone else. Wall Street analysts are supposed to dig through company numbers to divine what's really happening -- but almost none of them managed to do that. Regulators didn't regulate. Enron's board of directors didn't direct.
Why did all these people look the other way for so long? Money talks. Or, with Enron, shouts. The company put lots of money in pockets of the people and institutions that were supposed to police it. Enron's incessant dealmaking generated huge fees for Wall Street investment banking houses. And guess what? Wall Street loved Enron, with most analysts rating its stock and bonds as the greatest thing since money was invented, at least until they finally heard Enron's death rattle. Even when it became clear last fall that Enron was engaging in creative bookkeeping, almost no analysts recommended selling the stock, says Chuck Hill, who tracks analyst recommendations for First Call/Thompson Financial. "They should have thrown in the towel a lot earlier," he said. Enron paid huge fees -- $52 million in 2000 -- to Arthur Andersen for auditing and consulting services. Andersen allowed it to get away with accounting that was, at best, aggressive and, at worst, criminal. If Andersen had stood on principle, Enron would doubtless have changed accountants. Enron famously made heavy political contributions. Pols got peanuts compared with what Wall Street and Andersen got, but it was enough to help Enron run roughshod over regulators at the national and state levels.
With so many dollar signs floating around and the company's stock soaring, no one was interested in bad news -- a problem that's hardly limited to Enron. "A lot of people don't want to hear the straight truth," says Thomas Donaldson, a business-ethics professor at the University of Pennsylvania's Wharton School. "Investors don't want the CEO to say something negative that will drop the stock, even for the short term. There's a culture of puffery, a culture of winking." The winking stopped last year when regulators and the financial markets finally reined in Enron -- at least five years after its big-time financial shenanigans had begun.
Enron started out innocently enough, born of a mildly innovative 1985 deal to combine two boring businesses: an Omaha-based natural-gas-pipeline company called InterNorth and a Texas pipeline company called Houston Natural Gas. Ken Lay, a soft-spoken statesman kind of guy with a Ph.D. in economics, found a hyperaggressive financial whiz named Jeff Skilling working in McKinsey & Co.'s energy practice in Houston. They had a brilliant insight. Instead of just delivering gas to customers at a modest profit, Enron could use newly deregulated pipelines to match buyers and sellers. In other words, Enron became a gas trader, as well as a gas company. Because trading was much more fun and much more lucrative than building pipes and drilling wells and selling gas at regulated, low-profit prices, Enron morphed into a trading company with a utility attached to it.
And make no mistake, these guys were deregulation's True Believers. At a dinner I had with Skilling in the late 1990s, he was like a religious zealot who couldn't stop repeating his favorite mantra as the solution to all the world's problems. There are rolling blackouts in the Midwest? Deregulate. Some energy companies look like they're price gouging? Deregulate more. And if salad dressing had dripped onto my tie? ... You get the picture.
With Lay and Skilling in charge, Enron's revenues and profits climbed sharply. People from all over the country clamored to join Enron and its crusade. TV monitors in the Enron Building in downtown Houston displayed the stock price. Employees could get pumped up by inspirational elevator messages on the way to work. In the best dot-com tradition, employees were treated to subsidized Starbucks, an on-site gym and lavish company outings. Enron wasn't just a business, it was a lifestyle that rewarded foam-mouthed aggression. "There's nothing wrong with ambition, but there was simply a warped culture at the top," says John Allario, 38, who worked six years in Enron's business-development department before losing his job in the collapse. "They wanted to climb to the top of the mountain and pound their chest and crush anyone or anything that got in the way."
The most important measure of Enron's growth was its rising stock price. It was the oil that made the Enron machine run smoothly. After faltering in 1997, Enron shares went on a run in late 1998, doubling, then doubling again. Enron stock options were making employees rich and helped the company attract the best and brightest. Not wanting to miss out on a sure thing, Enronites stuffed company shares into their 401(k) plans. The company required most employees to have a chunk of their 401(k)s in Enron stock -- but many employees had far more stock than Enron required, and far less in diversified investments, such as mutual funds.
But what made Enron successful -- innovation and daring -- got the company into trouble when it decided in its arrogance that it could "financialize" almost anything. Rather than sticking to natural gas and electricity, which it understood, Enron in the mid- and late-'90s branched into whatever struck its fancy: water, coal, fiber-optic capacity, weather derivatives (whatever those are) and newsprint. It bought and sold properties, and traded up a storm. But many of its businesses tied up lots of capital while earning very little or running in the red. In the late 1990s, by my count, Enron lost about $2 billion on telecom capacity, $2 billion in water investments, $2 billion in a Brazilian utility and $1 billion on a controversial electricity plant in India. Enron's debt was soaring. If these harsh truths became obvious to outsiders, Enron's stock price would get clobbered -- and a rising stock price was the company's be-all and end-all. Worse, what few people knew was that Enron had engaged in billions of dollars of off-balance-sheet deals that would come back to haunt the company if its stock price fell.
And it was in those too-clever-by-half financial structures that Enron sowed the seeds of its undoing. Before we proceed to the story of Enron's final days, let's get out our trusty lightsabers and take an accounting trip, one made more lively by some Enron financial techie's fondness for "Star Wars."
Our case involves something called JEDI, as in Jedi knight. JEDI stands for Joint Energy Development Investments, which was an investment partnership between Enron and the California Public Employees Retirement System, known as Calpers. Enron and Calpers invested $250 million each into the partnership in 1993. JEDI prospered -- the Force must have been with it -- as Enron deftly bought and sold energy stocks, power plants and other investments, earning a 23 percent annual return for Calpers. Very nice. So Calpers welcomed Enron's offer in late 1997 to do a sequel. They ramped up JEDI II, with each side putting up $500 million. But first, Calpers wanted to cash in its JEDI I stake, worth $383 million. Enron obliged. Instead of liquidating the partnership, Enron went looking for someone to ante up $383 million to take Calpers's place. That would keep JEDI I off Enron's balance sheet and its profit-and-loss statement. Making JEDI I part of Enron would have cut the company's reported profits sharply, and increased its reported debt by more than $500 million.
To solve this problem, Enron ginned up Chewco Investments - as in Chewbacca the Wookiee. Chewco was a partnership of Enron executives and some undisclosed outsiders. Chewco didn't have $383 million sitting around. So Enron lent it $132 million and guaranteed a $240 million loan. This left about $11.5 million for Chewco to come up with. Not a whole lot, given the size of the deal. But $11.5 million was an important number. Why? Because it was more than 3 percent of Chewco's capital. And what's magical about that number? Clearly you're not an accountant. If outsiders put up at least 3 percent of the capital, accountants are allowed to keep the deal off the parent company's books. But Enron couldn't even get this right. It turns out that Enron had provided collateral for about half of Chewco's $11.5 million investment. This meant Chewco had only about 1.5 percent at risk, not 3 percent. So JEDI and Chewco should have been treated as part of Enron by Arthur Andersen from late 1997 on. But they weren't. In congressional testimony last month, Andersen chief executive Joseph Berardino admitted the accounting was wrong, but said it wasn't Andersen's fault because no one told his firm about the collateral Enron had provided. What Berardino didn't say then (and he wouldn't talk to us) is that even if Chewco had met the 3 percent rule, the result would still be outrageously misleading. Keeping JEDI and Chewco off the books inflated Enron's 1997 profits by 75 percent. And the move inflated profits for three more years, for a total of $396 million. Did keeping JEDI and Chewco off Enron's books when their impact was so great "present fairly" Enron's financial situation, as Andersen certified? Not to me. But I'm only an English major.
Now, to the death spiral. Enron had started 2001 in great shape. Its stock was $83, close to its previous high of $90. CEO Jeff Skilling said in January that the stock was really worth $126. But rather than heading north, Enron stock started falling as the year wore on. The continuous decline in Internet and telecom issues helped drag it down, as did falling natural-gas prices. What some Enron insiders knew -- but outsiders didn't -- is that the falling stock price was going to cause trouble, big time. That's because Enron was going to have to fork over lots of money, or give ruinous amounts of stock, to institutions that had lent billions to Enron's off-balance-sheet entities. The commitment to provide that stock made the off-balance-sheet entities creditworthy, because it reassured lenders about getting their money back.
Skilling quit unexpectedly in August, triggering speculation that something was amiss (he said he wanted to spend more time with his family). Skilling wouldn't talk to Newsweek, but his spokesman said that Skilling "left believing the company was in very good shape." Asked if Skilling felt any responsibility for Enron's failure, his spokesman said he believes that "what happened to Enron is a tragedy. He does not understand the reasons for it."
The reasons, actually, are sort of obvious. The end began on Oct. 16, when Enron held a conference call to discuss its third-quarter profits. Or, more accurately, losses. Buried in its release was the fact that Enron's net worth had mysteriously shrunk by $1.2 billion. That was because of a complex off-balance-sheet deal involving four partnerships called Raptor, but Enron didn't explain that.
For the first time, Enron found itself fielding lots of hostile questions from its formerly docile constituency on Wall Street. Meanwhile, The Wall Street Journal had been picking away at the Enron facade, revealing, among other things, that Enron's chief financial officer, Andrew Fastow, had made more than $30 million in fees for running some of the supposedly independent partnerships. That, plus the losses and the vanished $1.2 billion of net worth, started a Wall Street uproar. This went virtually unnoticed in Washington, where all eyes were on Afghanistan. But a few days later the Securities and Exchange Commission informed Enron that it had begun an informal investigation. Enron did what comes naturally to any large company in trouble -- it ran for a lawyer: University of Texas Law School Dean William Powers Jr. It put Powers on its board and named him to chair a special board committee to deal with the SEC, and to investigate. Powers hired William McLucas, a former head of the SEC's enforcement division and a partner at the Washington law firm of Wilmer, Cutler & Pickering. McLucas assembled a legal task force and hired accountants from Deloitte & Touche to dig into the books.
Guess what? Inside a month, McLucas & Co. found unpleasant truths that Enron's board (and presumably Andersen) had ignored or overlooked for years. Then again, McLucas didn't have a vested interest in ignoring them. McLucas's conclusion: Enron's profits had been grossly overstated and its debts understated for five years.
On Nov. 8, Enron issued a report, clearly crafted by McLucas, saying that its numbers dating back to 1997 could no longer be relied on. About 10 days later, it issued its third-quarter report, containing additional damaging information. The end was nearing. As a trading company, Enron needed huge amounts of credit to carry inventory (and, as we've seen, to cover losses) and also needed the confidence of trading partners. With Enron's numbers hinky, its credit failing, a cash crisis clearly on the horizon, Enron's beloved free market did it in. Creditors fled, trading partners fled, money gushed out the door. After an aborted attempt to sell out to crosstown rival Dynegy Inc., which walked away from the deal at the last moment, Enron was out of cash, out of credit, out of luck and out of time. It filed for bankruptcy on Dec. 2. And it may well never emerge from it. Its energy-trading business is still very valuable, but the bankruptcy is looking messy, even by bankruptcy standards.
Former Enron employees can't stop shaking their heads over the sorry saga. "There was a time not so long ago when we all thought Ken Lay was just the most wonderful person in the world," says Shane Yelverton, who had worked as a senior administrative assistant in Enron's engineering department. "But now we're hearing all this stuff: that he was selling off stock, even while he was telling us not to sell our stock. It's disgusting."
Charles Prestwood is more than disgusted. A pipeline operator who had been with Enron since day one, he retired in October 2000 with $1.3 million of Enron stock in his 401(k). Now, he's watching pennies. "All those dreams are gone now," he says. "I've lost everything I had. I'm just barely surviving."
Remember John Allario, the former Enron employee who so elegantly described the corporate culture in Enron's heyday? He's getting a measure of revenge. Invoking his former CEO's last name, he started a Web site, laydoff.com, that peddles I GOT LAY'D BY ENRON T shirts. "We've sold about 450 so far," Allario said last week. "It's my way of showing the company that its former employees whom they left in the lurch are still creative, and that we have something to offer."
The Enron fallout promises to be severe and far-reaching. With a criminal investigation underway, some of the Enron players face the prospect of spending time in the big house. The only question about Arthur Andersen is how much the partners will have to pay to settle this mess, and whether the company can survive as an independent entity. The accounting profession is wishing it were once again faceless and colorless, instead of being in the harsh spotlight. Financial conglomerates like JP Morgan Chase and Citigroup are going to be scrutinized over their multiple and often conflicting roles at Enron: lenders, trading partners, investors, advisers, investment bankers.
Small investors, understandably, are frightened when a giant, well-regarded company collapses overnight. The obvious lesson: don't keep too many eggs in one investment basket, especially in the company you work for. Utilities deregulation has suffered a severe blow: if a huge company like Enron can disappear overnight, how can you trust new market players to provide you with essentials like electricity, gas and water? And maybe it's time to change the name of the Houston Astros' home park, Enron Field, to House of Cards.
The bottom line: Enron wanted to change the world. It did. But not quite the way that it had in mind.
With Keith Naughton, Kevin Peraino, Temma Ehrenfeld, Donna Foote in Los Angeles and Jamie Reno in San Diego

/CONTACT: Rosanna Maietta of Newsweek, +1-212-445-4859/ 12:38 EST
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

National Desk
THE NATION Enron Chief Misled Employees, Waxman Says Inquiry: Kenneth Lay's e-mails painted a bright future for the firm, even as its stock was faltering.
RICHARD A. SERRANO
TIMES STAFF WRITER

01/13/2002
Los Angeles Times
Home Edition
A-26
Copyright 2002 / The Times Mirror Company

WASHINGTON -- Key congressional investigators charged Saturday that Enron Corp. Chairman Kenneth L. Lay misled his 21,000 employees late last summer when he gave them a rosy picture of the company's financial health, even as the giant energy conglomerate was sliding toward financial ruin.
Rep. Henry A. Waxman of Los Angeles, the ranking Democrat on the House Committee on Government Reform, released copies of e-mails sent by Lay to employees in August that suggested all was well with the company and that its stock would rebound.
But Waxman said Lay must have known then that Enron was falling into deep financial trouble.
The e-mails were sent as Enron shares tumbled in the wake of Jeffrey Skilling's abrupt Aug. 14 resignation as company president.
"It appears that you misled your employees into believing that Enron was prospering and that its stock price would rise," Waxman said in a letter to Lay, asking him to respond by Friday.
Repeated calls seeking comment from officials at Enron's headquarters in Houston went unanswered Saturday. But Enron spokesman Mark Palmer told Associated Press that the company was on solid footing when Lay sent the e-mails and that its financial problems did not become clear until later.
"Ken Lay was telling the truth," Palmer said. "We had had 21 consecutive quarters of earnings growth, the same number of consecutive quarters of volume growth. Our core business at Enron had never been in better shape."
In an Aug. 14 e-mail, Lay told employees "that I have never felt better about the prospects for the company."
Two weeks later, on Aug. 27, an e-mail advised employees that his work to shore up investor confidence in the company likely would "result in a significantly higher stock price."
In other developments Saturday, two Republican House leaders, Reps. W.J. "Billy" Tauzin of Louisiana and James C. Greenwood of Pennsylvania, called on Enron accounting firm Andersen to turn over additional records to congressional investigators.
Late last week, the Chicago-based company disclosed that from September to November it had destroyed thousands of documents involving Enron Corp.
Tauzin and Greenwood asserted in a letter to Andersen that the documents were "knowingly destroyed" and said they did not want to risk the loss of any other paperwork. They gave the company until Monday to produce some documents and until Friday for others.
Andersen spokesman Patrick Dorton said, "We are committed to being forthright and doing the right thing in this matter."
Also, the Center for Public Integrity, a Washington-based watchdog group that studies political fund-raising, said a review of federal disclosure forms shows that 14 of the Bush administration's top 100 officials owned Enron stock. Based on the disclosure forms, in which officials provide an estimated range of their assets' values, the Enron holdings by the administration officials were worth between $284,000 and $886,000.
Bush Officials Were Shareholders
Senior officials who owned stock included Defense Secretary Donald H. Rumsfeld; Karl Rove, President Bush's chief political advisor; and Peter Fisher, an assistant Treasury secretary. It was disclosed Friday that a top Enron executive called Fisher several times in the fall asking him to help the company secure a bank loan. White House officials say Fisher did not intervene in the matter.
Lay has been a friend of Bush, and he and other Enron executives have contributed about $550,000 to the president's political endeavors.
But Enron officials have been generous to Democrats as well, contributing to Al Gore, Bush's opponent in the 2000 presidential campaign, and to more than half the 50 Democrats in the Senate.
Enron officials have acknowledged that, during the latter part of last year, they were desperately trying to save the company from the bankruptcy filing that occurred in December. As a result of the company's collapse, thousands of families who owned Enron stock lost money.
Last week, new details emerged about company executives, including Lay, seeking help from Bush administration officials to stave off the company's demise. Those contacted included Treasury Secretary Paul H. O'Neill and Commerce Secretary Don Evans; both have said they took no action to help Enron.
The e-mails offer a glimpse into the inside world of Enron at a time when its financial problems were growing but before company executives turned to O'Neill and Evans for help.
Though he cited personal reasons for leaving the company, Skilling's departure Aug. 14 triggered a battering of Enron stock.
"I want to assure you that I have never felt better about the prospects for the company," Lay's e-mail read that day.
"All of you know that our stock price has suffered substantially over the last few months. One of my top priorities will be to restore a significant amount of the stock value we have lost as soon as possible."
He added that "our performance has never been stronger; our business model has never been more robust; our growth has never been more certain.
"We have the finest organization in American business today."
On Aug. 27, Lay sent another e-mail to employees, who received a grant of stock options, and told them that "one of my highest priorities is to restore investor confidence in Enron."
He added that his efforts "should result in a significantly higher stock price."
Waxman, in his letter to Lay about the e-mails, noted that, by the time of the second computer message, the stock price was at $37 a share, down from a high the previous August of $90.56.
"You had already sold $40 million of Enron stock during 2001 and over $100 million since October 1998," Waxman told Lay.
Enron stock hit a low of 26 cents a share Nov. 30.
As Stock Fell, So Did Severance
Waxman further noted that, while the company stock was plummeting, Lay sought a $60-million severance package for himself. When employees objected, Waxman said, "you proposed reducing your package to $40 million."
And when Enron employees again objected, Lay decided in mid-November not to accept the severance package compensation.
Waxman said he was bothered that Lay told his employees everything was fine, but less than two months later he was telling Bush officials in Washington that the company urgently needed help to prevent a bankruptcy filing.
"At a minimum," Waxman said, the statements by Lay "create the appearance that you misled Enron employees about the value of their investments in Enron and the security of their jobs.
"If this were accurate, it would be a gross betrayal of your employees' trust, as well as possibly illegal conduct."

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Week in Review Desk; Section 4
The World: School for Scandal
Trying To Pass Damage Control 101
By DON VAN NATTA Jr.

01/13/2002
The New York Times
Page 1, Column 1
c. 2002 New York Times Company

WASHINGTON -- WILL they ever learn?
The rules in the damage-control playbook are deceptively simple: be the first to release the bad news (all at once, if possible). Do not misrepresent information. And the cover-up is always worse than the crime.
Yet, last week, Washington once again watched as a new administration seemed to ignore the old rules when it scrambled to deal with what may be its first full-blown political scandal -- its close ties to the Enron Corporation, one of the largest contributors to President Bush's 2000 presidential campaign.
Almost every day, the White House disclosed new contacts between administration officials and executives at Enron, the once-powerful, now-bankrupt Houston energy trading conglomerate that first sought favorable regulatory policies from the Bush administration before literally pleading for its help to survive. The White House is insisting it has done nothing for the company. But by the end of the week, some strategists said the White House's trickling out of information helped the Enron story gather enough momentum that it pushed terrorism off the front page.
Perhaps it is the political survival instincts of a new administration. Or perhaps it is nothing more than a White House's stubborn refusal to give the press what it wants. Whatever the reason, every new scandal seems to doom a president to repeat his predecessors' mistakes.
''They are learning, very slowly, the way to do this, the fact that you have to get out in front of these stories, but they haven't learned entirely yet how to do it,'' said Lanny J. Davis, the Clinton administration spin doctor who made an art form out of the Friday night damage-control leak to a wire service reporter so news would hit the Saturday papers, thought to have the least readership. ''Some things, you have to learn the hard way.''
Even the most experienced Washington hands said there might be nothing illegal in the late fall conversations between Kenneth L. Lay, Enron's chairman, and two cabinet officers. Mr. Lay sought help for Enron's dire financial condition from Commerce Secretary Donald L. Evans.
''They were hesitant and not on top of things in the first hours of this crisis,'' said David R. Gergen, a longtime political strategist who worked in the Nixon, Ford, Reagan and Clinton administrations. ''This is an administration that is sometimes hesitant in the first moments of a crisis or challenge, but it recovers very well. I think they made a strong effort to get much more out at the end of the week. The problem is, we just don't know if there is any more, if there are things being held back.''
There are many moments in the modern presidency when the temptation to hold back the truth prevailed, but always to the everlasting regret of the Oval Office occupants. No one did more holding back than Richard M. Nixon, and the Watergate cover-up sank his presidency.
In the first days of the Iran-contra scandal, Ronald Reagan appeared to be following the damage-control scenario by releasing what the administration said was virtually everything about the arms-for-hostages deal. Of course, many more details emerged later, and it was again the cover-up that proved far more politically toxic than the original allegation.
Bill Clinton insisted he ''did not have sexual relations with that woman.'' But his denial, maintained by his aides for eight months, dragged the country through a scandal that lasted more than a year before it ended with Mr. Clinton's impeachment by the House and acquittal by the Senate.
How long the Enron inquiry will last, some strategists say, depends on what else may be waiting out there about the company's relationship with the White House. ''I just worry that some other shoe is going to drop,'' said a Republican strategist with ties to the White House.
The Enron inquiry is unlike the scandals that bedeviled the Clintons, including the Monica S. Lewinsky affair and the Whitewater land deal. Most of the information related to those scandals was located in the White House -- even, literally, inside the Oval Office.
But Enron is a wide-ranging private sector debacle, being investigated by the Justice Department, the Labor Department, the Securities and Exchange Commission and five separate Congressional committees. Documents have been destroyed by employees of Enron's auditor, Arthur Andersen.
''It's somewhat more complicated because the information sits in various places, not all of which are under the control of the White House,'' said Suzanne R. Garment, author of ''Scandal: The Culture of Mistrust in American Politics.'' ''The opportunities are multiplied for screw-ups.''
The allegations of influence-peddling are almost impossible to prove. The campaign finance quid pro quo is always elusive. The White House attempted to chase away the allegations by arguing -- so far without being contradicted -- that Enron got nothing for its many years of generosity. Other than a few meetings, the administration did not give it the energy policy it wanted, or the bail-out assistance requested as Enron hurtled toward bankruptcy last fall.
''What you have here is a case where a contributor called up and asked for something but did not get it,'' said Ari Fleischer, the White House press secretary. Moreover, no evidence has emerged that President Bush is in any way involved.
Mrs. Garment said the ''contributor calls could turn out to be nothing, but they are precisely the kind of tendrils by which scandal classically creeps up the brick wall.''
FORMER Clinton administration officials watched with incredulity as their counterparts attempted to put out the Enron fire. ''Since Sept. 11, they have all performed well under ridiculous pressure,'' said Jennifer Palmieri, the press secretary of the Democratic National Committee, ''but they have never been through anything like this.'' Yet some Democrats might also be entangled.
Some Republican administration officials were furious at some of the press coverage. ''They act like there's some billing records or some cattle scam or some fired travel aides or some blue dress,'' Mary Matalin, an aide to Vice President Dick Cheney, said, referring to many points she used when attacking the Clinton administration.
It took several days of disclosures from the Bush White House to jump start the political scandal machine, hibernating since Sept. 11. Political researchers and Democratic operatives sent out blast-faxes of past favors done for the Bush family by Mr. Lay and Enron. And reporters began asking: what did the president know, and when did he know it?
''Even if no more damaging information comes out,'' Ms. Palmieri said, ''this is a major problem for this administration. It is going to damage the president's credibility and it is going to hurt their ability to get their message out.''
Mr. Gergen said, ''Washington journalists believe there is blood in the water,'' but he said most of the public views Enron as a failed corporation whose employees watched helplessly as their retirement savings evaporated. The blame does not touch the White House.
To ensure the budding scandal does not ''have legs,'' Mrs. Garment said the White House should immediately investigate whether anyone else in the administration had any contact with Enron. ''I assume the White House is making a complete sweep of the upper levels of government for any information on contacts between members of the administration and Enron,'' she said. ''And if they find anything that they think is relevant, they should say what it is immediately. Surely, they have learned from the past. Right?''

Photo: The Enron headquarters in downtown Houston. (Associated Press)
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Bush, Enron chief rose out of the same circles of achievement
By DEB RIECHMANN
Associated Press Writer

01/12/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

WASHINGTON (AP) - President Bush bestowed the nickname "Kenny Boy" on embattled Enron executive Kenneth Lay back when the two were up-and-comers in Texas.
That doesn't mean they are best buddies; Bush dispenses nicknames freely and not just on intimates. Yet as their careers soared, their interests became more intertwined, whether in business, politics or baseball.
Bush's largest financial benefactor, Lay found him to be a friend of the energy industry when Bush was Texas governor. And Bush made a special trip to Houston during his presidential campaign to attend the Astros' first game at Enron Field, as Lay threw out the first pitch.
They've enjoyed "quality time," Lay has said.
How close their friendship grew has come under scrutiny since Enron, the Houston-based energy giant, filed the largest bankruptcy in U.S. history last month.
It has since been disclosed that Lay contacted officials in the Bush administration, which has at least 15 high-ranking members who owned stock in the company last year. Several Cabinet members acknowledged contacts from Enron but said they did not tell Bush or take any action.
The president calls Lay a "supporter," in recognition of the money poured into his campaigns over the years by Lay, his company and its employees.
But he denies speaking with Lay about the company's financial problems and says his administration will aggressively investigate the failure of the company. Enron's fall cost thousands of jobs and vaporized the retirement savings of many employees.
"My sense is that Bush cares about him," said Bill Miller, a political consultant in Austin, Texas, who witnessed Lay's ascent in the corporate world and Bush's rise to governor, then president.
"It was a friendship-friendship, not just a business friendship."
White House and Enron officials insist the two were never all that close. Any idea that Lay is a "close intimate" of Bush is ludicrous, said Bush adviser Karl Rove
"It would be a stretch to call them personal friends," said Enron spokesman Mark Palmer, adding he recalled hearing Lay say that Bush had called him "Kenny Boy" once or twice.
Parsing his words carefully, Bush said last week that it was when he became governor after the 1994 election that "I first got to know Ken." But their relationship apparently goes farther back.
Lay, as chairman of the University of Houston board of regents in the late 1980s, tried to bring the senior Bush's presidential library to his school. George W. Bush was involved in setting up the library, which eventually went to College Station, Texas, instead.
Lay says he spent "a little more quality time with George W." during that time.
Criminal, civil and congressional investigations are looming into whether Enron defrauded investors, including 401(k) plan investors, by concealing information about its financial problems.
Bush, sitting on high approval ratings, is hoping his connections to Lay won't become a political liability.
Bush has received more than $550,000 from Enron, its employees and their relatives during his political career - the most from any source. Altogether, more than 250 members of Congress from both parties have received Enron contributions.
Lay's relationship with the Bush family dates back to when the president's father was the only Bush in national politics.
Lay was co-chairman of former President Bush's 1990 economic summit for industrialized nations, which was held in Houston.
Lay and his wife, Linda, dined on hickory grilled veal medallions and Texas peaches and cream with summit attendees who included British Prime Minister Margaret Thatcher and French President Francois Mitterrand.
Lay also was co-chairman of the host committee for the Republican National Convention when it was held in Houston in 1992. George W. Bush played an active role in his father's unsuccessful campaign for a second term that year.
The businessman had Democratic connections as well, serving Democratic Gov. Ann Richards as leader of her business council. He gave money to her campaign and Bush's in 1994, and when Bush defeated her that year, the new governor kept Lay on the business council.
As Lay was donating money to Bush's 1994 and 1998 governor's campaigns, he also was lobbying legislators to deregulate the electric industry, an area into which Enron was expanding.
Bush signed a deregulation law in 1999 clearing Enron's path into new markets.
"Bush has always delivered on Kenneth Lay's political pitches," said Craig McDonald, director of Texans for Public Justice, a campaign-finance advocacy group.
Even if Bush's dad hadn't been in the White House, the two men would have been on similar trajectories.
"They're both from the energy business; they both like baseball," said W.J. "Jack" Bowen, a retired gas executive who hired Lay twice, at a Florida energy company and then at Transco Energy Co. in Houston.
They have similar personal traits, said Miller, who has watched Texas politics for years. Both are bright and down-to-earth. Each tends to delegate authority.
"Neither one of them pretends to be an intellectual," Miller said. "Lay is reserved, but not shy. Bush has got more ham bone in him."

AP Graphic ENRON BUSH LAY, AP Photo WX101
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

National Desk; Section 1
ENRON'S COLLAPSE
Complex Web of Relationships in Boom and Bust
By JOHN SCHWARTZ

01/13/2002
The New York Times
Page 26, Column 2
c. 2002 New York Times Company

The cast of characters in the Enron drama is lengthy, and their relationships are complex.
THE EXECUTIVES
Kenneth L. Lay gained national fame as the chairman and chief executive of Enron, a company that reshaped the nation's energy markets -- and notoriety as the company flamed out spectacularly.
A man with a doctorate in economics and an evangelical belief in free markets, Mr. Lay turned an old-fashioned gas pipeline operator into the world's biggest energy trader. But when Enron faltered, he could not explain the company's finances to the satisfaction of Wall Street or of Dynegy Inc., a rival that offered to rescue Enron but ultimately walked away from a proposed merger.
Mr. Lay's longtime No. 2, Jeffrey K. Skilling, fostered a culture at Enron described as creative and cutthroat. He led the company into new markets, setting up trading desks for paper, chemicals, water rights and high-speed Internet service.
Mr. Skilling was chief executive for six months, resigning last August. He said last month that he was stunned by the company's rapid decline.
Enron replaced its chief financial officer, Andrew S. Fastow, in October, seeking to placate investors and regulators who had begun questioning a set of unusual partnerships he arranged to shift debt off the company's books. Two weeks later, the company revised its accounting for the partnerships, wiping away about $600 million in profits it had reported over the previous five years. Mr. Fastow earned $30 million from his investments in the deals.
THE BOARD
Enron recruited prominent people to its board of directors, but given the company's collapse, analysts give them low marks. The directors include Wendy L. Gramm, the former chairwoman of the Commodities Futures Trading Commission and the wife of Senator Phil Gramm, Republican of Texas.
Ms. Gramm serves on the board's audit committee, which is responsible for the company's accounting and financial reporting. Until 1998, she owned Enron shares; when the Gramms decided that the stock presented conflict of interest issues, she sold her shares for $300,000. Since then, the company has placed her board pay in a ''deferred account'' that can be tapped later.
Also on the board is Dr. John Mendelsohn, president of the M. D. Anderson Cancer Center, one of Houston's most prestigious institutions. Enron has donated more than $600,000 to the center in the last five years. Another audit committee member, Lord John Wakeham, was in Margaret Thatcher's inner circle when she was Britain's prime minister.
THE LAWYERS
No corporate crisis would be complete without celebrity lawyers, and the Enron debacle has enlisted some of the biggest. David Boies, who took on Microsoft in the federal antitrust suit, is representing Mr. Fastow. Robert S. Bennett, who represented President Bill Clinton in the Paula Jones scandal, is representing Enron in Washington.
THE POLITICIANS
Mr. Lay -- ''Kenny Boy'' to his friend George W. Bush -- is a major contributor to both political parties. Mr. Lay and other Enron executives have given more than $550,000 to Mr. Bush in his political career.
Enron's executives met with Vice President Dick Cheney four times last year to discuss energy matters. When Mr. Cheney was chief executive of Halliburton, a unit of the company built Houston's new baseball stadium, Enron Field. Before he became the president's top economic counselor, Lawrence B. Lindsey was a paid adviser to Enron. Karl Rove, Mr. Bush's chief political strategist, and I. Lewis Libby, Mr. Cheney's chief of staff, were investors in the company.
The ties reach far beyond the White House. The Republican national chairman, Marc Racicot, the former governor of Montana, was a lobbyist for the company until last week. In Texas, Mr. Bush's successor, Rick Perry, has been criticized for appointing a top Enron executive to the state's Public Utility Commission.
THE ACCOUNTANTS
Joseph F. Berardino, chief executive of the accounting firm Arthur Andersen, Enron's longtime auditor, is caught in the Enron net. In December, he told Congress that Enron might have illegally hidden information from its auditors. Last week, Andersen disclosed that its employees had destroyed documents related to its auditing of Enron -- even after the government began investigating Enron's fall.
If the story seems to take on the breadth of a Cecil B. DeMille epic, that may only be appropriate. For there is a cast of thousands: the company's investors, including Enron employees who saw their retirement savings disappear virtually overnight. Their loss -- and their anger -- guarantee that the investigations of Enron are only beginning.

Photos: Dr. John Mendelsohn, cancer center chief.; Andrew S. Fastow, Enron former officer.; Lord John Wakeham of Britain.; Dick Cheney, the vice president; Rick Perry, the Texas governor.
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Business/Financial Desk; Section 1
ENRON'S COLLAPSE
Before Debacle, Enron Insiders Cashed In $1.1 Billion in Shares
By LESLIE WAYNE

01/13/2002
The New York Times
Page 1, Column 1
c. 2002 New York Times Company

While investigators are focusing on how much money investors and employees lost in the Enron Corporation's collapse, some shareholders and lawmakers are now setting their sights on another target: the millions that Enron insiders received by selling their shares while the price was still high.
As Enron stock climbed and Wall Street was still promoting it, a group of 29 Enron executives and directors began to sell their shares. These insiders received $1.1 billion by selling 17.3 million shares from 1999 through mid-2001, according to court filings based on public records. They continued selling just before Enron's stock started to tumble early last year and the company began its slide into bankruptcy protection.
One of the biggest sellers was Kenneth L. Lay, who became prominent as the company's chairman and a leading contributor to President Bush. He was among more than a dozen Enron executives who received $30 million or more, including one who sold shares valued at $353.7 million.
Lawyers and spokesmen for the executives, board members and the company said that the sales were proper, and that the insiders had no special information or advantages over other investors.
''This issue is being investigated,'' said Robert S. Bennett, a lawyer for Enron. ''But at this point in time, I am unaware of any evidence that supports the allegation there was improper selling by members of the board or senior management.''
Many of these Enron executives retain large holdings in the company, selling shares regularly, as executives at other companies do. ''In many instances, the sale of the stock was preplanned according to a strict timetable,'' Mr. Bennett said.
Mr. Lay himself sold Enron stock 350 times, trading almost daily, receiving $101.3 million. In all, Mr. Lay sold 1.8 million Enron shares between early 1999 and July 2001, five months before Enron filed for bankruptcy. As of last February, he still owned more than 7.7 million shares.
Mr. Lay sold his stock for $31 to $86 a share; this week, Enron was selling for under 70 cents a share. Often, Mr. Lay sold in amounts as small as 500 shares, while at other times he sold as many as 100,000 shares.
It has not been determined how much Mr. Lay or the others paid for their shares, or how much they gained. Much of Mr. Lay's holdings, and those of other executives, were in the form of stock options, which allowed them to buy shares at a discount.
Other top sellers were Lou L. Pai, the former chairman of an Enron subsidiary, who received $353.7 million for his 5 million shares; Rebecca P. Mark-Jusbasche, a director and former Enron executive who received $79.5 million for 1.4 million shares; and Ken L. Harrison, a director who sold 1 million shares for $75.2 million.
Jeffrey K. Skilling, the company's former chief executive, received $66.9 million for 1.1 million shares. Beginning in December 2000, Mr. Skilling began to sell his holdings at a pace of 10,000 shares about every seven days. He still owns about 600,000 shares and options, according to public filings.
Andrew S. Fastow, the company's ousted chief financial officer, who set up many of the financial partnerships that have been criticized for concealing Enron's large debts, received $30 million for his holdings.
A detailed accounting of these trades is contained in a lawsuit brought by Amalgamated Bank, of New York, which invested the pension money of union members in Enron shares. Representing the bank in this case, which is now in the Federal District Court in Houston, is the same law firm that brought shareholder suits against Charles H. Keating Jr. in the savings and loan scandal and against Michael R. Milken, the junk bond financier, for securities fraud.
While the suit has received little attention so far, it highlights one of the main points in the political debate now taking place in Washington -- whether small shareholders were left out of a flow of information about Enron's deteriorating financial condition.
The differences in the trading strategies of the two groups -- those outside the company who were buying Enron's shares and those inside the company who were selling them -- reflect the different information that each group had, according to the suit.
''The defendants employed devices, schemes and artifices to defraud,'' the lawsuit states. It accuses the 29 defendants of ''unlawful insider trading'' and says the group ''materially misled the investing public'' by issuing false statements.
Senator Joseph I. Lieberman, Democrat of Connecticut and chairman of the Senate government affairs committee, has already announced hearings that will, in part, look at how Enron shareholders might have been deceived by the company's financial statements. Senator Barbara Boxer, Democrat of California, has also expressed concern for Enron's small shareholders, especially employees who put its shares in their 401(k) retirement plans only to lose their savings.
Representative Henry A. Waxman of California, the ranking Democrat on the House Commerce Committee, released a letter yesterday asking Mr. Lay to answer questions about optimistic statements Mr. Waxman said that Mr. Lay had made in e-mail messages to employees last August. In the e-mail, gathered by staff investigators, Mr. Lay said that Enron remained strong.
At Enron, more than half of the employees' 401(k) assets, or about $1.2 billion, was invested in company stock, which is now nearly worthless. Billions more were lost by other investors, from individuals to large institutions that bought Enron shares for the pension plans of unions and corporations.
The lawsuit claims the insiders withheld information, allowing Enron's shares to remain at an artificially high level while they were selling their shares. ''This is the most massive insider bailout that we've ever seen and we've been prosecuting these cases for 30 years,'' said William S. Lerach, one of the bank's lead attorneys. ''The overall size of this case is unprecedented.''
Spokesmen for some of the defendants say that this group had done nothing wrong. An Enron spokesman, Mark Palmer, dismissed the suit as ''completely without merit'' and a ''weak argument.''
Gordon G. Andrew, a spokesman for Mr. Fastow, the former chief financial officer, declined to comment, but said that Mr. Fastow still had about 50 percent of his original holdings. Mr. Andrew said that Mr. Fastow's last stock sale took place in November 2000 and that Mr. Fastow had purchased shares in early 2001.
A spokeswoman for Mr. Skilling, the former chief executive, said that ''there is absolutely no basis to the allegation that Mr. Skilling did anything improper with regard to the sale of Enron stock.'' The defendants have not yet filed answers to the complaint. Arthur Andersen & Company, also named, declined to comment.
At the top end of the selling was Mr. Pai, who headed an Enron subsidiary called NewPower Holdings, an online retailer of electricity and natural gas. Before leaving Enron last spring, Mr. Pai sold five million shares of Enron between January 1999 and July 2001 for $353.7 million.
In January 2000, just 60 days after the formation of NewPower, Mr. Pai received more than two million Enron shares. He began to sell them almost immediately, mostly while they were trading above $70.
Enron directors, also named in the case, sold stock too. All Enron directors receive stock options as part of their $380,619 annual fees. Of that, 15 percent was paid in cash, the remainder in stock.
One director, Wendy L. Gramm, the wife of Senator Phil Gramm, Republican of Texas, sold all her 10,256 shares for $276,912. She sold the stock on one day -- Nov. 3, 1998 -- for $27 a share. Ms. Gramm said earlier that she and her husband decided to sell their Enron shares to avoid the appearance of a conflict. She was then paid in cash.
The Securities and Exchange Commission and the Justice Department are both investigating Enron. A Senate committee issued 51 subpoenas Friday as part of an investigation into the insiders' stock sales.
The investigations should aid the case against the insiders, said Michael Hennigan, a Los Angeles lawyer in the Orange County, Calif., bankruptcy lawsuit. ''I assume that the government is going after the exact same things that Lerach is after,'' he said, referring to the lawyer for the bank suing Enron.
Last week, a federal judge declined to immediately freeze the assets of the defendants, asking for further information before reconsidering the request.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

News; Domestic
Enron Auditing Firm Destroyed Documents
Carol Lin, John King, Greg Clarkin

01/13/2002
CNN Sunday
(c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.). All Rights Reserved.

"TIME" magazine says just days before energy trader Enron made its financial meltdown public, employees of its auditing firm were told to destroy most of their Enron documents. "TIME" says that directive came in a memo to Arthur Andersen employees.
CAROL LIN, CNN ANCHOR: "TIME" magazine says just days before energy trader Enron made its financial meltdown public, employees of its auditing firm were told to destroy most of their Enron documents. "TIME" says that directive came in a memo to Arthur Andersen employees.
Today Joe Lieberman said if that memo is what it appears, quote, "the folks at Arthur Andersen could be on the other end of an indictment before this is over."
Financial troubles for the energy company have been brewing for some time, but the political fallout could just be beginning. In Washington today White House officials began defending their exchanges with Enron CEO Kenneth Lay.
CNN senior White House correspondent John King has more.
(BEGIN VIDEOTAPE)
JOHN KING, CNN SENOR WHITE HOUSE CORRESPONDENT (voice-over): Top Bush deputies disclose new details of their contacts with Enron officials, but say the bottom line is unchanged: A major political supporter of the president asked for help, and the answer was no.
DON EVANS, COMMERCE SECRETARY: I'm going to do everything I can to protect the integrity and the trust of that office. And my judgment was to protect the integrity of that office, not to step in.
KING: Key Democrats say it is not time for pointing fingers.
SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: I have not seen any evidence up to this time that officials of the Bush administration acted improperly with regard to Enron.
KING: Still, Democrats in Congress want every detail of Enron's dealings with the administration.
Enron chairman and CEO Ken Lay spoke to Commerce Secretary Evans on October 15 of last year, the day before the company disclosed major losses. But Evans says the only topic discussed in that call was Enron operations in India. The Enron chief called Evans again on October 29. And Evans says in that conversation Lay asked for help with bond agencies.
Lay also called Treasury Secretary Paul O'Neill twice: in late October at home, and again at the office in early November.
PAUL O'NEILL, TREASURY SECRETARY: Ken Lay didn't ask me to do anything and we -- you know, we did nothing.
KING: The White House says the president learned of the phone calls just last Thursday, more than two months after the fact. And the president's spokesmen said late last week he did not believe anyone at the White House was told at the time.
But Evans says he told the White House chief of staff a few weeks after the call because Enron's troubles were making headlines.
EVANS: I thought the White House ought to know. I was over there one day, and I stepped into Andy Card's office and told him I received this call. He simply listened to me and said thank you very much.
KING: Thousands of Enron shareholders and employees lost millions when the company filed for bankruptcy. And some Democrats say Secretaries O'Neill and Evans should have warned the public the company was in trouble.
(on camera): But Secretaries Evans and O'Neill say they were not told anything about the company's finances that was not already public knowledge. And they say any investigation in the end will show Enron's generous support of the president, and its connections within the administration, bought it no special treatment.
John King, CNN, the White House.
(END VIDEOTAPE)
LIN: Though news of Enron's troubles is only just beginning to grab attention in Washington, Wall Street has been tracking the company's fall from grace for some time. Enron's stock chart tells that story.
Take a look at this: During the past year, issues of Enron topped out at $83 a share. But as of the market's close on Friday, those same shares were trading at 67 cents a piece.
And as CNNFN's Greg Clarkin reports, many critics are wondering if the Wall Street banking community kept the brewing scandal under wraps.
(BEGIN VIDEOTAPE)
GREG CLARKIN, CNNFN CORRESPONDENT (voice-over): It's already engulfed Houston and Washington, and now the Enron collapse threatens to pull in Wall Street.
A number of Enron critics are asking if Wall Street's bankers played a role in keeping information away from the public as the one-time energy giant collapsed.
WILLIAM LERACH, SECURITIES LITIGATION ATTORNEY: A fraud of this scope and size simply cannot be perpetrated without the assistance of sophisticated professionals. This case is going to continue to evolve and expand. There are other professionals, lawyers, investment bankers and the like, who appear to be deeply implicated.
CLARKIN: The former head of the Securities and Exchange Commission agreed, saying Wall Street bears some of the blame.
ARTHUR LEVITT, FMR. SEC. CHAIRMAN: It's not just he auditors, it's the security analysts; it's the rating agencies that dropped the ball; it's the investment bankers who cooked up the scheme to hide matters from the general public.
CLARKIN: As for the auditors, Arthur Andersen, Enron's accounting firm, has admitted to destroying documents relating to the company. "TIME" magazine reports Andersen employees were direct to destroy all but the most basic, quote, "work papers," end quote.
One member of Congress said, if true, it may lead to criminal charges.
LIEBERMAN: If this memo was what it looks like, I'm afraid that the folks at Arthur Andersen could be on the other end of an indictment before this is over.
CLARKIN: Senator Lieberman also said the Enron disaster could bring down Andersen as well.
LIEBERMAN: Arthur Andersen is a great company with a great name. That name is being sullied; and ultimately this Enron episode may end this company's history.
CLARKIN: Andersen's role has many demanding new oversight of those charged with checking the books of corporate America.
Former SEC Chairman Levitt points out what happened at Enron could happen to other corporate heavyweights.
Greg Clarkin, CNN Financial News, New York.
(END VIDEOTAPE)
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USA: US senator - Enron accountant could face charges.

01/13/2002
Reuters English News Service
(C) Reuters Limited 2002.

WASHINGTON, Jan 13 (Reuters) - If Arthur Andersen ordered workers to destroy audit material related to Enron Corp., the Big Five accounting firm could face criminal indictment, a leading Democratic senator said on Sunday.
Sen. Joseph Lieberman, a Connecticut Democrat, was referring to a report by Time magazine that Arthur Andersen, Enron's auditor, ordered employees in an Oct. 12 memo to destroy all audit material on Enron Corp. except the most basic "work papers."
The magazine reported on Sunday that just four days before Enron disclosed a stunning $618 million loss for the third quarter - its first public disclosure of its financial woes - the workers who audited the company's books were ordered to destroy the records, and reminded to do so in the weeks leading up to the first Security and Exchange Commission subpoenas issued on Nov. 8.
"We know that Arthur Andersen, the supposedly independent auditor, covered up facts very relevant to the condition of Enron," Lieberman told CBS's "Face the Nation."
"It may well be" criminal, he said. "Arthur Andersen is a great company with a great name. That name is being sullied and ultimately this Enron episode may end this company's history."
"From what I've seen of the Time magazine story, the memo about destroying the documents of Enron was not just a routine 'clear your files' memo. It was specifically about Enron and it came at a time when people inside, including the executives of Arthur Andersen and Enron, knew that Enron was in real trouble and that the roof was about to collapse on them," said Lieberman, chairman of the Senate Governmental Affairs Committee.
Lieberman's panel has begun an investigation.
"This kind of memo to destroy documents raises very serious questions about whether obstruction of justice occurred here. That's not for me to make a judgment on now. Obviously I don't know enough about it," he added. "But you've got lawsuits being filed ... you've got criminal investigations going on.
"If this memo was what it looks like, I'm afraid that the folks at Arthur Andersen could be on the other end of an indictment before this is over."
Arthur Andersen admitted last Thursday its employees had deleted documents related to its review of the bankrupt energy trader's finances, and congressional sources said thousands were destroyed.
A spokesman told Time it would be inappropriate to discuss the situation until the company completes its own review.
The Senate Permanent Subcommittee on Investigations also has issued 51 document subpoenas to Andersen, Enron and 49 unnamed Enron executives, employees and directors.
Sen. John McCain told CBS the accounting firm was receiving $50 million dollars a year for "consulting" as well as $50 million for auditing.
"That's hard to understand how you can audit objectively while you are getting huge sums of money for consulting to an energy firm," McCain said.
Arthur Andersen did accounting for the global energy trading giant before it declared bankruptcy on Dec. 2, wiping out the jobs and pensions savings of thousands of workers and inflicting losses of millions of individual investors. In addition to the regulatory and congressional investigations, the Justice Department has opened a criminal probe.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

NEWS
Enron Gave $21,933 to Schumer / Donations largest to any Senate Democrat
Ellen Yan. WASHINGTON BUREAU

01/13/2002
Newsday
NASSAU
A41
(Copyright Newsday Inc., 2002)

Washington - Sen. Charles Schumer, who sits on two committees planning hearings on the Enron bankruptcy, received more donations than any other Senate Democrat from the failed energy trading giant.
The $21,933 the senator received came during his 1998 race and was the fourth largest in the Senate, even topping donations to some House lawmakers from Enron's home state of Texas, according to a study by the Center for Responsive Politics, which monitors campaign donations. The money came from company employees, including chairman Kenneth Lay, and its political action committee.
Although Enron overwhelmingly favored Republicans, Schumer collected more from the company than any non-Texan, except for Sen. Conrad Burns (R-Mont.), who got $23,200 and sits on the powerful Appropriations Committee, which doles out the nation's spending money. Enron's top recipient in Congress was Sen. Kay Bailey Hutchinson (R-Texas), an appropriations member who got $99,500 from 1989 to November of last year.
Schumer is on the Energy and Natural Resources Committee and the Banking, Housing and Urban Affairs Committee. Both panels expect to investigate how and why Enron imploded, sinking employees' pension funds, and to learn how much the Bush administration knew of the company's troubles before the public fall. Other committee members also received contributions from Enron.
Schumer received the donations during his battle with incumbent Alfonse D'Amato, one of the most watched and expensive races in the nation. In a position favored by Enron, Schumer made power deregulation one of the keystone campaign issues upstate because the high energy prices there were damaging the economy. Since he got into the Senate, there have not been many key energy votes.
Schumer spokesman Bradley Tusk said nothing untoward happened: "Did Enron give us contributions? Yes. Have they asked us to do anything? No."
Once Schumer arrived in the Senate, Tusk said, he led and won the fight against the company's main priority in 1999 when it came to reauthorizing the Commodities Exchange Act. "The bill would have allowed electronic trading companies like Enron to be exempt from federal oversight," Tusk said. "We thought it would put consumers at risk."
The money may be explained by a common denominator between Enron and Schumer. One was a prolific giver, the other a prolific fund- raiser.
Schumer is "going to get a lot of money from a lot of donors . . . and his fund-raisers don't stop at the border" of New York, said Steven Weiss, a spokesman for the Center for Responsive Politics.
The company's employees and PAC also contributed to several other New Yorkers, according to campaign records. Sen. Hillary Rodham Clinton got $950 during her race, and former Sen. Daniel Patrick Moynihan $1,000 in 1992. In the House from 1989 to 2001, Reps. Gary Ackerman (D-Jamaica Estates) and Charles Rangel (D-Manhattan) each got $3,500; Vito Fossella (R-Staten Island) $3,000; Edolphus Towns (D- Brooklyn) $500; Anthony Weiner (D-Brooklyn) $500; and Peter King (R- Seaford) $300. Former New York City Mayor Rudolph Giuliani got $3,000; D'Amato $13,000 from 1996 to 1998; and Rick Lazio $9,400, mostly during his failed Senate bid in 2000.
On the state level, Enron employees gave $1,000 to Gov. George Pataki last year and the same this year to Democratic gubernatorial candidate Andrew Cuomo. They spent $60,000 to $70,000 in lobbying at the state capital each year from 1998 to 2000, but substantially less in 2001.
Staff writer John Riley contributed to this story.

Caption: Newsday File Photo / Dick Kraus - A common denominator between Enron and Charles Schumer: One was a prolific giver, the other a prolific fund-raiser.
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Commentary
Enron echoes past scandals
Clarence Page Clarence Page is a member of the Tribune's editorial board

01/13/2002
Chicago Tribune
Chicagoland Final ; C
19
(Copyright 2002 by the Chicago Tribune)

Here's a modest proposal to major news media: Accompany every news story about Enron Corp. with a profile of an Enron victim so we don't forget who this scandal is really about.
It's easy to forget the little people as we sort through the big people who let the little people down in what is growing into Washington's latest big scandal.
Chandra Levy's ex-boyfriend, Rep. Gary Condit, is not the only Washington scandal target to be relieved of pesky press attention by the war on terrorism. Were it not for the Sept. 11 terror attacks, it would not have taken until last week, when the Justice Department opened an investigation, to put this story on the front burner of media attention.
Houston-based Enron has been Bush's most generous corporate contributor throughout his political career. Thousands of investors and Enron employees who presumably worked hard and played by the rules suddenly lost their savings and pensions, because there was less to Enron's finances than they had been led to believe.
While their stock crashed, top Enron executives may have been able to bail out quickly without telling the public or Enron's employees, who were not allowed at that point to move their pension funds from Enron stock to an investment that was making money.
Investors like to think they can trust the information they receive about a company's stability and finances, especially when it is a company for which they work. If Americans cannot look to Washington to help them to protect their hard-earned life savings from rip-offs like the Enron bankruptcy, you have to wonder what Washington is for.
Yet when you look at Enron's cozy Washington connections, particularly with the Bush administration, you begin to wonder, as they say out in the rural areas, whether the fox was guarding the henhouse.
It is premature to put this developing blowup in the same league with major White House scandals of the past, but there are numerous unfortunate echoes:
Bush's declaration that his good pal Enron Chairman Kenneth Lay never hinted at the company's precarious financial position echoes Bush's father declaring that he was "out of the loop" of the Iran- Contra affair in the 1980s.
Disclosures that Enron's Chicago-based auditor, Arthur Anderson LLP, destroyed thousands of Enron files sounded like the 18 1/2 minute gap in President Nixon's White House tapes.
We even have--Hello, again!--a familiar face: savvy attorney Robert Bennett, who defended Clinton against Paula Jones' accusations of sexual harassment. Now Bennett is defending and spinning for Enron to reporters.
That's Washington. The same faces keep coming back. So do a lot of the same questions, to which the White House has its damage-control machinery working. The strategy includes:
(1.) Look proactive. Get Atty. Gen. John Ashcroft, who received a now-embarrassing $25,000 contribution from Enron for his Senate campaign, to recuse himself.
(2.) Have President Bush announce the criminal investigation, express sympathy for investors who got the shaft in "this awful bankruptcy" and announce new pension disclosure rules to protect workers in other companies.
Among Enron's ripped-off workers, that reform is called, "closing the barn door after your horses, your mule and all of your dairy cattle have walked away."
(3.) Deny, deny, deny. "I have never discussed the financial problems of the company," Bush told reporters at a photo-op. "The last time I saw Mr. Lay was at my mother's fundraising event for literacy. That was in Houston last spring . . ."
Jocular George usually refers to his pals by first names or nicknames. But Enron's chief, one of his biggest benefactors, suddenly was just "Mr. Lay."
No, this scandal probably is not going away soon. Bush will have to learn to live with his losses, just like Enron's investors, although Bush's losses probably won't cost him as much.
----------
E-mail: cptime@aol.com

PHOTO; Caption: PHOTO: An unidentified woman carries a box of her belongings from Enron's Houston-based headquarters. AP photo by Pat Sullivan.
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Editorial
Learning From Enron

01/13/2002
The Washington Post
FINAL
B06
Copyright 2002, The Washington Post Co. All Rights Reserved

LAST WEEK the scandal around Enron deepened. The Justice Department announced a criminal investigation into the firm's collapse, and the Bush administration belatedly came clean about a number of high-level contacts it had with Enron and its creditors as the firm headed toward bankruptcy. More may yet come out. But for the moment there is no evidence that the Bush team was improperly embroiled in the firm's deceptive schemes. Enron appears to have sought help from the administration in securing fresh credit from its bankers and in staving off a downgrade by a credit-rating firm. But no help seems to have been given.
The real scandal about Enron is different. It is that a public company, with a legal obligation to report accurately on its finances, concealed the true state of those finances from its owners. Those owners included many small investors who either held Enron stock directly or through their retirement funds, and who have been cheated. Many Enron employees, who were encouraged by the company to fill their retirement plans with company stock, have been left with little or nothing. Meanwhile Enron's senior managers, who either perpetrated the fraud or at a minimum failed to prevent it, have extracted millions in pay and bonuses from the company.
The task now is to identify those responsible for this disaster and to devise regulations that might prevent its recurrence. As well as senior officials within Enron, the spotlight must fall on Arthur Andersen, the auditing firm that was supposed to certify the accuracy of Enron's accounts. Auditors often defend themselves in such cases by blaming the firm, claiming that managers gave them false numbers to work with. But in Enron's case, Andersen has already admitted that it spotted accounting mistakes and suggested that they be put right, but then certified the accounts as accurate without any corrections. What's more, Andersen now confesses to have destroyed documents related to Enron, not the usual behavior of an innocent party.
Three kinds of reform might make corporate accounts more accurate in future. The first is to make corporate board members take their responsibilities more seriously. Boards are supposed to ensure that managers act in shareholders' interests, and a key part of their job is to appoint tough auditors to verify financial statements. But board members often do managers' bidding, either because they are drawn from management ranks or because their independence is compromised by consulting contracts with the company. Enron board members received thousands of dollars from the managers they oversaw. This practice should be strictly limited.
Second, and most important, the rules by which auditors work should be made tougher. At present, the Financial Accounting Standards Board is reluctant to take a hard line on accounting tricks used to deceive shareholders, in part because the board depends on auditing firms and public companies for its budget. As a result, Enron's practice of concealing its risky financial instruments in partner firms may actually have been legal under the board's standards, even though it rendered its published accounts meaningless. This is scandalous; no investor, no matter how sophisticated, could have known the full extent of Enron's obligations (which sank the firm). Until firms are required to disclose completely their obligations, how can stockholders know which firms are burdened by debts that don't appear on their balance sheets? And if stockholders can't reliably know the extent of corporate obligations, how can it be safe to buy stocks?
Finally, auditors' independence should be ensured. At present, auditors provide consulting services to the firms they oversee, harming their independence in the same way that board members compromise themselves. Setting a cap on such services, or requiring more detailed disclosure of them, is worth considering.
None of these changes will be easy, to be sure. But Enron threatens "a massive loss of public confidence in the numbers that are the bedrock of American markets," in the words of Arthur Levitt, the former head of the Securities and Exchange Commission. He is right, and it is time to do something about it.

http://www.washingtonpost.com
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

National Desk
THE NATION NEWS ANALYSIS White House's Failure to Sound Alarm Faulted That no warnings were issued as Enron collapsed raises the specter of special treatment, critics charge.
JAMES FLANIGAN; AARON ZITNER
TIMES STAFF WRITERS

01/13/2002
Los Angeles Times
Home Edition
A-1
Copyright 2002 / The Times Mirror Company

Even though they mounted no formal effort to bail out Enron Corp., Bush administration officials are coming under fire for not publicly disclosing the extent of the company's troubles when they became aware of them.
Some legal experts contend the administration was in a position to sound a warning to the public or the Securities and Exchange Commission after a series of phone calls from Enron executives to Treasury Department officials last fall. The fact that they didn't, while Enron's financial situation grew darker and its stock price declined steadily, raises the specter of special treatment for a powerful corporation, congressional critics say.
But the Bush administration, despite close ties to Enron, did not help the firm stave off bankruptcy as the federal government had done for failing enterprises such as Long-Term Capital Management, Chrysler Corp. and Lockheed Corp.
Enron was different. Many experts on government-business relations say the company's relationship with the Bush administration made aiding it a potential political embarrassment. But others say the administration decided not to help the company because its failure did not threaten widespread damage to financial or energy markets and the economy as a whole.
Yet the fact that Enron's failing condition went on without public disclosure for so long--even as high government officials were apprised of it--puzzled legal experts.
"I'd be surprised if they [Treasury officials] didn't call the SEC," said attorney John Hanson, a specialist in bankruptcy cases for the law firm Nossaman Guthner Knox Elliot LLP, which has offices in four California cities, including Irvine and Los Angeles, and in Washington.
In October and early November, Enron President Lawrence "Greg" Whalley made a series of six to eight calls in which he asked Peter Fisher, Treasury undersecretary for domestic finance, to help secure loans from the company's bankers. Fisher refused, and on Nov. 8 Enron Chairman and Chief Executive Kenneth L. Lay telephoned Treasury Secretary Paul H. O'Neill to tell him of Enron's dire financial situation.
That same day, Enron filed documents with the SEC revising its financial statements back to 1997, evaporating $600 million in nonexistent profits and accelerating its stock plunge.
Although the administration's accounts of what happened are incomplete, it appears that neither Fisher nor O'Neill asked the SEC to demand that Lay tell stakeholders and investors about the firm's deteriorating condition, observers note. "I cannot comprehend why they did not inform [SEC Chairman Harvey] Pitt," said a onetime lawyer for the federal government who asked for anonymity because he still does business with the government.
"My counsel would have been to call Lay back and request him to do full disclosure," said Lynn Turner, a former chief accountant at the SEC.
In the 1998 case of Long-Term Capital Management, a foundering investment firm kept out of bankruptcy by a government-assisted infusion of capital, Federal Reserve Chairman Alan Greenspan communicated constantly with then-SEC Chairman Arthur Levitt and with the Treasury Department and the Commodity Futures Trading Commission, Turner said.
Rep. Henry A. Waxman (D-Los Angeles) charged last week that Bush administration officials had "done nothing to mitigate the harm of the Enron bankruptcy to thousands of its employees and shareholders." In response, White House Press Secretary Ari Fleischer said Enron officials had not provided the Treasury officials with any information that was not already in the general news.
Stock Rose After Earnings Revision Filed
But the record of SEC filings and public statements by Enron officials shows that Lay and other company officials maintained publicly that the company's energy trading business was strong and that it had the financial wherewithal to survive the crisis even as some of the firm's difficulties became evident in October and November.
The company reported a $618-million loss and a reduction in its shareholders' equity Oct. 16, and Nov. 8 it revised its earnings for the previous four years, although without public reference to its overwhelming debts or the financial peril it was telling Treasury officials about. In fact, Enron stock rose almost 20% in the four days after the Nov. 8 disclosures as investment analysts anticipated its proposed merger with Dynegy Inc.--later canceled--and said most of Enron's troubles were behind it.
Because the precise dates of Whalley's phone calls to Fisher were not released, it cannot be determined how much shareholder value was lost between the time Fisher was first contacted and Enron stock plummeted (it dropped from $33.84 a share on Oct. 16 to $8.41 on Nov. 8). But company shareholders and employees lost more than $18 billion of market value in that decline.
From that point, Enron stock fluctuated until the end of November, when its bonds were reduced to junk status, and the firm filed Dec. 2 for protection from creditors under Chapter 11 bankruptcy. Enron stock closed Friday at 67.5 cents a share.
Legal experts are not certain whether officials have a responsibility to disclose information received in communications from private industry. "It's a tough question," said Turner, the former SEC accountant. "Officials can have confidential communications."
In the case of Enron "the courts will decide" whether government officials should have pushed for public disclosure, said William Bagley, a lawyer in private practice who in 1974 served as the first commissioner of the Commodity Futures Trading Commission.
Matters of disclosure are only one part of the mounting debate concerning Enron's collapse. Some say the Enron-Treasury discussions alone raise serious questions.
"It's a terrible precedent for the rest of the economy if major companies feel like they have access to the highest levels of government and feel comfortable asking the government to intervene in their private negotiations," said Austan Goolsbee, an economics professor at the University of Chicago Graduate School of Business. Goolsbee termed the Enron phone calls "borderline unethical."
But Alice Rivlin, a former vice chairwoman of the Federal Reserve and a Clinton administration budget director, saw a responsibility for officials to communicate.
"When a really big company is in really big trouble, having the CEO call to say 'You ought to know what's going on' is a good thing," Rivlin said. "If they had gone down and not said anything, that wouldn't have been responsible. I think the reaction of the Treasury secretary, if that had happened, would have been, 'Why didn't somebody tell me?' "
Some See Secrecy as Part of Problem
Others see Enron's secrecy in all things as part of the firm's difficulties. "There's a front door in government and a back door, and most of these contacts were through the back door, hidden from public scrutiny," said Paul C. Light, director of government studies at the Brookings Institution, a nonpartisan Washington think tank.
More appropriate, Light said, would have been public appeals by Enron for bailout legislation, filings with the Securities and Exchange Commission "or other above-board, in-the-sunshine approaches for help."
But many experts see Enron's political influence as a reason for its failure to get a bailout. Politically, the Bush administration already had been on the defensive for taking massive contributions from Enron, which in California had been pilloried for allegedly trying to gouge the public during the energy crisis.
But Edward Muller, an investor in energy projects and former president of Edison Mission Energy, said Bush administration energy officials did not rely on political considerations in their decisions to withhold help. "They simply decided that a bankruptcy of Enron would not disrupt energy or financial markets or the economy," said Muller, who was in touch with officials last fall in connection with his own business interests.
Enron, despite generating massive revenues, did not employ hundreds of thousands of workers, as did Chrysler in the 1980s or Lockheed in the 1970s. And unlike Long-Term Capital Management in the 1990s, its collapse did not threaten banks across the country and the world.
Indeed, Enron's bankruptcy did not greatly affect prices for electricity and natural gas, nor did it disrupt markets that trade in those commodities. One effect of Enron's bankruptcy, energy analysts said, has been to make bankers and financial institutions more cautious about lending and investing in power companies. But such caution typically follows any publicized bankruptcy.
In any case, lawyer Bagley explained, federal bailouts are not easy to do. "There is no institutional structure, so it takes extraordinary action by Congress--as in Chrysler or Lockheed." (In 1971, Congress narrowly voted special financing to save the aerospace firm from bankruptcy after an unwise investment in building a commercial airliner.)
Long-Term Capital was saved by emergency bank financing, but that was organized by the Federal Reserve. Enron could have been "rescued" by a similar infusion of capital, Bagley noted. "But where would the capital come from? The Bush administration would have had to seek congressional action for Enron." And given Enron's closeness to the White House, such an effort may well have raised political difficulties too great to surmount.
*
Times staff writers Jube Shiver, Peter Gosselin and Warren Vieth in Washington and Nancy Cleeland in Los Angeles contributed to this report.

PHOTO: (to photos) Kenneth L. Lay, left, telephoned Treasury Secretary Paul H. O'Neill on Nov. 8 to tell him of Enron's dire situation. SEC documents filed that day revised Enron's financial statements back to 1997.; ; ; PHOTOGRAPHER: Reuters
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

News; Domestic
Interview With John Dingell, Tom Davis
Tony Snow, Brit Hume

01/13/2002
Fox News: Fox News Sunday
(c) Copyright Federal Document Clearing House. All Rights Reserved.

SNOW: Continuing our discussion of the Enron collapse, we welcome two key players from the House of Representatives: Democrat John Dingell, ranking member of the House Energy and Commerce Committee; and Republican Tom Davis, chairman of his party's National Congressional Committee.
Also here with questions, Brit Hume, Washington managing editor of Fox News.
Representative Dingell, based on what you've seen so far, is there any case for political hanky panky so far in Enron?
REP. JOHN DINGELL (D), MICHIGAN: I think it's too early to say. I think what we have to do is have a thorough investigation, get all the facts, and then make the necessary judgment.
Certainly Enron's behavior, Andersen's behavior, have raised questions. And certainly the fact that the administration would not reveal the matters that went on with regard to the vice president's panel on energy and Enron's part in it raises some questions.
BRIT HUME, FOX NEWS: Well, let me just ask a follow up on that if I can, Congressman. What link do you see between the discussions the administration had on energy policy and the financial collapse of this company? Is there any connection?
DINGELL: Well, there's no connection there, but there is a connection which is even more important, and that is what energy policy was put.
Remember, Enron was pushing very, very hard to have total deregulation of energy, particularly electrical utility energy sales that had a particular effect upon California and which caused huge disasters to the people of California with regard to energy. Plus...
HUME: Well, how many investigations are you talking about here, Congressman? Are you talking about one about the financial collapse of Enron, or are you talking about two, including a separate investigation of energy policy, California's predicament, Enron's discussion with the vice president on that matter?
DINGELL: All this ties together.
HUME: How?
DINGELL: Enron was busy doing many things including stripping its employees of their 401(k) benefits, including possible insider trading, including filing false reports with the SEC, the 10-Ks, the 10-Qs and annual reports, and they were also tied up in a peculiar relationship with Andersen, their auditor.
SNOW: OK, Representative Davis, what do you think? I want to get your response to what Representative Dingell said.
REP. TOM DAVIS (R), VIRGINIA: First of all, I think a lot of what Representative Dingell says goes to what the Post says this morning.
SNOW: That's The Washington Post.
DAVIS: The Washington Post, it's: "Poll finds bad news for Democrats looking for a traditional mid-term election edge."
Of course we ought to investigate the collapse of Enron and what happened to the employees and how some of the largest owners of this and the CEO were able to cash out while forbidding their own employees to do that. We ought to take a look at the financial accounting standards on this. We ought to see if new rules and regulations ought to come forward.
But taking a look at these overall policies, just this politics, there's absolutely no evidence to date that the administration did anything improperly. And we know that Enron gave a lot of money to a lot of players in Washington on both sides.
SNOW: Carl Levin, who is going to be running an investigation on the Senate side, has said on another broadcast that he thinks that Ken Lay, in fact, was asking over the phone for inappropriate favors from the administration. Do you see any evidence of that?
DAVIS: Well, we know he was on the phone. We know that they had Bob Rubin, who was President Clinton's Cabinet secretary, call up on their behalf. And we don't know all those answers yet.
What we do know so far is we found no indication that the administration, in any way, did anything improper or answered any calls that might have come forward.
HUME: But you are, as the head of the National Republican Congressional Committee, in the process of returning campaign contributions.
DAVIS: Absolutely.
HUME: Well, if there's nothing improper here, why return the money?
DAVIS: Well, I'll tell you why, because they gave $100,000 in corporate dollars, it could go back and help those employees, help fund their pension plans. And, frankly, I think that is a better use of $100,000 at this point.
SNOW: Representative Dingell, you also got some money over the years from Enron. Did anybody at Enron try to contact you?
DINGELL: Well, Enron talks to everybody. And I've told them no at almost everything they've said...
(LAUGHTER)
... and that includes deregulation of electrical utility sales and things of that kind.
SNOW: But during this period when Enron officials were contacting the treasury secretary, the commerce secretary and the undersecretary of treasury, did anybody call you and say, we want you to take a look into rating services or we want you to give us some help?
DINGELL: No, they did not, and I would not have done so.
And by the way, Tony, they gave me $10,500, and we're going to give that money -- I've already instructed my campaign treasurer -- to the funds that have been set up to help the employees, and I urge everybody to do the same thing.
HUME: Well, just to follow that up for a second, Tony's questions, when did they contact you, how often and about what?
DINGELL: Well, they were usually contacting me about deregulating electrical utility sales, and we always told them no.
HUME: When was the last time? When did that happen last?
DINGELL: Oh, over a period of some time, and we told them no.
HUME: What? Last year, last six months, last month, when?
DINGELL: Oh, over a long period of time. They contacted us about that. We told them no. I opposed the proposal. I think it was the right thing to do.
HUME: Sounds like the $10,500 was a bad investment.
DINGELL: Well, if they regard it as an investment, they lost their shirt. But what we're going to do with that money is give that to the employees' funds to try and help make whole from the fact that so many of their employees lost everything in the process of the collapse because Enron would not let them cash out their 401(k)s.
HUME: Congressman Dingell, when the hearings get under way, will you be wanting to have Bob Rubin among those testify about attempts to gain influence or bailout for Enron?
DINGELL: If you watched me when I ran investigations, and I ran a lot of them, and they were very, very effective, we had everybody in. And we saw to it that we got all the facts.
HUME: That would be a yes?
DINGELL: And that's what I want of these investigations in the Senate and the House.
HUME: Would that be a yes then?
DINGELL: That means absolutely yes.
SNOW: Representative Davis, I've heard you talk about returning contributions, Representative Dingell talk about returning contributions. If you returned everybody's contributions, you probably would be able to save one or two of the people who worked. You've got thousands at Enron.
This is token help.
Now, is there going to be some move on Capitol Hill to make these people whole? And if so, shouldn't other people who have been the victim of bad business practices and had their portfolios hampered, shouldn't they also expect help from Capitol Hill?
DAVIS: Well, I don't know that they can expect a government bailout at this point.
But, look, I agree with Congressman Dingell. We need to get to the bottom of this matter. We have a criminal probe going on from the Justice Department. I think that's appropriate.
But I think on Capitol Hill, we need to look at why the seventh- largest corporation in America fell so quickly, why their corporate executives were cashing out and their ordinary employees that had grown the company were not able to do that and lost their pension funds.
SNOW: Is it your suspicion that corporate executives deliberately misled employees and told them everything was going to be fine, meanwhile, they cashed out while the employees were left holding the bag?
DAVIS: That's the appearance is. I think we need to nail that down, but that is the appearance.
And the question then is, were they acting illegally, improperly, and do we need to put in new rules and regulations to stop this in the future?
SNOW: Representative Dingell, getting back to the investigations, Attorney General John Ashcroft, who received money just last year from Enron in a failed Senate bid in Missouri, said he's going to recuse himself from the case.
Do you think anybody who's received money from Enron over the years should recuse themselves from the investigations? And that would include you.
DINGELL: I think there's a judgment that should be made.
Well, Tony, I'm just going to tell you, I've opposed Enron at every turn. And I intend to -- with regard to deregulation and questions that they regard important and contacted me on, and I intend to continue that practice.
No, I'll give Enron an honest investigation. We'll look and see what kind of rascality went on.
Remember, there's plenty here to look into. There's the fact that Enron, apparently, made false representations in connection with their annual reports, their 10-Ks and their 10-Qs. They, either alone or together with their accountant, misrepresented facts. Their accountant also destroyed large volumes of papers.
I don't think you can find anybody in the country who doesn't want to get to the bottom of this. That includes me and every other member of Congress.
SNOW: Representative Davis, do you think either political party is going to be able to gain political advantage out of this Enron scandal?
DAVIS: Well, right now there is absolutely no evidence that anyone in elected office or in the administration acted improperly. So at this point, I don't see any advantage. I see people -- they're jockeying for it, when you look at the polls and how these have been used in the past. But I can assure you, we'll have a fair hearing on the House side.
SNOW: All right, Representative Dingell, very quickly, either side getting an advantage? We'll get 10 seconds.
DINGELL: Well, Tony, I want to see a fair, thorough and complete investigation.
SNOW: All right.
DINGELL: I don't think we ought to make a partisan issue out of this. I think we ought to get to the facts.
SNOW: All right. Representative Dingell, Representative Davis, thank you both.
Now for some viewers on the West Coast, Fox Sports and the NFL playoffs are coming up. For everyone else, our panel is next. Either way, stay tuned to Fox.
(COMMERCIAL BREAK)
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
Content and Programming Copyright 2002 Fox News Network, Inc. ALL RIGHTS RESERVED. Transcription Copyright 2002 eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, Inc.'s and eMediaMillWorks, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

News; Domestic
Interview With Paul O'Neill
Tony Snow

01/13/2002
Fox News: Fox News Sunday
(c) Copyright Federal Document Clearing House. All Rights Reserved.

TONY SNOW, HOST: In one year Enron went from the toast of Houston to just plain toast. Executives walked off with millions of dollars, employees lost their life savings, and accountants shredded critical papers.
(BEGIN VIDEO CLIP)
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The administration is deeply concerned about its effects on the economy. We're also deeply concerned about its effects on the lives of our citizenry.
(END VIDEO CLIP)
SNOW: Did Enron executives break the law, bend the law or fall victim to bad luck? Will any politicians take a fall? We'll ask Treasury Secretary Paul O'Neill and two key congressional investigators, Representatives John Dingell and Tom Davis.
Plus, the latest on the hunt for bin Laden and a round-up on the war against terror. And our quadra-pundit panel: Brit Hume, Mara Liasson, Fred Barnes and Juan Williams.
This is the January 13 edition of FOX NEWS SUNDAY.
Good morning. We'll talk with our guests after an update on America at war.
(NEWSBREAK)
SNOW: The top domestic story this morning: the collapse of Enron. Not long ago the company was the world's largest energy trader, worth $70 billion. But last fall the company acknowledged several hundred million dollars' worth of previously unreported liabilities, and its stock, already hit by a weakening economy, went into free-fall from a high of more than $80 a share to less than 50 cents today.
A company that once boasted of never having had a bad quarter now has filed for the biggest bankruptcy in our nation's history. In the process, thousands of employees have seen their retirement savings vanish, while some company executives managed to sell stock then worth millions.
Adding to the intrigue, Arthur Andersen, the firm auditing Enron's books, claimed it didn't get some important records from the company and destroyed thousands of other pages of documents. The administration and at least four congressional committees have launched investigations, but the complex case may take years to resolve.
So is this a corporate scandal, a political scandal, both, neither? For answers we turn to the treasury secretary, Paul O'Neill.
Good morning.
PAUL O'NEILL, SECRETARY OF TREASURY: Good morning.
SNOW: Now, in October you received the first of three phone calls from Ken Lay, the chairman of Enron. In his first phone call to you, what did he say?
O'NEILL: He called to tell me that he thought it would be useful for our technical people to talk with his technical people to understand the complex derivative contracts they had, to assure ourselves that their problems were not going to get translated into larger problems for the U.S. and the world capital markets.
SNOW: So he did not seek direct help? He didn't ask for, at least at that juncture, any intervention with rating services or anything?
O'NEILL: Absolutely not. No, he just called me to alert me that he thought we ought to pay attention to the technical details.
SNOW: All right. And when you got that request from him, did any alarm bells go off? Did you say, this is an unusual request?
O'NEILL: No, I didn't think it was unusual at all. I get dozens of calls from people every day, and his call wasn't unusual.
SNOW: So you mean corporate executives will often call and ask for your advice about technical details of their derivatives trades?
O'NEILL: Well, they -- well, you know, this is a very unusual case in the sense that Enron's the biggest energy -- or was the biggest energy trader in the world. And so, in that sense, I didn't think it was unusual.
You know, I think one thing that's been missing through a lot of the conversation about this is a lack of understanding of what goes on in the world.
As the treasury secretary at the time that I had this call, I was working on the economic stimulus bill with the leadership of Congress. I was trying to get the Congress to pay attention to and pass a terrorist risk insurance proposal, which, unfortunately, they failed to do. I was working on pursuing terrorist financing all over the world.
So, you know, this is three, four-minute conversation in the midst of a sea of things going on in the world, and I didn't think it was unusual at all.
SNOW: So it wasn't a big deal. The following day he calls. What did he ask for then?
O'NEILL: You know, I guess I don't remember two conversations back to back. You're telling me something new.
I think what our records show is that I had two conversations with Ken, and I think the dates are the 28th of October and another one on the 8th or 9th of November.
And, you know, the second call that I had from Ken was to tell me that they were being looked at by the rating agencies. It was just a heads-up, and that was it.
SNOW: So, at this point, one of the questions a lot of people want to know is, why didn't you tell the president, why didn't anybody tell the president at this point?
O'NEILL: Well, again, you know, if you put this in the context of what's going on, the president's prosecuting the war against the terrorists -- you know, I have been involved in big-league events for, I don't know, most of the last 40 years. I didn't think this was worthy of me running across the street and telling the president. I don't go across the street and tell the president every time somebody calls me.
SNOW: This is the seventh-largest corporation in America. When you got those phone calls, did it occur to you that Enron might very soon be bankrupt?
O'NEILL: I had no idea. You know, I had -- I frankly think what Ken told me over the phone was not new news. You all had been reporting for weeks that Enron had problems, that they were in trouble and the rest of that. And, you know, it's part of the reason I didn't think there was any reason for me to talk to anybody else, because I thought what Ken said to me was public property. It was not new news.
SNOW: So were you surprised by the collapse of Enron's stock value?
O'NEILL: Well, not really. I guess, you know, I've watched lots of corporations come and go. It's an interesting fact that there are very few companies that have been around for 40 or 50 years or 100 years.
So, you know, in the broader scheme of things, not really. Companies come and go. It's -- part of the genius of capitalism is, people get to make good decisions or bad decisions, and they get to pay the consequence or to enjoy the fruits of their decisions. That's the way the system works.
SNOW: Now, a few years ago, a company called Long-Term Capital got a bailout from the federal government as it was facing bankruptcy. At least one --
O'NEILL: I don't think that's...
SNOW: I'm sorry. Go ahead.
O'NEILL: I don't think that's a correct characterization. My recollection is that Long-Term Capital had a problem, and the New York Fed, I think it's true, played a role in convening the banks that were at risk, but I don't think the federal government provided anything at all, Tony.
SNOW: OK. In that case...
O'NEILL: There was no bailout. There was no bailout.
SNOW: OK. Well -- and there was no requested bailout here. There was a request for perhaps some aid in intervening with Moody's, which was doing corporate ratings.
O'NEILL: Not to me.
SNOW: OK. But to people under your jurisdiction, correct?
O'NEILL: According to accounts that I've read in the newspapers, that's right.
You know, this thing has become a subject of lots of conversation. We have taken what I think are prudent steps, so that I've not spent any time talking to the undersecretary about the conversations he had with other people, to make sure that we do this correctly.
You know, I think we have done the right thing. We're going to continue to do the right thing.
The president has asked me to lead a couple of different groups, to see if there are lessons that we should learn, and possibly change law, rules or regulations to better protect individuals who have a stake in a 401(k) plan or a pension plan, to make sure that the people that are involved out there in companies are not disadvantaged by decisions that their leaders make.
SNOW: Now, is the philosophy of this administration that, when a company gets into a bind like this, it's on its own?
O'NEILL: Absolutely. You know, unless there's an issue related to the company that reaches to public responsibility, you know, in the American capitalist system, companies are responsible for their actions.
And there is a broad scheme of laws and rules and regulations that instruct and tell companies what they're supposed to do. And so, of course, you know, we don't have an interest in individual companies, and that's it.
SNOW: So you're not talking to Peter Fisher, who's your undersecretary working on this. There seems to be almost a see-no- evil, speak-no-evil kind of atmosphere. You're not talking to a guy who's working for you. You and Don Evans don't talk to the president until a meeting just very recently.
Surely there had to be some sense in your mind that these calls were inappropriate, or that there was something about them that you did not want to pass along to the president. Is that correct?
O'NEILL: No, it's not. I didn't think there was anything inappropriate about someone calling me to give me a heads-up that there were some technical things that we ought to pay attention to. I don't find that inappropriate. It seems to me it's exactly the right discharge of my duties to make sure that the public's not going to be hurt by some individual company action.
SNOW: Now, Henry Waxman is saying that this administration -- well, let me read a quote from Congressman Waxman. He's going to be conducting an investigation; a lot of people are. He's making allegation about the way the White House has handled this. We're going to get it up on the screen here presently.
He said, "It is now clear that the White House had knowledge that Enron was likely to collapse but did nothing to protect innocent employees and shareholders who ultimately lost their life savings. I'm deeply troubled that the White House stood by and let this happen to thousands of families."
Your reaction?
O'NEILL: My reaction is, you know, it's just amazing to me to have this kind of comment. What we knew, what I knew, I think what those of us in the administration knew was public property. Everyone knew from Enron's disclosures that they were struggling. We didn't know more than that.
The company had a duty to inform its shareholders and its employees about things that were going on inside the company. That's not a federal government responsibility.
And again, we didn't have any knowledge that wasn't general public property. You all in the television world and in print media were reporting on kind of a day-to-day basis what was going on in Enron. I didn't know anything more than you did.
SNOW: So when Ken Lay e-mailed employees in August saying he thinks the best times are ahead, do you think he was being straight with his employees?
O'NEILL: Well, I don't know. You know, that's something you need to ask Ken Lay. I don't know. I didn't have inside knowledge of what the company's prospects were. You know, having been a CEO, I often -- I always communicated with my people what I thought was going on. And you need to ask Ken Lay what he had in his mind when he sent that e-mail.
SNOW: Do you think the federal government or Congress ought to do anything to try to make whole some of the shareholders, especially people who worked for Enron who've lost their life savings, or is that just the breaks?
O'NEILL: Well, again the second group the president asked me to lead is to look and see whether the laws and rules and regulations about disclosure are appropriate and whether something's been missing in the requirements for disclosure, especially in these areas that are so complicated.
I don't know whether you've ever spent any time trying to understand the derivatives business. I did, because when I was at Alcoa we ran a billion-dollar, multi-billion-dollar derivatives process in the 36 countries we were involved in around the world. And it's an enormously complicated subject.
The president's asked me to look at the rules and regulations and see whether we need to modify them in some way to assure that shareholders and employees are not disadvantaged because the disclosure rules are not strong enough.
SNOW: Mr. Secretary, final question. I'm going to read a Fox News Opinion Dynamics Poll question. We asked people about their optimism about the economy, whether they think things are going to get better or worse in the next year. And 74 percent said better; only 14 percent said worse.
Are they realistic or guilty of irrational exuberance?
O'NEILL: No, I think they're on the right track. I think -- you know, I think the information we have so far in the data on economic performance is a mix but I think it's mixed toward the positive side, and I'm optimistic we're going to return to a good rates of real growth.
SNOW: With or without a stimulus package?
O'NEILL: Well, the stimulus package, I still believe, would hasten the movement out of a slow economic period. It would help people who were directly affected by the events of September 11.
The president said over and over again, every person who has a prospect of losing their job or who has lost their job, we should care about them and therefore, yes, we should do the stimulus package.
I'm hoping the Congress will come back informed by their constituents that they, the constituents, want a stimulus package and that we'll finally get a vote in the Senate. We already passed two bills in the House. Hopefully the Senate's going to be responsive, and we're going to do something in the next few weeks.
SNOW: All right. Secretary O'Neill, thanks for joining us.
O'NEILL: My pleasure.
SNOW: Up next, Congress takes a look at the Enron mess.
(BEGIN VIDEO CLIP)
BUSH: This administration will fully investigate issues such as the Enron bankruptcy to make sure that workers are protected.
(BEGIN VIDEO CLIP)
(COMMERCIAL BREAK)
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
Content and Programming Copyright 2002 Fox News Network, Inc. ALL RIGHTS RESERVED. Transcription Copyright 2002 eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.), which takes sole responsibility for the accuracy of the transcription. ALL RIGHTS RESERVED. No license is granted to the user of this material except for the user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Fox News Network, Inc.'s and eMediaMillWorks, Inc.'s copyrights or other proprietary rights or interests in the material. This is not a legal transcript for purposes of litigation.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

News; Domestic
White House Says it Offered Enron No Assistance
Kyra Phillips, John King

01/13/2002
CNN: Sunday Morning
(c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.). All Rights Reserved.

The Enron investigation is dominating Sunday's news talk shows. The big question is: What is the likely political fallout from the Enron bankruptcy?
KYRA PHILLIPS, CNN ANCHOR: The Enron investigation is dominating today's Sunday's news talk shows, along with the war in Afghanistan. The big question, though, what is likely economic -- what is the likely economic and political fallout from the Enron bankruptcy. Well CNN's John King has more now from the White House. A lot of people are asking that question John.
JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: A lot of people asking Kyra, and the political side of these investigations will go hand in hand with the exploration, not only by the Justice Department and other government agencies, but by the Congress as well, is into just how Enron filed for bankruptcy and did it mislead its shareholders and its employees. That is the business side of it, if you will.
On the political side, members of Congress want to know about contacts between senior Enron officials and senior Bush administration officials. There are political connections, the company is a prolific donor for political campaigns, not only the Republicans, the Democrats as well. Also some personal relationships between the president and the CEO of Enron, and as well as other senior Bush administration officials who have long-standing relationships with the company and its senior officials.
Two Cabinet secretaries, Don Evans at Commerce, Paul O'Neill at Treasury, out making the round of the talk shows again today. They did receive a phone call from the Enron CEO, Ken Lay, late last year before the company filed for bankruptcy, in which at least in the Evans conversation, Secretary Evans says Ken Lay asked for help. Now two ways to get into trouble in a controversy like this -- one is to do something hard and the Bush administration officials insist when Enron asked for help, the answer was no, and they say any investigation will show that, that they did not help them at all.
But another way you can get in trouble and at least extend the political controversy is if the answers don't match up. Here at the White House on Thursday, the White House Press Secretary Ari Fleischer was asked if Secretary Evans or Secretary O'Neill passed on word to anyone here at the White House -- the president or any other senior officials that Ken Lay had called them and asked for help. Ari Fleischer said not that he was aware of, that it was not passed on to the best of his knowledge. Today discussing this on "Meet The Press", Secretary Evans said he did indeed pass word on to the White House.
(BEGIN VIDEO CLIP)
DON EVANS, COMMERCE SECRETARY: I was in the White House, a lot more started to happen with respect to Enron. They announced the Dynegy merger. Shortly after that, there was some question whether or not the Dynegy merger would make or not. And so with all the ongoing and continuing activity at Enron and Dynegy, I thought the White House ought to know. I was over there one day, and I stepped into Andy Card's office and told him I received his call, he simply listened to me and said thank you very much.
(END VIDEO CLIP)
KING: Evans said that Andy Card told him he did not pass that information onto President Bush. Again, though, members of Congress, especially the Democrats want more details of any and all contacts between the administration and Enron. Any regulatory decisions or other decisions made by the administration that might have benefited Enron and so you have not a conflicting answer, but certainly new information today from Secretary Evans that he did pass some information onto the White House.
You can be sure that will be another request as Democrats in Congress as the investigations of the political side of all of this go hand in hand with the criminal investigations and other regulatory investigations into just what happened at Enron -- Kyra.
PHILLIPS: John King, live at the White House. Thanks so much.
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News; Domestic
Enron-White House Relationship Continues Causing Controversy
Kyra Phillips, John King

01/13/2002
CNN: Sunday Morning
(c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.). All Rights Reserved.

More questions and few answers this morning as the investigation of fallen energy giant, Enron, shifts into high gear. A high-ranking Democrat has asked some tough questions from Enron CEO.
KYRA PHILLIPS, CNN ANCHOR: More questions and few answers this morning as the investigation of fallen energy giant, Enron, shifts into high gear. A high-ranking Democrat has asked some tough questions from Enron CEO.
Congressman Henry Waxman has asked Kenneth Lay to explain two upbeat e-mails sent to employees that talked up the company's future, even though it was sliding toward bankruptcy. Waxman also wants to know why Enron barred workers from selling their Enron stock after the company acknowledged its financial problems. Enron also had some links to the Bush administration.
And CNN's John King is at the White House with more on this. John, how worried is the Bush administration about this investigation?
JOHN KING, CNN WHITE HOUSE CORRESPONDENT: Well, Kyra, Bush administration officials say they have absolutely nothing to hide, but they also acknowledge that this is likely to become a political question -- some would say controversy -- for weeks, if not months.
The administration initially reacted a bit defensively to all these questions about contacts between senior Enron officials and senior Bush administration officials. Ken Lay, the CEO, is a long-time Bush family friend, not only of the president, but also of his father. He's close to the vice president. Many officials in the administration actually have worked as consultants for Enron. So there are a great deal of questions about contacts.
But you will see today, the Sunday news shows, you'll see the Commerce secretary, the secretary of the Treasury out talking publicly. They've been on CNN over the weekend, and as early as Friday and Thursday as well. The administration saying that the bottom line will be at the end of all these investigations, that a major political contributor of the president called and asked for help and the answer was no.
That won't satisfy people in Congress initially. You mentioned Henry Waxman, a key Democrat on the House Government Reform Committee. He wants to know everything about the administration's contacts with Enron. He wants to know if in any way once they became aware in the administration of Enron's financial difficulties, did they do anything to try to help.
There's a provision in what the president wanted in a stimulus package that you could say would have helped Enron. It would have helped a lot of companies, but would have helped Enron specifically as well. So Congress will ask a lot of questions about this, but the Bush administration says in the end though the answer will be, and they insist the answer will be, that a friend of the president asked for help and the answer was no.
PHILLIPS: So the focus will be on whether the company deliberately lied about its financial position?
KING: That is one of the questions, and then there's a subplot to that. One of the things Congressman Waxman wants to know is, if the secretary of the Treasury and if the secretary of Commerce knew that Enron was in trouble and that Enron was saying different things in public, did they have a responsibility to put other government agencies on alert. Did they have a responsibility to pressure the company to be more candid and honest.
Bush administration officials say when those conversations took place between cabinet members and senior Enron officials, that there was public knowledge of the company's troubles, perhaps not detailed public knowledge, but that Enron was already on record.
But one of the things you mentioned in the lead-in, Henry Waxman wants to know, why was Ken Lay writing optimistic e-mails to company employees at around the time he was calling Bush administration officials, there's a month or so difference, around the time he was calling them and saying the company was in trouble.
In one of those e-mails he said he wants to know if --- Henry Waxman says to Ken Lay, if you sent those e-mails, then "they create the appearance that you misled Enron employees about the value of their investments." And of course, it was critical because many Enron employees were putting their savings into the company's 401(k) plan and buying Enron stock in doing so.
PHILLIPS: Well, John, since we've been talking about the subject matter, I continue to get bombarded with e-mail. I just want to sneak one in here, if you don't mind.
KING: Not at all.
PHILLIPS: This one comes from John. He says, "if these same set of circumstances had occurred during the Clinton Administration, the outcry from the Republicans and the various news media would have been so deafening that impeachment proceedings would be the talk of D.C. by now. Why is the reaction to George W. Bush administration indiscretion so muted, compared with Clinton-era political scandals?"
KING: Well, I'd have to say I would, I guess disagree somewhat with the premise of the question. The inquiries are just beginning in the past few days. The Bush administration has launched investigations of its own. Congress will launch its investigations.
There are many committees looking into this in Congress, and as Congressman Waxman is asking questions, he serves on the same committee as Congressman Dan Burton, who is the chairman of that committee, who is the Republican that many Clinton Administration officials came to, I'll use the word dislike. They might use a stronger term. There will be some to and fro here. There's a great deal of media inquiry into this, media inquiry into the contacts between Bush administration officials.
As of this moment, Sunday morning here in Washington, there is no evidence that anyone in the Bush administration did anything to help this company, but there are a lot of questions. We're asking them at CNN. Others are asking them in the news media. Congress is asking them as well.
And you can be sure in the weeks and months ahead, Congress will be asking for any and all documentation of contacts between the company and the administration.
And if any evidence surfaces that the administration did help the company, did reach out to help the company or in any way help hide information that should have been put in the public domain, then you can be certain those investigations will intensify.
PHILLIPS: John King, great to see you on this Sunday. Thanks so much.
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Interview: Bennett Roth and David Ivanovich discuss the Enron debacle and how it might affect the Bush administration

01/13/2002
NPR: Weekend Edition - Sunday
Copyright 2002 National Public Radio, Inc. All Rights Reserved.

LIANE HANSEN, host: From NPR News in Washington, this is WEEKEND EDITION. I'm Liane Hansen.
Executives and directors of the Enron Corporation sold more than $1 billion worth of the company's stock just before the energy trading company fell into bankruptcy last year, according to a report in today's editions of The New York Times. The Times reports that company chairman Ken Lay sold 1.8 million shares of Enron stock between early 1999 and July 2001. But last August in two e-mail messages to Enron employees, Lay boasted that Enron's performance was robust and called the company the, quote, "finest organization in American business today."
In our studio this morning are two Washington-based reporters for the Houston Chronicle who have been covering the Enron story. David Ivanovich reports on business and Bennett Roth covers the White House.
Good morning and welcome to you both. Thanks for coming in.
Mr. BENNETT ROTH (Houston Chronicle): Good morning.
HANSEN: David, let's start with you and these reports of possible insider trading and potentially misleading e-mails from Ken Lay to Enron employees. What do you make of these reports?
Mr. DAVID IVANOVICH (Houston Chronicle): Well, it's certainly interesting to see the extent of the insider trades in light of the company's collapse. I'm not surprised that the executives would have been talking up the company. Executives tend to do that. But what's so controversial about this, of course, is that so many of the rank-and-file employees at Enron had Enron shares locked in their 401(k) plan, and were unable to sell their shares at the crucial point when the stock was nose-diving.
HANSEN: So the executives were able to get--sell their stocks and the employees were unable to get into their retirement accounts. What about the accounting firm of Arthur Andersen? It disclosed this past week that it had destroyed documents relating to Enron's finances. Is that going to have an effect--what effect would it have on any investigation?
Mr. IVANOVICH: Oh, sure, I think that it really puts the limelight on Andersen. On Friday, the House Energy and Commerce Committee, which has been investigating the Enron debacle vigorously, told the accounting firm that they want to see the personal files of six partners who were looking in the Enron case, and they want those documents by Monday.
HANSEN: Bennett Roth, Enron, and particularly Ken Lay, have long connections, close connections with President Bush and members of his administration. The president seemed to be distancing himself from Enron's troubles this past week. How close can you tell us are those ties?
Mr. ROTH: Well, they certainly go way back to Bush's father, who appointed Ken Lay to help run the economic summit in 1990 and the Republican convention in 1992 in Houston. Ken Lay and Enron have been Bush's most generous benefactor over the year, giving him somewhat over a $1/2 million. And, you know, when Bush was governor, there's this correspondence between the two men in which Governor Bush wished Ken Lay happy 55th birthday, and Ken Lay wrote a letter, you know, talking about Bush's knee surgery. So I mean, there certainly has been a long relationship between them.
But certainly, Bush has done his best this week to distance himself, somehow suggesting that he inherited Ken Lay from Ann Richards, the former governor, who appointed Bush to a business board. However, it appears to be a little bit of a stretch there. Yes, indeed, Richards did appoint him to the board, but Lay has said himself that he supported Bush in the 1994 gubernatorial race against Richards, and Enron and Bush actually gave Bush more money than Richards.
HANSEN: Hmm. But Enron executives put out some feelers to the Bush administration. They wanted to help get some loans to forestall the bankruptcy, but there's no indication the administration actually followed through. So what do you think we're seeing here? Is it just a potentially embarrassing footnote, or is a bigger problem looming for the administration?
Mr. ROTH: Well, we really don't know yet. I mean, this information has been dribbling out. A month ago, it appeared that--I mean, from the Bush administration, there'd been no contacts, and all of a sudden this week we find there's all these contacts, and much of it really depends on the congressional investigations, the Justice Department investigation, and this could go on. Now right now it's a distraction, and Bush would like to talk about the economy, the war and other things, and this week ended up talking about Enron, and that's certainly a political minus. But it really remains to be seen. But there's certainly a lot more questions out there.
HANSEN: David, a lot more questions out there, I'm sure.
Mr. IVANOVICH: There certainly are. We have questions that--the congressional panels are all looking into this. We have so many members of Congress that are now calling for investigations, it's hard to keep track of how many hearings and how many subpoenas have been sent out.
HANSEN: But there have also been members of the Bush administration that have had to recuse themselves from involvement in this investigation, and Enron has also made contributions to Democrats over the years. So how might this affect the congressional investigation?
Mr. IVANOVICH: Well, you have so many members who don't know what to say about Enron right now. They--some want to speak up; some are afraid to. Most of the Enron money did go to Republicans, but there are a large number of Democrats on the Hill that received money, as well.
HANSEN: Do you really think it's just going to be a distraction for the Bush administration?
Mr. IVANOVICH: Oh, I don't know. I think that they're panicking right now. It's interesting to see their reaction. I don't think that they're reacting in a calm manner about this at this time.
HANSEN: And, briefly, Bennett, what do you think, just a distraction or something more?
Mr. ROTH: Oh, I--it could be more than that. And I agree with David. The way they're reacting makes you somehow think that maybe there's more there. I mean, why would they be so eager to distance themselves from Enron and so eager to point to the Democrats right now. I mean, they certainly are worried about this.
HANSEN: Houston Chronicle correspondents Bennett Roth and David Ivanovich. Thank you both for coming in this morning.
Mr. ROTH: Thank you.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

News; Domestic
Interview With Michael Weisskozpf
Kyra Phillips

01/13/2002
CNN: Sunday Morning
(c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.). All Rights Reserved.

Michael Weisskozpf of "TIME" magazine discusses the Enron collapse.
KYRA PHILLIPS, CNN ANCHOR: Right now four Congressional committees are looking into what went on at Enron before the company filed for the largest bankruptcy in history. And, too, we wanted to point out that more than 250 lawmakers on Capitol Hill received campaign contributions from Enron.
"TIME" magazine's Senior Correspondent Michael Weisskozpf joins us now from Washington to further discuss the political fallout from this bankruptcy and the investigations.
Good to see you, Michael.
MICHAEL WEISSKOZPF, "TIME" MAGAZINE: Good to be here.
PHILLIPS: Well, we received a number of e-mails from viewers on this subject matter. Remember yesterday, actually, we did a reporter's notebook talking about the subject matter. And if you don't mind, can I just read some of these e-mails to you and have you respond to them?
WEISSKOZPF: Please.
PHILLIPS: OK. This one comes from Jean. It's one of the first ones -- we got a couple hundred of these actually. "I'm a stock investor that still owns my Enron shares. What will happen to the stockholder's shares in the Enron debacle?"
WEISSKOZPF: There are shareholder suits ongoing now, and most of their arguments is directed against the insider trading by 29 top Enron executives who unloaded about $1 billion worth of shares before they dropped.
PHILLIPS: Now, a lot of people have been talking about this situation as the next -- next White Water. Do you think that's going a little too far?
WEISSKOZPF: Well, certainly, the administration has a perception problem already because of its long-standing political connections with Enron and Ken Lay, its Chairman. However, any scandal needs more than that. And unless we find any type of official action in this administration which favored Enron, I would guess that this would have short life.
PHILLIPS: This question comes from Dale -- this e-mail -- the question is, "What kind of tax advantages did Enron reap as a result of its political campaign contributions?"
WEISSKOZPF: None. Taxes are -- campaign contributions are not tax deductible.
PHILLIPS: Now, Enron executives gave hundreds of thousands of dollars in political contributions. From your perspective, as a correspondent covering this story, does it appear that this was a company that gave money to get what they wanted from the government? Do you think there was a favor exchange here?
WEISSKOZPF: Corporations are not charitable when it comes to political careers. They all have some motivation. However, even the wiliest of corporate executives realize those contributions only take you so far. It probably only gets you an audience, which is a great deal more than the ordinary American gets. But an opportunity to put your argument to decision-makers, that's what they got.
PHILLIPS: Michael, another e-mail. This one comes from Kevin. "As a laymen to the inner workings of the legal system, I don't quite understand the delay in bringing Enron executives to justice. They clearly violated the law and misrepresented the company's financial standings to their workers and the world. What kind of outcome can the American people expect in this case, and when?"
WEISSKOZPF: That's really the job of these investigating committees in Congress; also, the Justice Department and the SEC. It must be proven that company executives were aware of misleading the public while they were hiding losses. You need to show more than action, you have to show a kind of conspiracy behind it.
PHILLIPS: Michael Weisskozpf, "TIME" magazine. I enjoy your articles. We'll definitely be following these hearings. No doubt, this is not going to go away for a while. Michael, thanks for being with us early on this Sunday.
WEISSKOZPF: A pleasure.
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Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS RESERVED. Prepared by eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.) No license is granted to the user of this material other than for research. User may not reproduce or redistribute the material except for user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Cable News Network, Inc.'s copyright or other proprietary rights or interests in the material; provided, however, that members of the news media may redistribute limited portions (less than 250 words) of this material without a specific license from CNN so long as they provide conspicuous attribution to CNN as the originator and copyright holder of such material. This is not a legal transcript for purposes of litigation.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

News; Domestic
Enron Collapse Brings Bush Administration Under Scrutiny
Carol Lin, John King

01/13/2002
CNN Sunday
(c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.). All Rights Reserved.

The Enron collapse continues to reverberate in Washington. Top Bush administration officials today appeared on Sunday news programs to shed more light on their contacts with the energy giant.
CAROL LIN, CNN ANCHOR: The Enron collapse continues to reverberate in Washington. Top Bush administration officials today appeared on Sunday news programs to shed more light on their contacts with the energy giant.
CNN senior White House correspondent John King joins us now with more -- John.
JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: Good evening to you Carol.
We learned more about those contact today. We also saw a shift, if you will, in the Democratic focus in its criticism of the Bush administration for its dealing with Enron before Enron filed for bankruptcy.
One Democratic criticism is two secretaries in the Bush Cabinet -- Don Evans in Commerce, Paul O'Neill at Treasury -- had phone calls from the top official at Enron, the CEO and the Chairman Ken Lay in the weeks prior to Enron's filing bankruptcy. Many Democrats say Secretary Evans and O'Neill had a responsibility to give a public warning so that shareholders and employees at the company who were continuing to buy the stock had some indication the company's finances were headed south.
Secretaries O'Neill and Evans dismissing that today, saying they were told nothing by Ken Lay that wasn't available in the public domain. Treasury Secretary Paul O'Neill says yes, he had two conversation with Ken Lay, but he considered them routine; and he says there was no reason at all to tell the president.
(BEGIN VIDEO CLIP)
PAUL O'NEILL, TREASURY SECRETARY: Well again, you know, if you put this in the context of what's going on -- the president's prosecuting a war against the terrorists. You know, I have been involved in big league events for, I don't know, most of the last 40 years. I didn't think this was worthy of me running across the street and telling the president. I don't go across the street and tell the president every time somebody calls me.
(END VIDEO CLIP)
KING: Secretary Evans said today that Ken Lay did ask for his help, but that he refused and decline to intervene. Secretary Evans also disclosed that several weeks after that phone call he did tell the White House Chief of Staff Andy Card. He says Andy Card did not tell the president; that, in fact, that the president learned about all these phone calls from Ken Lay to the members of his Cabinet just last Thursday, a full two months after the fact.
As all this plays out, four committees in Congress looking into it. Senator Joseph Lieberman of Connecticut, the Democratic vice presidential candidate in the last election, is the chairman of one. He says Democrats have many questions of the administration, but that so far he sees no evidence of any wrongdoing.
(BEGIN VIDEO CLIP)
SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: I have not seen any evidence up to this time that officials of the Bush administration acted improperly with regard to Enron. In fact, based on the stories that are being told, I'd say that the Cabinet members in the Bush administration who were called by Enron executives for help as the company was about to go into bankruptcy acted properly by not giving any help.
(END VIDEO CLIP)
KING: Still, other Democrats say they want men many more details of any and all administration dealings with Enron -- not just in the weeks before its bankruptcy. Democrats want to know if the administration made any regulatory or other policy decisions that could have benefited the company once its top officials here in the administration found out that Enron was in trouble.
Bush officials saying they will cooperate with those congressional investigations and, indeed, are investigating the company from the administration's standpoint. They say in the end it will be proven the administration did nothing wrong.
But again Carol, Democrats have questions. The political side of this inquiry could go on for weeks, if not months.
LIN: All unfolding as we speak. Thank you very much. John King reporting live from the White House tonight.
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Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS RESERVED. Prepared by eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House, Inc.) No license is granted to the user of this material other than for research. User may not reproduce or redistribute the material except for user's personal or internal use and, in such case, only one copy may be printed, nor shall user use any material for commercial purposes or in any fashion that may infringe upon Cable News Network, Inc.'s copyright or other proprietary rights or interests in the material; provided, however, that members of the news media may redistribute limited portions (less than 250 words) of this material without a specific license from CNN so long as they provide conspicuous attribution to CNN as the originator and copyright holder of such material. This is not a legal transcript for purposes of litigation.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Cabinet members say they didn't inform Bush about Enron calls for help
By H. JOSEF HEBERT
Associated Press Writer

01/13/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

WASHINGTON (AP) - Two Bush cabinet members said Sunday they never considered intervening in Enron's spiral toward bankruptcy, nor informed President Bush of requests for help from the fallen energy giant.
"Companies come and go. It's ... part of the genius of capitalism," said Treasury Secretary Paul O'Neill, when asked if he was surprised at the sudden collapse of Enron. The company's failure has left the one-time energy trading behemoth's stock virtually worthless and thousands of workers' pension funds in disarray.
Last fall, a month before Enron declared bankruptcy, O'Neill received two telephone calls from Enron's chief executive, Kenneth Lay. Lay also called Commerce Secretary Don Evans at the time, reaching out for help to harness the energy company's financial slide.
O'Neill's view of Enron's collapse was characterized as "cold-blooded" and reflective of "the 18th century, but not the 21st century" by Sen. Joseph Lieberman, D-Conn., whose Committee on Governmental Affairs is leading Senate investigations into the Enron debacle.
Separately, Lieberman said that an internal Arthur Andersen LLP memo on Oct. 12 directing that all but basic Enron working papers be destroyed "raises very serious questions about whether obstruction of justice occurred."
Andersen this past week revealed that Enron documents had been destroyed. But Lieberman said most troubling was that the memo, disclosed in a report in Time magazine, "was specifically about Enron" and not a general directive to clean out files. Congressional investigators want to find out why Andersen did not raise flags about Enron's business practices.
Andersen, in a statement Sunday, acknowledged "there were internal communications that raise questions" about the handling of Enron documents and that the company "is committed to getting the facts and taking appropriate actions in the Enron matter." The statement said it would be inappropriate to comment further on the Time magazine report.
Lieberman and Sen. John McCain, R-Ariz., said on CBS' "Face the Nation" the administration may have been right in not intervening to try to save Enron. But they said the government's response - as well as earlier federal monitoring of its business practices - may have been hampered by the energy company's freewheeling flow of campaign contributions.
"We're all tainted by the millions and millions of dollars that were contributed by Enron executives, which ... creates the appearance of impropriety," said McCain, a longtime voice for campaign finance reform. McCain acknowledged getting $9,500 in Enron contributions in two Senate campaigns.
Lieberman, who said he received $1,000 from Enron in his 1994 Senate campaign, said one focus of his committee's investigation will be "whether any of the influence" from Enron money affected the administration's handling of the Enron collapse, or oversight by federal agencies.
"I don't feel at all compromised," added Lieberman, referring to his committee's investigation.
Since 1990, Enron and its employees contributed $5.77 million to political campaigns, about three-fourths of it to GOP candidates. About half of the money was spent in the 2000 election, with President Bush a major beneficiary.
O'Neill and Evans said Sunday that while they received calls from Lay in late October and early November, they dismissed any suggestion of intervening to help the company.
Evans said that Lay was looking "for all the possible ways that he could stabilize his company" and asked that Evans consider contacting credit rating agencies. "I considered it and said, 'Thank you for the call,"' Evans said on NBC's "Meet the Press."
O'Neill said that Lay, in a call of three or four minutes, "asked me for nothing." But O'Neill acknowledged that during one conversation Lay said Enron's ability to sustain its credit rating "was a critical aspect" of keeping a merger with rival Dynegy on track. The merger later fell apart.
The Treasury Department has acknowledged that, around the same time in late October and early November, another Enron executive repeatedly contacted Peter Fisher, a Treasury undersecretary, trying to get the government to encourage banks to extend credit to the struggling company.
Sen. Carl Levin, D-Mich., whose Senate Governmental Affairs subcommittee has issued 51 subpoenas in connection with its Enron investigation, said Sunday on ABC, "I have no doubt that they were asking for the government to take action."
But an Enron spokesman, Mark Palmer, said the calls "were informational" and "not about trying to improve our credit rating."
Neither O'Neill nor Evans said they informed President Bush of the telephone calls. But Evans said he frequently discussed Enron's situation during general meetings with the president in November and December.
The tone of those conversations was "how sad it was to see what was happening to that once great company," Evans said on NBC.
Enron filed for bankruptcy on Dec. 2.
O'Neill said his concerns involving Enron were over the possible impact on U.S. and global capital markets, but he was assured by Fisher that there weren't going to be problems in that area. O'Neill said that at the time of the calls he was deeply involved in pushing the president's stimulus package in Congress, pursuing the financial trail of terrorists and dealing with other issues of greater concern.
"I didn't think this was worthy of me running across the street (to the White House) and telling the president," O'Neill said on "Fox News Sunday." "I don't ... tell the president every time somebody calls me."
As to the sudden collapse of Enron and the nosedive of the company's stock, O'Neill said he was not surprised.
"I've watched lots of corporations come and go. ... There are very few companies that have been around for 40 or 50 years. ... Companies come and go. It's part of the genius of capitalism.
"People get to make good decisions or bad decisions, and they get to pay the consequences or to enjoy the fruits of their decisions. That's the way the system works."

AP Photos WX105-106, 108
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

O'Neill - I did not discuss Enron case with subordinates.

01/13/2002
EFE News Service
(c) 2002 Distributed via COMTEX News

Washington, Jan 13, 2002 (EFE via COMTEX) - U.S. Treasury Secretary Paul O'Neill said Sunday he never spoke to his subordinates about the Enron case and did not consider his conversations with executives of the now-bankrupt energy trader to be unusual.
During an appearance on the "Fox News Sunday" television program, O'Neill said he did not mention telephone calls from Enron president and executive director Kenneth Lay to his subordinates in the Treasury Department to ensure that he acted appropriately.
Likewise, O'Neill said he did not consider it unusual that Lay called him on a couple of occasions before Enron declared bankruptcy.
O'Neill said Lay did not ask for help and that the conversations on Oct. 28 and Nov. 8 or 9 "didn't last more than three or four minutes."
"I didn't think this was worthy of me running across the street and telling the president ... I frankly think what Ken told me over the phone was not new news. You all had been reporting for weeks that Enron had problems, that they were in trouble," O'Neill said.
The Justice Department and four congressional committees are investigating the bankruptcy of Houston-based Enron, a company whose executives were large contributors to Republican candidates and President Bush, as well as many Democratic candidates.
O'Neill said Lay told him that, at that time, Enron was worth $70 billion and he wanted to talk to "a technical person" in the department to explain the company's problems and assure them it would have no consequences for the economy or for the stock market.
Enron filed for bankruptcy in December, causing thousands of employees to lose their jobs and the value of its stock to plummet from $80 per share to less than a dollar.
This situation meant that most of its workers not only lost their job but also their retirement funds, but some Enron top executives maneuvered to sell their shares, which were worth billions of dollars, in advance of the price crash.
emm/mc/bp
http://www.efe.es
Copyright (c) 2002. Agencia EFE S.A.
KEYWORD: Washington
SUBJECT CODE: POL
US

ENRON.

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US regulators probe Enron share-sell sell-off by executives - report

01/13/2002
AFX News
(c) 2002 by AFP-Extel News Ltd

NEW YORK (AFX) - A number of Enron Corp executives who sold their shares in the company before its stock plummeted are being investigated by federal regulators, the New York Times reported, citing court filings.
As Enron stock climbed and Wall Street was still promoting it, the 29 Enron insiders began to sell their shares, netting 1.1 bln usd by selling 17.3 mln shares from 1999 through mid-2001, the newspaper reported.
One individual sold shares valued at 353.7 mln usd, it said.
The group continued selling just before Enron's stock started to tumble early last year and the company began its slide into bankruptcy protection.
"This issue is being investigated," Robert Bennett, a lawyer for Enron told to the newspaper.
"But at this point in time, I am unaware of any evidence that supports the allegation there was improper selling by members of the board or senior management," he was quoted as saying.
sg/pch/lam

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Report: Enron gave more than $200K to Florida politicians

01/13/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

TALLAHASSEE, Fla. (AP) - Florida's pension fund investment in Enron Corp. has cost the state more than $300 million, but many top politicians received money from the Texas-based energy giant.
Enron officials doled out more than $200,000 in campaign contributions, including the maximum allowable $500, to scores of the state's elected officials in Washington and Tallahassee.
Since 1990, Enron and its employees contributed $5.77 million to political campaigns nationally, about three-fourths of it to GOP candidates. About half of the money was spent in the 2000 election, with President Bush a major beneficiary.
Gov. Jeb Bush received $6,500 for his 1998 campaign, the Palm Beach Post reported in Sunday's editions.
Enron is under a nationwide criminal investigation by the Justice Department for possibly defrauding investors and other questionable financial dealings. Early last year, the company had a market value of more than $40 billion.
By December, the company was broke, employees saw their retirement plans disappear and Florida's $94 billion state pension fund lost more than $300 million after being forced to dump 7.5 million Enron shares.
Last month, the state Board of Administration, which Gov. Bush heads, fired Alliance Capital Management Corp., saying it was troubled by the New York financial adviser's decision to continue buying Enron stock after company officials admitted they'd lied about its finances.
Florida officials are asking federal courts handling the various Enron cases to make the state a lead plaintiff because of the state's losses.
Altogether, Florida's 25-member delegation has received $42,300. Four of the Florida lawmakers - Graham and Reps. Michael Bilirakis, R-Tarpon Springs, Cliff Stearns, R-Ocala, and Peter Deutsch, D-Lauderhill - serve on congressional energy committees.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Enron Gave To Florida Politicians;Pension Fund Lost $300M

01/13/2002
Dow Jones International News
(Copyright (c) 2002, Dow Jones & Company, Inc.)

TALLAHASSEE, Fla. (AP)--Florida's pension fund investment in Enron Corp. (ENE) has cost the state more than $300 million but many top politicians received political contributions before the Texas-based oil giant went bust.
Enron officials doled out more than $200,000 in campaign contributions, including the maximum allowable $500, to scores of the state's elected officials in Washington and Tallahassee.
Gov. Jeb Bush received $6,500 for his 1998 campaign, the Palm Beach Post reported in Sunday's editions.
Enron, which is one of the biggest contributors to President George W. Bush, is under a nationwide criminal investigation by the Justice Department for possibly defrauding investors and other questionable financial dealings. Early last year, the company had a market value of more than $40 billion.
By December, the company was broke, employees saw their retirement plans disappear and Florida's $94 billion state pension fund lost more than $300 million after being forced to dump 7.5 million Enron shares.
Last month, the state Board of Administration, which Gov. Bush heads, fired Alliance Capital Management Corp. (AC), saying it was troubled by the New York financial adviser's decision to continue buying Enron stock after company officials admitted they'd lied about its finances.
Florida officials are asking federal courts handling the various Enron cases to make the state a lead plaintiff because of the state's losses.
U.S. Sen. Bob Graham, the state's top elected Democrat, received $8,000 from the company.
"As a member of the Energy Committee, Sen. Graham received campaign support from a wide variety of energy interests, as well as environmentalists and others," said Paul Anderson, Graham's press secretary. "At the time he received these contributions, no one could have known what was going to happen to Enron late last year."
Sen. Bill Nelson, D-Fla., received $1,000 contributed in December 2000, a few weeks after his election. Nelson spokesman Dan McLaughlin said Nelson had a fund raiser in Washington to help retire his campaign debt, and one of the contributors at that event had ties to Enron.
In all, from 1995 to 2000, Enron gave $166,500 to state Republicans and $42,000 to Democrats, reflecting the GOP's increasing control of Florida politics and government.
Enron also contributed to Florida's congressional delegation.
U.S. Rep. E. Clay Shaw, R-Fort Lauderdale, has gotten $7,000. U.S. Rep. Mark Foley, R-West Palm Beach, has received $3,500. U.S. Rep. Robert Wexler, D-Delray Beach, got $500.
Altogether, Florida's 25-member delegation has received $42,300. Four of the Florida lawmakers - Graham and Reps. Michael Bilirakis, R-Tarpon Springs, Cliff Stearns, R-Ocala, and Peter Deutsch, D-Lauderhill - serve on congressional energy committees.
The state Democratic Party got $20,000, most of which was used to help the campaign of then-Lt. Gov. Buddy MacKay. That year, Enron also contributed $500 to Secretary of State Katherine Harris as well as 13 Democratic and 60 Republican legislative candidates, nearly all of them incumbents.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

A SECTION
ENRON INSIDERS' SALES DRAW IRE ; STOCK SHARES SOLD BY EXECUTIVES FROM 1999 THROUGH MID-2001 WERE WORTH $1.1 BILLION.
Leslie Wayne, New York Times

01/13/2002
Orlando Sentinel
METRO
A6
(Copyright 2002 by The Orlando Sentinel)

While investigators are focusing on how much money investors and employees lost in Enron Corp.'s collapse, some lawmakers and shareholders have set their sights on another target: the millions that Enron insiders got by selling shares near the top of the market.
As Enron stock climbed and Wall Street was still touting it, 29 Enron executives and directors began to sell their shares. These insiders received $1.1 billion by selling 17.3 million shares from 1999 through mid-2001, according to court filings based on public records. They continued selling as Enron's stock started to tumble early last year and the company began its slide into bankruptcy.
Kenneth Lay, who became prominent as the company's chairman and a leading contributor to President Bush, was among more than a dozen Enron executives who received $30 million or more. One sold shares valued at $353.7 million. Lawyers and spokesmen for the executives, board members and the company say they had no insider information or other advantages over other investors.
"This issue is being investigated," said Robert S. Bennett, a lawyer for Enron. "But at this point in time, I am unaware of any evidence that supports the allegation there was improper selling by members of the board or senior management."
Since Enron's fall, Congress, the Justice Department and regulators have begun looking at whether the company illegally concealed the extent of its financial problems from investors and accountants.
Some Enron execs retained large holdings of Enron stock and sold regularly, much as executives at other companies do.
Lay himself sold Enron stock 350 times, almost daily, receiving $101.3 million. In all, Lay sold 1.8 million Enron shares from early 1999 to July 2001, five months before Enron filed for bankruptcy.
Some of Lay's shares were sold for as much as $86. Last week, Enron was selling for less than 70 cents a share. Sometimes Lay sold amounts as small as 500 shares; other times he sold as many as 100,000 shares at a time. Lay and other executives had much of their holdings in stock options, which let them buy shares at a discount on the market price.
Other top sellers were Lou L. Pai, former chairman of an Enron subsidiary, who received $353.7 million for his 5 million shares; Rebecca P. Mark-Jusbasche, a director who received $79.5 million for 1.4 million shares, and Ken L. Harrison, a director who sold 1 million shares for $75.2 million.
Jeffrey Skilling, the company's former chief executive, received $66.9 million for 1.1 million shares. Beginning in December 2000, Skilling began to sell his holdings at a pace of 10,000 shares about every seven days. Andrew Fastow, the company's ousted chief financial officer who set up many of the financial partnerships that have been criticized for concealing Enron's large debts, got $30 million for his holdings.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Insiders at Enron made millions
By Leslie Wayne
New York Times News Service

01/13/2002
Deseret News
A10
Copyright (c) 2002 Deseret News Publishing Co.

NEW YORK -- While investigators are focusing on how much money investors and employees lost in Enron Corp.'s collapse, some shareholders and lawmakers are now setting their sights on another target: the millions that Enron insiders received by selling their shares near the top of the market.
As Enron stock climbed and Wall Street was still touting it, a group of 29 Enron executives and directors began to sell their shares. These insiders received $1.1 billion by selling 17.3 million shares from 1999 through mid-2001, according to court filings based on public records. They continued selling as Enron's stock started to tumble early last year and the company began its slide into bankruptcy.
Kenneth L. Lay, who became prominent as the company's chairman and a leading contributor to President Bush, was among more than a dozen Enron executives who received $30 million or more. One sold shares valued at $353.7 million. Lawyers and spokesmen for the executives, board members and the company say they had no insider information or other advantages over other investors.
"This issue is being investigated," said Robert S. Bennett, a lawyer for Enron. "But at this point in time, I am unaware of any evidence that supports the allegation there was improper selling by members of the board or senior management."
Some of them retained large holdings of Enron stock and sold regularly, much as executives at other companies do.
Lay himself sold Enron stock 350 times, almost daily, receiving $101.3 million. In all, Lay sold 1.8 million Enron shares between early 1999 and July 2001, five months before Enron filed for bankruptcy.
Some of Lay's shares were sold for as much as $86. Last week, Enron was selling for under 70 cents a share. Sometimes Lay sold in amounts as small as 500 shares, other times he sold as many as 100,000 shares at a time. Lay and other executives had much of their holdings in the form of stock options, which allowed them to buy shares at a discount on the market price.
Other top sellers were Lou L. Pai, the former chairman of an Enron subsidiary, who received $353.7 million for his 5 million shares; Rebecca P. Mark-Jusbasche, a director who received $79.5 million for 1.4 million shares, and Ken L. Harrison, a director who sold 1 million shares for $75.2 million.
Jeffrey K. Skilling, the company's former chief executive, received $66.9 million for 1.1 million shares. Beginning in December 2000, Skilling began to sell his holdings at a pace of 10,000 shares about every seven days. Andrew S. Fastow, the company's ousted chief financial officer who set up many of the financial partnerships that have been criticized for concealing Enron's large debts, received $30 million.
A detailed accounting of these trades is contained in a lawsuit brought by Amalgamated Bank, of New York, which invested the pension money of union members in Enron shares.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Enron `gift' to Democrats for Dabhol project?
By Sridhar Krishnaswami.

01/13/2002
The Hindu
(c) 2002 Katsuri & Sons Ltd

WASHINGTON, JAN. 12. Enron Corporation, which is becoming a major embarrassment for and liability to the Republican Party and the administration in an election year, is said to have given $100,000 to the Democratic Party when the $3-billion deal with India was being clinched.
According to a media report, the Enron Corporation had discussed the power plant proposal with the then President, Bill Clinton's Chief of Staff, Thomas "Mack" McLarty in 1995 and 1996; and the White House continually monitored the India Dabhol Project through the American Embassy. And in 1996, four days before New Delhi approved the project, the Houston Firm contributed $100,000 to the Democratic Party. However, Enron, according to the report, has denied that its "gift" to the party was any kind of repayment for the Clinton administration's attention to the project.
The controversy over the failed corporation has come to embarrass the Bush administration with many saying that it is now becoming the Republican version of the Whitewater scandal that dogged the Clinton Presidency from almost start to finish. The U.S. President, George W. Bush, and his senior aides are maintaining that nothing improper has taken place.
The Houston-based firm is now the focus of a Justice Department enquiry, going into whether top Enron executives improperly shielded investors from losses and prevented the employees from selling billions of dollars of stocks which were plummeting. Many Republican and Democratic law-makers also want to know if Enron, with ties to the Grand old Party, sought any favours from the Bush administration.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

The Statesman (India) - Dabhol jobless take crime route.

01/13/2002
The Statesman
Financial Times Information Ltd - Asia Africa Intelligence Wire, The Statesman c 2002 : All Rights Reserved.

United News of India GUHAGAR (Maharashtra). Jan. 13. - As the Centre and the state continue to fight over political nuances and trivialities, with utter disregard for the need to find ways to re-open the Dabhol Power Company, a sizeable section of the people rendered jobless by the closure of the 2,184-MW Dabhol power plant has taken to crime.
Villagers in this coastal region of Ratnagiri district resplendent with scenic beauty are in real dire straits. In a rare consensus, all villagers desire the re-opening of the plant at the earliest.
The villagers categorically state: both the Centre and the state government should keep off their political differences to find ways to restart the DPC. "Poor farmers have lost their farms and many others their jobs," pointed out a village elder, Mr Mankeshwar Gurav.
Significantly, with a major shift in the people's attitude, more and more villagers are now joining the pro-Enron bandwagon, advocating resumption of the power plant.
According to a pro-Enron activist and former sarpanch of Anjanwel taluka, Mr Iqbal Mastan, many villagers left their jobs in Mumbai and settled down here accepting work for lower wages. Over 3,000 people from surrounding villages were also employed in the project work and the plant. "They are now jobless and it's a matter of grave concern that crime rate in the villages is picking up," he observed. The 68 year-old man claimed he hadn't seen not a single case of crime in Anjanwel. But the closure of the plant made youths engage in pilfering and stealing. Recently, eight youths of a village were arrested for stealing copper rods from the DPC premises.
Financial Times Information Ltd - Asia Africa Intelligence Wire
All Material Subject to Copyright
The Statesman (India)

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

AUSTRALIA: Enron Australia book wind-up moves slowly.

01/13/2002
Reuters English News Service
(C) Reuters Limited 2002.

MELBOURNE, Jan 14 (Reuters) - Enron Australia administrators said on Monday that a wind-up up the group's electricity and weather derivatives book would be a slow process following the rejection of bids for its sale.
"It is going to take quite some time for the book to be worked out just in terms of how all the counterparties are terminated and securing valuations on the books as well," administrator consultant Alan Topp told Reuters.
The Australian unit of Enron Corp appointed voluntary administrators Sims Lockwood in early December after its U.S. parent filed for Chapter 11 bankruptcy.
The electricity book at the start of the sales process was estimated to be worth about A$5 million based on the mid-point between bids and offers on the forward price curve, although valuations on outstanding contracts are still to be agreed.
The administrators last month provided data room access for nine potential bidders in the electricity and weather derivatives book, but the sale did not go ahead.
"The offers we received were in a form that could not be accepted, and secondly we had not received a number of confirmations from counterparties that they would agree to the assignment of their book in any event," Topp said.
Topp said a creditors meeting was likely to be held on January 29.
"There are still a number of counterparties which haven't closed out," he said.
Enron has been a major provider of Australian power market liquidity, holding a 15-20 percent share of the over-the-counter market which allows generators and retailers to hedge their exposure to the volatile spot market.
The company was once the world's biggest trader of gas and electricity and other commodities. The operations, dormant since early December 2, generated most of Enron's US$101 billion in revenue in 2000.
Topp said the sale in the U.S. of Enron Corp's trading operation to Swiss bank UBS AG , announced on Friday, was not likely to affect the Australian process.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Former Enron employees deeply angered by their treatment as company went down
By MARK BABINECK
Associated Press Writer

01/13/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

HOUSTON (AP) - Losing his retirement investment in Enron Corp. was one thing. What really hurt, said Charles Prestwood, was realizing that his unwavering corporate loyalty ran only one direction.
"We had great trust, great loyalty," said Prestwood, 63, who retired as a plant operator in 2000. "We were trained loyalty above everything. And we were loyal. When you have that type of indoctrination for many years, it's going to get in the way of your life eventually."
More than a month after Enron shed more than 5,000 worldwide jobs and its stock bottomed out, retirees and laid-off workers from all walks of life are still facing up to the ways the enormous debacle has stung them.
Enron employees whose 401(k) accounts were filled with company stock watched helplessly as ceaseless bad news obliterated their value last fall, while a bookkeeping mechanism barred them from cashing out.
"I'll never trust my employer quite the same again," said Tim Dalton, a corporate security specialist who was among the 4,500 Houston workers laid off in December.
Enron chairman Kenneth Lay "was like the Pied Piper. We followed him like lemmings into the sea," said Deborah DeFforge, who might have to leave Houston for the West Coast to find work.
Congressional committees as well as the Justice and Labor departments want to know why many senior Enron executives and board members sold their stock when it was still valuable, while workers were barred from selling stock in their 401(k) funds.
Enron says its stock price, which stood at about $80 a year ago, already was down to $13.88 when a coincidental 10-day freeze on 401(k) transactions was implemented because the plan changed administrators. By the time transactions could resume, the price was $9.98. When trading on the New York Stock Exchange concluded Friday, the company's shares were selling for 67 cents a piece.
The peak value of Prestwood's retirement account, about $1.3 million, might sound lavish. But he had intended to live simply off the dividends, plus Social Security and a small pension, withdrawing money only for things like "replacing the lawn mower or refrigerator if they break."
"What so hurts about the whole deal is that something you devote your whole life to, you see it destroyed right in front of your eyes," he said from his home on a quiet wooded country lot 40 miles north of Houston.
Prestwood is one of a number of former Enron workers who have filed lawsuits over their 401(k)s.
Dalton has funneled some of his energies into a Web site, http://www.thecrookede.com, where he sells Enron-bashing T-shirts. Some of the proceeds go to a fund he's established to help fellow Enron exes.
"We told someone we hope to sell some T-shirts for four to five months until it dies down," Dalton said. "`Die down?' they said, `You'll be selling T-shirts all year as all the dishonesty and crookedness is exposed."'
The anger also hasn't diminished for DeFforge, who is a plaintiff in "every suit I can get my hands on" and doesn't want to rest "until they're behind bars."
"To take that many people and dupe them for that length of time, yeah, we're pretty much all on a crusade," said DeFforge, a specialist in energy services until she was given 30 minutes to clean out her desk on Dec. 3.
While outsiders may scratch their heads as to why so many workers put so much of their retirement savings into company stock, Mike Black, a 54-year-old systems programmer, cites corporate messages last summer in which executives were saying shares "ought to be selling at $50 or $60" apiece.
Syed Ishaq said top executives assured workers the company would survive a few speed bumps, while never mentioning the curious off-balance sheet financing and crippling debt that were Enron's downfall.
"I even bought stock of the company when it was at $5 based on what I was told at an all-employee meeting!" Ishaq said in an e-mail. "Then I get laid off, I only get $4,500, which barely pays for one month of expenses, I immediately file for benefits and start looking for a job."
"We had no idea the books were messed up," Prestwood said. "When you're locked in and sit there crying and watching it melt down, something you've devoted your whole life to building, it's sad."
---
On the Net:
Enron: http://www.enron.com

AP Photo NY110
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Former Enron employees coping with firm's collapse
By MARK BABINECK
Associated Press Writer

01/13/2002
Associated Press Newswires
Copyright 2002. The Associated Press. All Rights Reserved.

HOUSTON (AP) - Losing his retirement investment in Enron Corp. was one thing. What really hurt, said Charles Prestwood, was realizing that his unwavering corporate loyalty ran only one direction.
"We had great trust, great loyalty," said Prestwood, 63, who retired as a plant operator in 2000. "We were trained loyalty above everything. And we were loyal. When you have that type of indoctrination for many years, it's going to get in the way of your life eventually."
More than a month after Enron shed more than 5,000 worldwide jobs and its stock bottomed out, retirees and laid-off workers from all walks of life are still facing up to the ways the enormous debacle has stung them.
Enron employees whose 401(k) accounts were filled with company stock watched helplessly as ceaseless bad news obliterated their value last fall, while a bookkeeping mechanism barred them from cashing out.
"I'll never trust my employer quite the same again," said Tim Dalton, a corporate security specialist who was among the 4,500 Houston workers laid off in December.
Enron chairman Kenneth Lay "was like the Pied Piper. We followed him like lemmings into the sea," said Deborah DeFforge, who might have to leave Houston for the West Coast to find work.
Congressional committees as well as the Justice and Labor departments want to know why many senior Enron executives and board members sold their stock when it was still valuable, while workers were barred from selling stock in their 401(k) funds.
Enron says its stock price, which stood at about $80 a year ago, already was down to $13.88 when a coincidental 10-day freeze on 401(k) transactions was implemented because the plan changed administrators. By the time transactions could resume, the price was $9.98. When trading on the New York Stock Exchange concluded Friday, the company's shares were selling for 67 cents a piece.
The peak value of Prestwood's retirement account, about $1.3 million, might sound lavish. But he had intended to live simply off the dividends, plus Social Security and a small pension, withdrawing money only for things like "replacing the lawn mower or refrigerator if they break."
"What so hurts about the whole deal is that something you devote your whole life to, you see it destroyed right in front of your eyes," he said from his home on a quiet wooded country lot 40 miles north of Houston.
Prestwood is one of a number of former Enron workers who have filed lawsuits over their 401(k)s.
Dalton has funneled some of his energies into a Web site, http://www.thecrookede.com, where he sells Enron-bashing T-shirts. Some of the proceeds go to a fund he's established to help fellow Enron exes.
"We told someone we hope to sell some T-shirts for four to five months until it dies down," Dalton said. "`Die down?' they said, `You'll be selling T-shirts all year as all the dishonesty and crookedness is exposed."'
The anger also hasn't diminished for DeFforge, who is a plaintiff in "every suit I can get my hands on" and doesn't want to rest "until they're behind bars."
"To take that many people and dupe them for that length of time, yeah, we're pretty much all on a crusade," said DeFforge, a specialist in energy services until she was given 30 minutes to clean out her desk on Dec. 3.
While outsiders may scratch their heads as to why so many workers put so much of their retirement savings into company stock, Mike Black, a 54-year-old systems programmer, cites corporate messages last summer in which executives were saying shares "ought to be selling at $50 or $60" apiece.
Syed Ishaq said top executives assured workers the company would survive a few speed bumps, while never mentioning the curious off-balance sheet financing and crippling debt that were Enron's downfall.
"I even bought stock of the company when it was at $5 based on what I was told at an all-employee meeting!" Ishaq said in an e-mail. "Then I get laid off, I only get $4,500, which barely pays for one month of expenses, I immediately file for benefits and start looking for a job."
"We had no idea the books were messed up," Prestwood said. "When you're locked in and sit there crying and watching it melt down, something you've devoted your whole life to building, it's sad."
---
On the Net:
Enron: http://www.enron.com

AP Photo NY110
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

SEC, UK accountancy watchdog ICA in Enron crisis talks - report

01/13/2002
AFX News
(c) 2002 by AFP-Extel News Ltd

LONDON (AFX) - A crisis meeting of Britain and America's top accountancy watchdogs has been called in the wake of the collapse of American energy group, Enron Corp and this could lead to crackdown on the industry, according to the Sunday Times.
America's Securities and Exchange Commission (SEC) and the Institute of Chartered Accountants (ICA), Britain's largest accountancy body, will meet in New York next month, the paper said.
Rule changes to be considered at the meeting could cost the big players billions of dollars in fees, it suggested.
Andersen audited Enron's books and was also paid millions of dollars in consulting fees by the company and last week admitted many Enron documents held by Andersen had been destroyed.
The SEC is now investigating.
Top of the agenda at the New York summit will be whether the SEC should revisit clean up plans laid out by Arthur Levitt, its former chairman.
Levitt wanted firms to sell their consultancy businesses, claiming there was a clear conflict of interest if a company was acting as an independent auditor while picking up huge fees for consultancy work - as was the case for Andersen and Enron.
Consultancy generates half of the revenue for the 'big five' accountants -- Andersen, Deloitte & Touche, Ernst Young, KPMG and PriceWaterhouseCoopers -- and, according to SEC figures, for every dollar that accountants got for audits, they received an average of 2.69 usd for non-audit work, the paper reported.
dlh/lam

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Opinion; Editorial Pages Desk
Resist Revenge

01/13/2002
Los Angeles Times
Home Edition
M-4
Copyright 2002 / The Times Mirror Company

The Bush administration faces the possibility of a full-scale scandal in the Enron bankruptcy. It can be dealt with quickly or drawn out painfully. What will decide this is how fast and how thoroughly the administration comes clean on all of its ties to Enron, and whether Democrats can avoid the temptation to pay back the Republicans for their long campaign against Bill Clinton. White House forthrightness and Democratic restraint are the winning combination here.
It is now clear that Bush administration contacts with Enron were not confined to Vice President Dick Cheney's task force; they went deep into the Cabinet. White House Press Secretary Ari Fleischer and other officials are trying to spin their way out by dismissing all questions as partisan politics, but the only way for the administration to clear itself is to open up its records, starting with the secretive energy task force.
That means minutes of meetings, phone logs, notes, e-mails, everything. Otherwise, the White House will feed the perception that it is trying to cover up involvement in a scandal that led to the collapse of one of the biggest corporate donors to the Bush campaign--the largest corporate bankruptcy in the nation's history.
Atty. Gen. John Ashcroft, who received $25,000 from Enron CEO Kenneth L. Lay a week before being defeated in the 2000 U.S. Senate race in Missouri, has acted appropriately in recusing himself from the Justice Department's criminal investigation. But contacts between Enron and Treasury Secretary Paul H. O'Neill and Commerce Secretary Don Evans also need to be explored fully.
The Treasury Department added Friday that Enron President Lawrence "Greg" Whalley asked Undersecretary Peter R. Fisher for help in getting banks to extend more credit and that the two men spoke six or eight times in October. If the administration did have extensive contacts with Enron and knew that the company was about to collapse, why did it do nothing to protect the employees who eventually lost their retirement savings, locked up in Enron stock? Exactly how many officials met with or had e-mail communications with Enron employees? Was the president aware of what his officials were doing?
Until recently, Rep. Henry A. Waxman (D-Los Angeles) was almost alone in demanding that the administration produce records of its contacts with Enron. He shrewdly avoided stepping from demands for information to allegations of wrongdoing. Now that five congressional committees have issued subpoenas concerning Enron, other Democrats should find strength to resist the innuendo and partisanship that marked Republican investigations of the Clinton White House.
Rumblings are also starting, though not yet on the record, among congressional Republicans who seem as alarmed as Democrats about Enron's ties to the White House. When Congress reconvenes, perhaps supporters of campaign finance reform will whisper "Enron" in the ears of members who refuse to petition for a vote on the languishing reform bill.
Sen. Joseph I. Lieberman (D-Conn.), who heads the Senate Governmental Affairs Committee, will need to walk a line between tough questioning and needlessly heated rhetoric when he chairs the first hearing Jan. 24. The administration will do itself a favor by cooperating fully. It may well turn out that there is nothing to hide. But first the administration has to open its books on its dealings with Enron.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

BUSINESS
Change the system that gave us Enron
By Jeff Brown

01/13/2002
The Philadelphia Inquirer
CITY-D
D01
(c) Copyright 2002, The Philadelphia Inquirer. All Rights Reserved.

As one congressional aide put it last week, the Enron debacle is the "perfect storm" - a catastrophic mix of all the worst in business, government and politics.
After the biggest bankruptcy in history, the revelations kept coming last week:
The company's auditor, Arthur Andersen, confessed to destroying Enron documents during the very period last fall when it was becoming clear they'd be needed to explain why Andersen had not raised the alarm over the huge energy-trading firm's high-risk practices.
The White House acknowledged that Enron Corp.'s chairman, one of President Bush's biggest political contributors, had contacted two cabinet officials as the company was collapsing. Enron denied it was seeking favors, but one of those contacted, Commerce Secretary Donald Evans, said Enron chairman Kenneth Lay had indicated he could use government help shoring up the company's bond ratings. Ratings reductions are what pushed the firm into its final downward spiral. Administration officials said they had given no help.
The Justice Department launched a criminal investigation while Attorney General John Ashcroft said he would not take part because he, too, had received generous Enron contributions during his Senate campaign in Missouri in 2000.
A string of congressional committees prepared for hearings, while Democrats positioned themselves to exploit the Enron catastrophe in next fall's campaigns.
It's far too soon to know all the implications of the Enron story. But what is known so far is enough to point clearly to the need for change in the way business and politics are conducted in this country.
If it wasn't obvious before, the Enron case underscores the need for campaign finance reform. President Bush may spend months trying to convince Americans that Enron hadn't bought access and influence in his administration. That's going to be difficult, given the contacts disclosed last week and earlier disclosures that Enron executives had met six times with Vice President Cheney during energy policy discussions last year. Enron has long been known as one of the most aggressive lobbyists in Washington.
Even without evidence of a quid pro quo between contributor and recipient, common sense tells you many contributors must believe they will get special treatment, else they wouldn't spend the money. People who think they've bought protection are more likely to fudge the rules. Hence, the perceived corruption in politics encourages corruption in business.
While much is still to be learned about the relationship between Enron and Arthur Andersen, it's already clear the case demonstrates the need for accounting reform. Accountants are supposed to be watchdogs for shareholders and the public. Too many have become lawyerlike advocates for the corporate executives who hire them.
Part of the problem is the conflict of interest that has developed as accounting firms have moved more heavily into corporate consulting. Many are simply afraid to jeopardize lucrative consulting deals by issuing critical audits. Washington should tackle this conflict of interest by forcing these firms to divest their consulting operations.
Accounting rules also need to be strengthened so that reports to shareholders and regulators accurately portray earnings and risks. For years, Enron was able to inflate its profits by concealing debts in a string of "off-balance-sheet" transactions. While some of this may have been done improperly, current rules do allow companies to hide debts and other obligations. Even Wall Street analysts were unable to figure out Enron's statements.
No one knows how many Enron-type time bombs are ticking at other companies. But if the accounting rules permit deception, it's sure to take place. And if the public concludes that corporate financial statements are not to be trusted, confidence in the stock and bond markets is sure to be undermined. That's not what we need as we try to recover from a two-year stock market slump.
Finally, it's already clear that 401(k) retirement plans need major reform. Thousands of Enron employees' retirement accounts were devastated when the company's share price fell from $90 to less than $1. Company rules had prevented most employees from selling Enron shares held in 401(k)s, even though Enron executives were locking in fortunes by unloading shares as the company's troubles mounted.
Bills recently introduced in Congress would limit employees' risk by placing a cap on the amount of the employer's stock that could be held in 401(k)s, or by giving employees the right to sell those shares.
While that would be an improvement, it wouldn't resolve the broader problem - that investment choices in most 401(k) plans are just too limited. Participants are left with too many eggs in too few baskets, an especially serious problem if the boss offers poor investment choices.
There's a simple solution: 401(k)s should be changed to work like individual retirement accounts, allowing participants unlimited investment choices.
Because Enron was so big - the seventh-largest U.S. corporation at its height - it's tempting to see this mess as unique. In fact, political influence peddling, accounting shenanigans, and abuse of employees and shareholders are widespread. Perhaps the Enron case is big enough to produce some sorely needed systemic change.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

National/Foreign
POLITICS EMERGE IN ENRON FALLOUT
Glen Johnson, Globe Staff

01/13/2002
The Boston Globe
THIRD
A.1
(Copyright 2002)

WASHINGTON - It was a curious bit of scheduling in the midst of a presidential campaign, but George W. Bush broke away from a trip to California on April 7, 2000, because of a pressing bit of business back home.
The Texas governor had to get to Houston to attend the opening of Enron Field, a baseball park named after the energy-trading firm headed by his friend and biggest individual donor, Kenneth Lay.
The $248 million stadium had been built by Halliburton Co., the Dallas oil-services and construction company that was run by Dick Cheney, whom Bush later picked as his vice presidential running mate.
Such connections between Bush and the Houston energy company that last month became the largest US company to file for bankruptcy protection - devastating many of its retirees' pension plans in the process - have given Democrats the first whiff of scandal from an administration that has pledged to restore honor and integrity to the White House.
To date there have been no allegations that anyone in the White House acted illegally, or that Lay was able to exploit friendships within the administration.
But the investigation into how Enron handled its financial problems, and how the administration responded upon learning about them, could provide the Democrats with grist for the campaign trail as the party seeks to regain control of the House and to tighten its tenuous grip on the Senate in the 2002 elections.
Republicans are especially vulnerable because Enron and Lay gave a majority of their campaign donations to the GOP, raising the specter of influence peddling.
"This is the largest alleged stock fraud in American history," said Paul Begala, a Democratic political consultant who had been a longtime adviser to Bill Clinton. "This is not about anybody's personal life, not about anybody's private failings. It's about allegations of insider access in a corporate rip-off."
However, the company also donated to Democrats, prompting some Republicans to argue that they are inoculated from across-the-aisle criticism. The Democratic connections were highlighted on Friday, when the Treasury Department disclosed that Robert E. Rubin, the Treasury secretary in the Clinton administration and now chairman of the executive committee of Citigroup, called a top Treasury Department official last November to discuss help for Enron.
Moreover, Democrats risk a backlash if their investigation is perceived as payback for the GOP's Whitewater inquiry during the Clinton administration.
Bush has been riding a popularity crest following his response to the Sept. 11 attacks.
"I think there's a great danger for Democrats if they seem opportunistic about trying to create a political scandal out of a business scandal," said Stuart Stevens, a Republican media consultant who was one of Bush's top advisers, and who has worked on campaigns with William F. Weld, the former Massachusetts governor.
"I don't think, just because Chuck Schumer received contributions from Enron, he did anything wrong," Stevens said of the Democratic senator from New York. "And this is a case where there's every reason to believe the Bush administration has handled itself exactly the way the public would want an administration to act."
The comment hinted at the balancing act both parties face as Enron moves from the name of an energy company to a synonym for corporate failure - and perhaps much more.
At least eight government investigations are under way.
What is not in dispute is that Lay and Enron were deep-pocketed political donors. In the 2000 election cycle, the company gave money to 71 current senators and 188 current members of the House. It donated $1.77 million to Republicans and $681,000 to Democrats, according to the Center for Responsive Politics, a campaign-finance watchdog group. Through his political career, Bush has received about $650,000 from Lay.
What is also not in dispute is that Enron suffered a spectacular decline. When Bush was inaugurated as president last year, Enron's stock was trading at around $80 per share. When he marks his first anniversary a week from today, the share price will be less than $1.
In between, the company announced on Oct. 16 that it was posting a third-quarter loss of $618 million. As the stock price began to spiral downward, Enron blocked its employees from selling Enron shares from their 401(k) accounts, ostensibly because the company was changing administrators for the pension plan. In the meantime, however, 29 senior executives cashed in more than $1 billion of stock. On Dec. 2, the company filed for bankruptcy protection, as thousands of employees said they had lost their life's savings.
Prosecutors are believed to be looking at how Enron used complex partnerships to keep about $500 million in debt off its books. The administration and Congress agree that it is proper to investigate whether any laws were broken during the collapse. Bush himself has called for an inquiry into the rules restricting employee stock sales. He has also established a committee to determine how to protect pension plans from similar corporate failures.
The fuel for a political debate centers on contacts between Lay and Bush administration officials, as Enron's worth plummeted.
Lay was one of 474 people to serve on Bush's presidential transition team last year. He also was a member of a panel advising the administration on its energy policy.
Vice President Dick Cheney, who headed the panel, has refused to give names of committee members, or dates of their meetings. But last week, the administration said that Lay and Enron officials met with Cheney and his staff six times last year; the most recent meeting was six days before the third-quarter loss was reported.
On Thursday, the White House said that three times shortly before the bankruptcy filing Lay phoned Treasury Secretary Paul H. O'Neill and Commerce Secretary Don Evans. In those calls, Lay warned the officials of his company's financial problems.
Evans says he was asked if there was anything he could do as Enron faced a downgrading of its debt. In the conversation with O'Neill, Lay suggested the possibility of a federally arranged bailout with private money, the White House said.
Then, on Friday, the administration said that a top Treasury Department official was contacted separately by Enron's president and Rubin, the former secretary, and that they discussed the possibility of a credit extension for Enron.
In all these instances, the administration officials said they did not take action. Evans and O'Neill have said they determined that the fallout from Enron's problems was not wide enough to warrant special help from the government.
O'Neill also said that as overseer of the capital markets, he hears from major companies every day. "I was not surprised at all that I would get a call saying, `Hey, we've got a problem over here and you should know about it,' " O'Neill said Thursday on CNN.
But it is the lack of action that bothers one Democrat.
"It is now clear the White House had knowledge that Enron was likely to collapse, but did nothing to try to protect innocent employees and shareholders who ultimately lost their life savings," said Representative Henry A. Waxman of California, the top Democrat on the House Government Reform Committee.
A Republican National Committee spokeswoman, Mindy Tucker, noted that Lay had ties to the Clinton administration - he slept at the White House and played golf with the president once - and significant links to the Democrats who are now trying to sit in judgment.
"If people are going to grouse about contributions, everybody is in trouble. Joe Lieberman took contributions from them and he's holding hearings. John Ashcroft took donations and he's recusing himself," Tucker said of Lieberman, the Connecticut senator, and Ashcroft, the attorney general.
Begala, who answered questions about a stream of political and sexual scandals while advising former President Clinton, said the Bush administration would be wise to release all information about its dealings with Lay and Enron, and to return the focus to the company's operations - and not its dealing with the White House.
"I have a Ph.D. in scandal management," Begala said. "These are hard and painful lessons, but I would offer my friends - and many are my friends - the tip to just put it out there and stop pretending this is a not a scandal."
Glen Johnson can be reached by e-mail at johnson@globe.com
SIDEBAR: A PRECIPITOUS COLLAPSE PLEASE REFER TO MICROFILM FOR CHART DATA.

Caption: Enron's corporate headquarters building in Houston. / AFP PHOTO
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

National/Foreign
CEO'S LONG PATH FROM FARM TO RIG
Robert Schlesinger, Globe Staff

01/13/2002
The Boston Globe
THIRD
A.14
(Copyright 2002)

WASHINGTON - Kenneth Lay came from humble roots that, his friends and associates say, he never forgot. He became one of the premier community philanthropists and political donors in the country.
He also built and presided over a company whose failure, amid allegations of financial improprieties, has ruined the retirement prospects of thousands of its employees.
The portrait of Kenneth Lay, who will turn 60 this year, is disjointed: There is both a folksy man of the people and a tough corporate operator, a man whose contradictions have been brought into view as his economic and political power has disintegrated into economic and political scandal.
"For a lot of us it's causing a conundrum that we're in, because it's kind of hard to put all these pieces together," said Bob Eury, president of Central Houston Inc., a nonprofit civic group, and a friend of Lay's for 15 years. "At this point everybody's kind of like, it's very hard to understand all this stuff."
Kenneth Lee Lay was a minister's son, born to Omer and Ruth E. Rees Lay, on a Missouri farm. The family lived in tiny Rush Hill, a wisp of a community outside Columbia, close enough that the three Lay children could live at home when they attended the University of Missouri.
"I spent a lot of time on a tractor and had a lot of time to think," Lay told the Houston Chronicle in 1991. "I must confess I was enamored with business and industry. It was so different from the world in which I was living."
Nevertheless, he thought his path might take him into the law, until he took his first economics class at the University of Missouri.
"It was something that clicked with me," Lay told the Portland Oregonian in 1997. "I just found the power and effectiveness of the market system to be incredible, which I pretty much believed anyway."
After finishing his undergraduate work in 1964, Lay moved among private-sector, government and academic work, making stops at the Department of the Interior (as deputy secretary for energy, from 1972 to 1974), the University of Houston (as a doctoral candidate; degree awarded in 1970), and Humble Oil, later known as Exxon (from 1965 to 1968).
In 1985, Lay helped two struggling natural gas pipeline companies combine, and quickly emerged as the chief of the new company: Enron.
Over the years, Lay moved to orient Enron away from the staid business of natural gas pipelines to the riskier - and more profitable - world of energy markets. These were markets, through lobbying and crusading, that Lay helped to create.
Lay also quickly made himself, and Enron, central figures in the Houston community. As the company grew, he pointed out that a company of its scope could have picked headquarters anywhere, and that Houston was a conscious choice.
"He was the go-to man for Houston, the individual in the corporate community who would get it done, the corporation in the corporate community who would take the lead on those major issues," said Jim Kollaer, president and chief executive officer of the Greater Houston Partnership.
Lay's friends pointed to Enron's philanthropy and the lead role Lay took in the creation of Enron Field, the home of baseball's Houston Astros, as examples of his leadership.
But Lay's generosity was not limited to community causes: He became one of the state's and nation's most prolific donors and political activists. While a Republican by instinct, Lay and Enron gave money to both parties, not least because Texas was dominated by Democrats until the early 1990s.
Lay drew close to the Bush family, supporting the father's two presidential runs and helping the son's gubernatorial and presidential campaigns.
Lay served as one of George W. Bush's "pioneers," a group of fund- raisers who promised to each raise $100,000 for the presidential effort. Lay and Enron were among the biggest donors to Bush's presidential campaign.
His connections were clear: When Governor Bush addressed Texas's antipollution laws, Enron was one of a few energy-producing companies invited to help redraft the law.
When Enron Field opened in 2000, Lay celebrated with Governor Bush and his father, the former president, in the owner's box.
Lay's early years in Washington had given him an understanding of the importance of establishment connections. He moved with relative ease between the parties, whether staying overnight in the White House of former President Bush or playing golf with President Bill Clinton in 1993.
But in the end, his connections failed him: As his company careened toward bankruptcy, he reached out to some of those contacts, apparently to no avail.
Enron's collapse has triggered a curious round of Washington confessions as various administration officials have stepped forward to disclose their contacts with the corporation and the CEO.
At the same time, Karl Rove, Bush's top political operative, played down the relationship between the two.
"The president knows him. He is a friend. But the idea that he is a friend in the sense that this is a guy who's a close intimate is just ridiculous," the Associated Press quoted Rove as saying on Friday.
Robert Schlesinger can be reached by e-mail at schlesinger@globe.com

Caption: KENNETH LAY "Enamored with business"
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Top Bush official savaged over Enron capitalism-as-usual comment by Charles Whelan [Corrected 01/13/02]

01/13/2002
Agence France-Presse
(Copyright 2002)

CORRECTION: ATTENTION - ADDS details
WASHINGTON, Jan 13 (AFP) - US Treasury Secretary Paul O'Neill was savaged by leading members of Congress on Sunday for describing the biggest corporate collapse in US history as "part of the genius of capitalism."
O'Neill and Commerce Secretary Donald Evans, appearing on the Sunday talk shows, distanced the Bush administration from the collapse of the company, which left thousands of workers holding worthless pension fund securities while top executives reportedly cashed out for hefty profits.
O'Neill, speaking on "Fox News Sunday," said the president knew nothing of appeals for help from the company prior to its collapse, which he described as a textbook illustration of capitalism at work.
"Companies come and go," said O'Neill. "It's -- part of the genius of capitalism is, people get to make good decisions or bad decisions, and they get to pay the consequence or to enjoy the fruits of their decisions. That's the way the system works."
The Justice Department has launched a criminal investigation and members of Congress have announced a series of probes into the affair.
Speaking on the CBS show "Face the Nation," Senator Joseph Lieberman, a former Democratic vice-presidential candidate, described O'Neill's comments as "outrageous."
"Those are statements that might have been made by the secretary of the treasury in the 18th century, but not in the 21st century."
"The death that Enron experienced was not a natural death. We know enough to know that now," he added. "This was not capitalism as we want it to be."
While Enron sped toward a corporate train wreck and executives pulled some one billion dollars out of the firm, chairman Kenneth Lay was telling workers that prospects for the energy giant had never looked better, according to information released by congressional investigators to US media.
Republican Senator John McCain, also speaking on CBS, said the collapse of Enron was "tainted" by the firm's massive contributions to politicians.
McCain and Lieberman said they agreed with a federal judge in Houston, Texas, who was considering freezing the assets of top company executives, so that ordinary shareholders could be compensated if the case went to the courts.
O'Neill and Evans both said they had received phone calls from Lay, a big financial supporter of Bush, prior to the company's collapse, but said that no demand from the company for help had been passed on to Bush.
"I didn't think this was worthy of me running across the street (to the White House) to tell the president," he said.
For over a decade Enron has been a major contributor to US politicians both Democrat and Republican, and among those benefitting most was Bush, who received 623,000 dollars from Enron since launching his political career in 1993, according to news reports in Washington.
But Evans, speaking on NBC's "Meet the Press" talk show, said there was no payback.
He also rejected criticism from Henry Waxman, the senior Democrat of the House Committee on Government Reform, who said the White House could have intervened to prevent tens of thousands of ordinary people from losing their savings.
"If I had stepped in I think it would have been an egregious abuse of the office of secretary of commerce of the United States of America," he said.
Enron hid its losses and overstated its profits prior to the collapse while the firm's auditor, Arthur Andersen LLP, has admitted shredding documents related to its audit of the firm.
Lieberman, who is leading one of the congressional investigations, said the fallout from the scandal could destroy the internationally acclaimed accounting firm.
cw/mk

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

BUSINESS
Firms offering severance, but only if workers agree not to file unemployment / A matter of compensation
L.M. SIXEL
Staff

01/13/2002
Houston Chronicle
2 STAR
1
(Copyright 2002 Houston Chronicle)

MOST of us figure that state unemployment insurance is a safety net. If we get laid off, we can always rely on up to $319 a week we can collect in unemployment benefits from the Texas Workforce Commission.
But you can't be so sure these days.
If you're receiving severance payments from your old employer, take a close look. You may have waived your rights to unemployment benefits without realizing it.
Four former employees from Mitchell Energy & Development Corp. found out the hard way. They not only lost their unemployment benefits, but they also were hit with a $41,479 judgment after Mitchell Energy successfully argued in federal court that they relinquished their rights when they accepted an early retirement package.
In an attempt to reduce their state unemployment insurance tax, some employers like Mitchell are forcing their employees to make a choice: Either take a company-sponsored buyout package or state unemployment compensation - but not both.
The lure is attractive to employers because companies pay unemployment taxes based on the number of ex-employees who receive benefits. The fewer filings for unemployment benefits, the lower an employer's tax. The amount of weekly benefits received by former employees is based on salary levels.
While it's unclear how many companies have adopted this practice, several employment law experts believe it will become far more common now that a federal judge has ruled they can do it.
And it is a significant expense. Employers can pay as much as 6.54 percent of the first $9,000 in wages per employee, or $588.60 each year, when they have a lot of claims filed against them.
Employment taxes may be costly. But there's a problem when employers force employees to waive their rights to unemployment benefits: Texas law prohibits it. In fact, the penalty is a six- month jail term for an employer who even accepts a waiver.
Mitchell Energy, however, argued that such waivers do not break the law because its early retirement plan is covered under the federal Employee Retirement Income and Security Act and therefore supercedes state law.
Under ERISA, companies that provide benefits such as health insurance and pensions have a wide berth in structuring their plans, giving them freedom to override related state regulations.
Until now, no one questioned whether ERISA would pre-empt state law concerning unemployment compensation.
In mid-November, U.S. District Judge David Hittner ruled that because Mitchell's early retirement plan doesn't allow employees to file claims against the company, they're not entitled to unemployment benefits. Hittner's ruling, according to W. Fulton Broemer, the attorney representing the four Mitchell workers, is the first time a federal judge in the United States has ruled ERISA overrides a state law that carries criminal penalties.
It's like saying that if a severance plan that's covered under ERISA requires you to kill a mockingbird before you can get your money, you must kill the bird, even though it's against state law in Texas, Broemer said.
Hittner also ruled that the waiver the employees signed to receive their early retirement benefits - which said they wouldn't file any claims against Mitchell Energy, but did not specifically mention unemployment benefits - was not vague and was fully enforceable.
A spokesman for Mitchell Energy said the company did not want to comment on the case.
...
Legislation planned
Concern over the Mitchell case has U.S. Rep. Gene Green, D- Houston, vowing to introduce legislation that would prevent employers from using ERISA as a shield against unemployment taxes.
Unemployment insurance was designed as a bridge, he said.
"It's not like someone is getting rich on it," said Green. "They're just trying to keep their homes and insurance."
The Mitchell case has unnerved many ex-Enron employees who also agreed not to apply for unemployment benefits in exchange for hefty severance checks. Enron's severance agreement specifically states that if an ex-employee files for unemployment benefits, severance benefits will stop.
Johnnie Williams knew that when she agreed to forfeit unemployment benefits in exchange for about $52,400 in severance when she lost her job in mid-November. But that was before Enron filed for bankruptcy. Now Williams is standing in line with thousands of other creditors questioning whether they'll get paid.
And like those thousands of other ex-Enron employees, Williams has bills to pay. Those unemployment checks would come in handy.
Enron spokeswoman Karen Denne said Enron officials decided they didn't want employees to collect both unemployment insurance and severance.
It's not illegal to put that condition into the severance plan, she said.
Denne said Enron's internal rule doesn't affect the employees who lost their jobs after the bankruptcy filing and received $4,500 in severance pay, which isn't subject to ERISA rules. They can apply for unemployment benefits, she said.
...
Clash at Mitchell Energy
As for the Mitchell Energy case, it all started in December 1998 when employees were told they would lose their jobs if they didn't agree to take a voluntary early retirement package, according to court documents.
The employees, who worked for Mitchell in Mineral Wells, agreed to take the package and were told by representatives of the Texas Workforce Commission that they could file for unemployment insurance for the 90-day period before their retirement benefits kicked in. The commission representatives had been asked by Mitchell Energy to speak to the employees who worked in the town of 14,000 west of Fort Worth.
The employees filed for unemployment benefits and initially began receiving checks. But when Mitchell Energy found out, company officials reminded the employees that they had agreed not to file any claims against the company.
All but four of the employees dropped their claims for unemployment benefits. Mitchell Energy sued the four for damages.
Initially, the Texas Workforce Commission sided with the employees, saying that they were entitled to unemployment benefits. But after Mitchell appealed, the commission reversed itself. In a 2- to-1 vote, commissioners sided with Mitchell, agreeing the four employees left the company voluntarily.
...
Dissenting voice
In his dissent, T.P. O'Mahoney, the commissioner appointed to represent workers, said he believed the employees were clearly facing a layoff.
"The employer's refusal to tell the employees when the work was ending or make it clear which particular positions were targeted for layoff appears to have been nothing more than an attempt to leave the employees in the dark and prevent the receipt of unemployment benefits," O'Mahoney wrote.
The four employees sued the Texas Workforce Commission over its decision in state district court in Austin. That case is pending.
Meanwhile, Judge Hittner ruled that the four employees - Vada L. Fain, Lester G. Trollinger, John F. Wilkins and Greer H. Yoes - violated their agreement not to file any claims against Mitchell and must pay $41,479 in attorney fees and other expenses to Mitchell to litigate the case.
But when an employee files for unemployment benefits, it's not a claim against a company, argued Rick McHugh, staff attorney with the New York City-based National Employment Law Project, a public policy group that examines workplace issues.
Unemployment benefits are a statutory benefit given by the Legislature, McHugh said.
"It's not a matter for employers to bargain about," said McHugh, who works in Ann Arbor, Mich.
Using that logic, McHugh asked, would the Texas Workforce Commission pay unemployment benefits to striking employees if an employer agreed to those payments in an ERISA severance plan? Under current law, strikers aren't eligible for unemployment benefits.
While McHugh said he doubts the Texas Workforce Commission would adhere to such an ERISA plan, it's hard to know for sure.
Texas Workforce Commission spokesman Larry Jones said his agency isn't aware of the Mitchell Energy case in federal court and can't comment. And since the four employees have sued the commission, Jones said it isn't appropriate to comment.
And there's another issue, McHugh said. How can ERISA supersede state unemployment laws when state unemployment compensation was created by federal law in the first place? The federal unemployment system was created by the Social Security Act and the Federal Unemployment Tax Act.
...
A precedent?
McHugh is worried about the precedent the Mitchell case may set for other states that have laws similar to Texas prohibiting employee waivers.
If the Mitchell case gets upheld on appeal, McHugh worries there'd be nothing to stop employers from doing the same thing with other benefit plans, such as workers' compensation, said McHugh. An employer could easily offer early retirement or severance to an injured worker in exchange for dropping a workers' compensation claim.
Broemer has appealed Hittner's ruling to the U.S. 5th Circuit Court of Appeals in New Orleans. McHugh said his group would like to pitch in and help with the appeal.
Joe Ahmad, a Houston employment lawyer with Ahmad, Zavitsanos & Anaipakos, doesn't think the ERISA pre-emption argument will hold up.
The courts, including the U.S. Supreme Court and the 5th Circuit, have been showing a bias against ERISA pre-emption in other issues. Instead, they've been focusing more and more on states' rights.
But Tony Rosenstein, an employment lawyer at Baker & Botts, believes Hittner was right on target.
There was clearly an ERISA pre-emption, said Rosenstein. And the unemployment statute isn't like embezzlement or bank robbery, which are part of state criminal law.
Meanwhile, Rep. Green has directed his staff to look into the case, and if the appeal of the four ex-Mitchell employees fails, he plans to introduce legislation to prohibit an ERISA pre-emption on unemployment benefits.
This kind of pre-emption was never intended by Congress, Green said, especially since unemployment insurance was created by federal law.
...
Push for action in Texas
The issue needs to come up in the next session of the Texas Legislature, said Richard Shaw, secretary-treasurer of the AFL-CIO, who has vowed to lead the fight.
It's an "atrocity" that the Texas Workforce Commission allows employers to get out of paying benefits even though the Legislature said employees who lose their jobs are clearly entitled to them, Shaw said.
Texas already disqualifies many more employees than other states, so many out-of-work Texans don't receive unemployment benefits, said Rick Levy, legal director for the Texas AFL-CIO.
Levy said that's because the Texas Workforce Commission has a broader definition of misconduct than most states and it doesn't count the last quarter of wages when computing eligibility.
Meanwhile, Williams decided to file for unemployment benefits while she waits for the bankruptcy court to act.

Photo: Johnnie Williams agreed to forgo state unemployment benefits in return for a $52,400 severance package from Enron Corp. But when the energy giant declared bankruptcy, Williams was left with nothing and wonders if she will ever get paid (color)
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

News
Enron `players' worked D.C. ties
Stephen J Hedges, Jeff Zeleny and Frank James, Washington Bureau

01/13/2002
Chicago Tribune
Chicagoland Final ; C
1
(Copyright 2002 by the Chicago Tribune)

When a newly minted President Bush strode into the White House nearly a year ago, the influence and interests of Kenneth Lay, and his massive Enron energy trading company, were only a few steps behind.
Lay, an old Bush family acquaintance and the chairman of Houston- based Enron, was already a member of the new president's transition team on energy issues. Within a few months, he consulted with White House personnel director Clay Johnson on possible presidential appointees to the Federal Energy Regulatory Commission, which oversees some of Enron's markets. Bush made an Enron vice chairman secretary of the Army. Vice President Dick Cheney's energy task force turned to Lay for his expertise six times.
The repetitive presence of Lay and his energy monolith during the opening year of Bush's presidency is extraordinary for its frequency and for its sorry conclusion.
When Enron's wobbly house of trading cards began to tumble in late October, Lay and his assistants did not hesitate to make hot-line- style calls to Bush's treasury and commerce secretaries to drop their bombshell about the company's precarious state and to hint at a government-led bailout, which never happened.
Bush, former governor of Texas, has said he never discussed the company's troubles with Lay, whom he has known for years. Other White House aides dismissed any suggestion that the administration took steps to save Enron from its impending collapse and the bankruptcy proceeding that followed.
But while Democrats were quick to point out the chummy Bush-Lay relationship of days gone by, they have lately taken a more cautious tone.
"There's smoke here, but there's no proof of fire," said Sen. Joseph Lieberman (D-Conn.), chairman of the Senate Governmental Affairs Committee, which will examine Enron's collapse at a Jan. 24 hearing.
Another Democratic lawmaker, Rep. Henry Waxman of California, on Saturday released copies of two e-mail messages Lay sent employees in August. In one, the Enron chairman said: "Our performance has never been stronger; our business model has never been more robust." In the other, he detailed an employee stock option program that spoke of "a significantly higher price" for Enron stock in the future.
"It appears that you misled your employees into believing that Enron was prospering," Waxman, the ranking Democrat on the House Government Reform Committee, said in a letter to Lay that the lawmaker also made public.
Mark Palmer, an Enron spokesman, said Saturday that "Ken Lay was telling the truth" in August. He added that only later did the company's financial problems become clear.
As for Bush-Lay chumminess, Lieberman's tone is as practical as it is diplomatic. The fact is, Lay and Enron were working Washington long before George W. Bush came to town, and there was plenty of money and influence being spread around both political parties.
"One mistake is to think that this all started with the Bush administration," said Chuck Lewis, executive director of the Center for Public Integrity, a Washington watchdog group. "They extracted favors from the Clinton administration and from Congress prior to Bush arriving. These guys are players."
Clinton connection
Lay was no stranger to the Clinton White House, playing golf with the president and staying overnight in the Lincoln Bedroom. Enron hired away Linda Robertson, a senior Treasury official in the Clinton administration, to head the firm's Washington office.
Enron made a $100,000 contribution in 1997 to the Democratic National Committee just days before its representatives accompanied Commerce Secretary Mickey Kantor on a trade mission to the former Yugoslavia, where Enron hoped to win a large contract.
Lay contributed $11,000 to former President Bill Clinton during his two campaigns; Vice President Al Gore got $13,750 from Enron in the 2000 election. During Clinton's eight years in office, the company and Lay contributed about $900,000 to the Democratic Party.
That sort of generosity was well-known in fundraising circles in Washington and across the country. In the past 10 years, Enron contributed $5.8 million to political candidates of all stripes, from former New York Mayor Rudolph Giuliani to Clinton to House Speaker Dennis Hastert (R-Ill.).
"The name of the game for both Democrats and Republicans is raise as much damn money as possible with no holds barred," said Leon Panetta, Clinton's former chief of staff. "And so both sides are going after huge contributors that will give largely soft money contributions that are unlimited.
"That just means it's an open invitation to companies that want to exert influence to play that game. And until there are some limits that are placed on soft money campaign contributions, what you see happening with Enron is going to continue to happen in the future."
But no candidate benefited more from Enron than President Bush. First as a candidate for governor of Texas and later as a presidential contender, Bush has received $623,000 from Enron since launching his political career in 1993.
The Center for Responsive Politics, a non-partisan group that tracks money and politics, said 73 percent of Enron's contributions in the last decade have gone to Republicans and 27 percent to Democrats.
"It definitely buys access," said Larry Noble, executive director of the group and former counsel of the Federal Election Commission. "It gets their phone calls returned. When you make that many contributions and Kenneth Lay is a friend of President Bush's, you have to ask very serious questions about what that access bought."
Enron officials contributed $10,500 to the Bush campaign for legal expenses in the Florida recount. When Bush became president, they donated $300,000 for the inaugural celebration.
Contributions to lawmakers
Though in far smaller amounts, political contributions were given to the majority of congressional lawmakers.
Nearly half of the representatives in the House and three-fourths of the senators received money from Enron executives, according to campaign finance reports filed in Washington. Texas lawmakers received the most, with Republican Sen. Kay Bailey Hutchison topping the list with $99,000 in contributions since 1989.
Atty. Gen. John Ashcroft received about $25,000 in Enron contributions during his unsuccessful Senate re-election campaign in Missouri. Ashcroft last week recused himself from an Enron criminal investigation launched by a Justice Department task force. The department later disclosed that Ashcroft, while serving as attorney general, was invited by Lay to speak to a group of chief executive officers about law-enforcement issues.
Sen. Charles Schumer (D-N.Y.) received $21,933 in contributions during the same period. He sits on the Senate energy committee. Senate Majority Leader Tom Daschle (D-S.D.) received $6,000.
The Enron governmental affairs office in Washington has nearly a dozen employees, in addition to contract lobbyists. Telephone calls to that office were not returned late last week.
But money was only part of the game. Lay and Enron are clearly more comfortable with the Republicans who are now in office, and, until early December, those officials appeared content with Enron.
Wendy Gramm, who headed the Commodity Futures Trading Commission under former President George Bush, is a good example. Not only did she once head the agency that regulated some of Enron's trading activities, but she was married to Sen. Phil Gramm (R-Texas), a member of the Senate Banking Committee.
While at the agency, Wendy Gramm shepherded a commission ruling that exempted a significant amount of Enron's energy trading from federal oversight. Several weeks later, she left government and was elected to Enron's board.
In December 2000, with his wife still on Enron's board, Sen. Gramm sponsored the Commodity Futures Modernization Act, which made the exemption law. A Gramm spokesman said the senator did not work on that part of the legislation.
As an Enron board member, Wendy Gramm sold $277,000 worth of Enron stock in 1998, according to the Center for Public Integrity.
Senior Bush adviser Karl Rove also held Enron stock worth $100,000 to $250,000, but he was required to sell it under government ethics rules.
In at least one high-profile instance, an Enron official joined the federal government. Bush's secretary of the Army, Thomas White, had been vice chairman of Enron Energy Services. Bush's nomination of the former brigadier general had raised congressional concerns because White had headed Enron's efforts to win federal contracts to run the utilities on military bases.
Sen. John McCain (R-Ariz.), among others, asked White to recuse himself from the contract-letting process, to which White agreed, though he still favors the trend toward privatizing such services. White sold about $50 million in Enron shares before the price of the company's stock plummeted.
Slew of investigations
Three congressional panels, the Justice Department, the General Accounting Office, the Department of Labor, and the Securities and Exchange Commission have opened inquiries into Enron's failure and the firm's activities before its bankruptcy filing. Though the first Senate hearing is less than two weeks away, it will take months, if not several years, to sort through the web of commodities trading schemes and off-the-books deals that regulators and congressional leaders say brought on Enron's collapse.
A thorough investigation of Enron's market influence likely will reveal a good bit of the dealmaking that occurred not on trading floors, but in Washington offices.
"There are so many tentacles to Enron, and so many different elements that it could have impacted, that it may take some time to dig out and discover," said Lewis of the Center for Public Integrity. "When they go back and look at . . . the actual influence over personalities and policies that played out over the last two months, that's when we're going to see exactly what Enron got, and what they didn't get."

PHOTOS 6 GRAPHICS 2; Caption: PHOTO (color): (George W. Bush.) Reuters photo. PHOTO (color): George W. Bush. AP photo. PHOTO (color): Dick Cheney. PHOTO (color): John Ashcroft. PHOTO (color): Don Evans. PHOTO (color): Paul O'Neill. GRAPHIC (color): Enron's connections to the Bush administration Source: Associated Press. Chicago Tribune - See microfilm for complete graphic. GRAPHIC (color): Enron's political contributions Sources: opensecrets.org, Federal Election Commission. Chicago Tribune - See microfilm for complete graphic.
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Editorial
Enron's oily aftermath

01/13/2002
Chicago Tribune
Chicagoland Final ; C
18
(Copyright 2002 by the Chicago Tribune)

Enron's corpse is providing evidence of a major financial scandal that will take years to unravel. It took only moments, though, for official Washington to sniff out the potential for a political scandal.
The comparisons to Watergate and Whitewater already are flying: What did President Bush know, and when did he know it?
The answers from the administration are: nothing and never.
The White House has revealed that the chairman of Enron, Kenneth Lay, called two Cabinet members late last year, apparently seeking government help with the failing company's desperate situation. The administration says that no offer of help was given, and that President Bush learned of the calls only last Thursday.
If that's the case, it speaks well of the Bush administration. Lay has been a major contributor to Bush's state and federal campaigns. To hear the administration tell it, the big-bucks donor got turned away at the door.
That, of course, won't stop the press and members of Congress from sniffing around this, to see if there's more to the story. And well they should. That's not a slap at Bush's integrity. It's a comment on the fact that in U.S. politics, firm denials have a funny history of going soft when exposed to scrutiny.
With the facts at hand this is, for now, a financial scandal, not a political scandal. It involves the stunning collapse of the nation's 7th largest company, possible criminal fraud, destroyed documents, and executives cashing in company stock at big profits while the retirement portfolios of Enron workers were wiped out.
The Justice Department is probing possible crimes leading up to Enron's Dec. 2 bankruptcy filing. The Securities and Exchange Commission and Labor Department are investigating, as are numerous congressional committees. A flood of shareholder litigation has begun.
Last week's stunning revelations provided more fodder for the investigators:
- Lay called Treasury Secretary Paul O'Neill and Commerce Secretary Donald Evans last fall, as Enron was collapsing. Some reports indicate that Lay, and Enron President Lawrence Whalley, in a series of phone calls to Treasury officials, sought assistance to stave off bankruptcy. Lay also called Federal Reserve Board Chairman Alan Greenspan to alert him the company was in a free fall that could impact financial and energy markets.
- Atty. Gen. John Ashcroft, who also received campaign contributions from Enron and Lay, has recused himself from any involvement in the investigation. Ashcroft's chief of staff and the entire U.S. Attorney's staff in Houston have also recused themselves because of potential conflicts.
- Arthur Andersen revealed that its employees had destroyed a "significant but undetermined number" of Enron documents. Employees apparently began deleting and shredding in September, before the full extent of Enron's troubles became known, and may have continued even after the SEC began investigating.
- Vice President Dick Cheney or his aides met with Enron executives half a dozen times last year when the administration was developing an energy policy.
None of this indicates the administration improperly intervened as Enron headed for bankruptcy. But precisely because the ties that bind this company to this administration are so strong, the Bush government must be honest and forthcoming. It is essential that these criminal and civil investigations be thorough, conducted fairly and free from any political influence.
Scandals at accounting houses just don't have as much sizzle as scandals at the White House. But that's where this one is focused, and it may well lead to welcome changes that have nothing to do with politics and everything to do with the integrity of the information that investors rely on when judging a company's stock.
The true state of Enron's finances were hidden from its investors because the company and its auditors permitted a series of senior level partnerships that kept hundreds of millions in debt off the books. When the extent of that deception became clear, Enron's downfall was assured.
Did Enron criminally misrepresent its condition by hiding the full extent of these partnerships? Was Arthur Andersen compromised because it received nearly as much last year from Enron for consulting services ($23 million) as it did in accounting fees ($25 million)?
The questions of politics will sort themselves out. The most pressing concern is that thousands of people lost their retirement savings --and may have been victims of a crime.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Foreign News
Clinton link with Enron lowers the heat on Bush
Rupert Cornwell in Washington

01/13/2002
The Independent - London
FINAL
21
(Copyright 2002 Independent Newspapers (UK) Limited)

The Democrats were dragged into the growing Enron scandal yesterday as it emerged that Robert Rubin, Bill Clinton's Treasury Secretary, contacted a top official at his old department to find out if the Bush administration could step in to help the energy group.
Mr Rubin made his call last November to Peter Fisher, head of the Treasury's domestic finance section, in his current capacity as chairman of Citigroup, one of the main creditors of Enron. A month later the company went bankrupt in the biggest financial collapse in modern US history.
Mr Rubin was one of the most admired members of the Clinton team, and his involvement will dent Democratic efforts to turn the affair into a new Whitewater. "This could be a flu shot for Bush," one observer said. "This could inoculate him from the worst of the scandal."
The debacle of what was once the seventh largest US corporation has caused great embarrassment for the White House because of the close ties of Enron's chief, Kenneth Lay, with President George Bush.
Since 1994, the company donated almost $600,000 (pounds 430,000) to the president's various campaigns, and helped to cover the costs of both the recount battle and his inauguration gala. In return the company has had a major influence on the Bush energy strategy, successfully pressing for greater deregulation.
But though three quarters of Enron's $5.8m of political donations since 1990 went to Republicans, Democrats too were beneficiaries. The investment paid off when Congress exempted Enron's key energy trading activities from a bill overhauling federal oversight of commodity markets.
In his call to the Treasury, Mr Rubin asked Mr Fisher about the possibility of pressing the bond-rating agencies not to lower their estimate of Enron bonds - and thus provoke a crisis of confidence in the group. According to the Treasury Department yesterday, Mr Fisher opposed the idea. Subsequently, agencies did indeed slash their assessment of Enron's creditworthiness, triggering its demise.
The latest disclosure capped three days of turmoil. First, details emerged of numerous calls by Mr Lay to senior Bush officials last autumn, telling them of Enron's growing problems. Hours later John Ashcroft, Attorney General and thus head of the Justice Department, which is now conducting a criminal probe of Enron, formally took himself out of the case, admitting he had taken $60,000 of Enron donations in his failed 2000 campaign to retain his Senate seat.
But the biggest bombshell was the confession by the Arthur Andersen accounting firm, which audits Enron, that it had destroyed many documents relating to the audit. Andersen was already under fierce criticism for failing to detect the private partnerships into which Enron executives had shunted millions of dollars of debt to keep them off the main balance sheet.

Caption: Robert Rubin, top, deflected attention from George Bush
Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Features - Sunday Comment - They can't pin this on Bush It was Clinton who lavished over $4 billion on Enron.
By Mark Steyn.

01/13/2002
The Sunday Telegraph
P24
(c) Telegraph Group Limited, London, 2002

The first time I gave any thought to Enron, the world's biggest energy trader, was during last summer's California blackouts, when the state had a go at blaming their woes on the company's chief executive, Ken Lay. "I would love," said Bill Lockyer, California's Attorney-General, "to personally escort Lay to an 8 x 10 cell that he could share with a tattooed dude who says, `Hi, my name is Spike, honey.' "
Fortunately for Mr Lay, he lived not in California but in Texas, beyond the reach of Mr Lockyer's summary cell-share programme. And, as Enron itself has now short-circuited, in the largest bankruptcy in US history, Lockyer and his fellow Democrats have moved on. These days, they and their media chums are positively salivating at the prospect of using Enron to do to the Bush Administration what the State of California wanted Spike to do to Mr Lay. On Friday on CNN, in the corner of the screen where of late "AMERICA FIGHTS BACK" has been emblazoned, there loomed instead the dread suffix: "ENRONGATE". The New York Times has lapsed into its lethal passive voice: "Questions were being raised."
The only "question" really being "raised" is: How can we pin this on Bush? Short answer: You can't.
For those who want to turn a bona fide business scandal into a political one, Ken Lay is supposedly the unacceptable face of Bush capitalism - of a particular Texan energy-industry backslapping business culture. The argument is that Lay has been writing cheques to Dubya's political campaigns since he first ran for dogcatcher, and that in return he's been rewarded with "access". Thus the headline in Friday's Washington Post: "Enron Asked For Help From Cabinet Officials. CEO Sought Intervention Before Bankruptcy."
Hmm. I must fish out The Washington Post of November 23, 1963: "President Makes Visit To Dallas. JFK Well-Received By Most Texans." The real news in the story is not Lay's phone calls but the officials' response: when Dubya's buddy tried to call in his chits, the Bush guys were unmoved. The headline should have read: "Cabinet Officials Declined To Help Enron. CEO Told, `Awfully Sorry To Hear About All These Problems, Ken. Look, I Gotta Run, But Let's Get Together And Do Lunch Sometime Next Year.' "
Meanwhile, the Attorney-General, John Ashcroft, has recused himself from the Justice Department investigation on the grounds that he too has been the beneficiary of Enron's largesse. At a stroke, Ashcroft sets the bar at a height the Democrats can't rise to. After all, in terms of their political investments, Enron had a widely diversified portfolio: 71 of America's 100 Senators got cheques from the company, among them half the Democratic caucus, including Ted Kennedy and Hillary Clinton. If Senators and Representatives are as punctilious about conflict of interest as the Attorney-General, there'll barely be enough of them to man the Congressional hearings.
In other words, if this is "another Whitewater", it's a bipartisan one: in Monica terms, it's as if, in between oral sex with the President, she was squeezing in bondage sessions with Newt Gingrich and rounding out the day lapdancing with Strom Thurmond.
In so far as anybody did "special favours" for Enron, it wasn't Bush but the Clinton Administration, which lavished over $4 billion in Federal funds on the company.
But Bush? Ken Lay must be utterly bewildered: he gives half a mil to his Texas buddy and what does he have to show for it? Nothing, except investigations by the Justice Department, Commerce Department, Securities and Exchange Commission and eight Congressional committees. Right now, 30 days with Spike would be a pretty good plea bargain.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

OUTLOOK
Editorials
ENRON / Shoes keep dropping; let's see the closet
Staff

01/13/2002
Houston Chronicle
4 STAR
2
(Copyright 2002 Houston Chronicle)

The Enron mess continues to grow messier with each passing day. Enron's auditor, Andersen, says its employees destroyed many Enron records. Who is watching the watch dogs? It's revealed that Ken Lay called Commerce Secretary Don Evans and Treasury Secretary Paul O'Neill, not for help, according to Lay, but to alert them to the energy company's problems. O'Neill and Evans say they never told President Bush about Lay's calls.
Enron President Lawrence "Greg" Walley reportedly asked Peter Fisher, the Treasury Department's undersecretary for domestic finance, to try to influence bankers to extend credit to Enron. Fisher never called the bankers, Treasury officials said.
And so it goes, one day after another with new revelations about the energy giant's dealings and its relationship with politicians and others.
A number of investigations are under way, and a number of politicians, no doubt, are champing to have a go at the Bush White House over its Enron associations.
All of this, plus concerns about the future of remaining and former Enron employees and stockholders, underscores the need for the probes to go forward with swiftness, fairness and openness.
The shoes keep dropping, but we need now to see the whole closet.

Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved.

Profile: Investigation of collapse of energy giant Enron; Treasury Secretary Paul O'Neill discusses phone calls made to him by Enron; Employees and shareholders are hardest hit by Enron's collapse; Shareholder advocate William Lerach discusses lawsuit being filed against Enron's executives; Former Securities & Exchange Commission Chairman Arthur Levitt discusses who might be to blame for Enron's collapse; Helping athletes break records defeats purpose of athletic competition

01/13/2002
ABC News: This Week
(c) Copyright 2002, American Broadcasting Companies, Inc. All Rights Reserved.

Announcer: From ABC News, THIS WEEK with Sam Donaldson and Cokie Roberts. SAM DONALDSON, co-host:
It burst into the headlines, the collapse of Enron. How the biggest corporate disaster in American history lost billions of dollars, bankrupted thousands of investors, and forced President Bush to answer questions about his largest contributor, Enron chief Kenneth Lay.
President GEORGE W. BUSH: I have never discussed with Mr. Lay the financial problems of the company.
Senator JOSEPH LIEBERMAN (Democrat, Connecticut): The relationship between Enron, its executives and the Bush administration is a part of the story.
DONALDSON: Who made it happen? Who let it happen? And how can the government keep it from happening again?
Unidentified Man: This hearing will come to order.
COKIE ROBERTS, co-host:
Our guests from the White House: Treasury Secretary Paul O'Neill, the Senate's top investigator, Democrat Carl Levin, shareholder advocate William Lerach and former Securities and Exchange Commission Chairman Arthur Levitt.
Announcer: That's THIS WEEK featuring George Will and George Stephanopoulos. Now Sam Donaldson and Cokie Roberts.
ROBERTS: Welcome to the program. Today we've decided to devote the entire broadcast to a single subject: the collapse of Enron. With criminal, Congressional and regulatory investigations all under a political overlay, Enron's troubles have taken center stage here in Washington. Sam:
DONALDSON: Absolutely, Cokie. Just a year ago, Enron, the giant Houston-based energy company that traded natural gas contracts, marketed electricity and other commodities, was riding high. The seventh-largest corporation in the country, its stock hitting $83 a share, its revenues $100 billion a year. But as the months went by, things began to fall apart. A huge debt was mounting out of public view. The stock price fell, and in desperation, top Enron officials reached out to the Bush administration last fall for help. After all, Enron and its officers had been the single biggest contributor to Bush political campaigns. Administration officials say they did nothing to help, and on December 2nd, Enron filed for Chapter 11 bankruptcy protection, wiping out an estimated $60 billion of stockholder investment and approximately $1.3 billion of employee retirement savings.
In the wake of this debacle, investigations are planned by the Justice Department, the Labor Department, the Securities and Exchange Commission and five different Congressional committees, all spurred on by last week's bombshell admission by the accounting firm of Arthur Andersen that its Houston employees have shredded documents relating to its audits of Enron. For its part, Enron says it will cooperate with investigations and warns the public against allowing the scandal machine to take over spreading unsupported speculation. Enron's embattled chief executive, Kenneth Lay, blames what happened on the recession.
Mr. KENNETH LAY (Chief Executive Officer, Enron): Many companies in 2002 are undergoing the difficult but cleansing effects of the current economic downturn. Enron itself has been a casualty of these events and many other events. For this consequence, I am deeply saddened.
DONALDSON: Inevitably, Enron's collapse has resulted, as Cokie says, in political battle lines being drawn here in Washington. Our chief White House correspondent Terry Moran has the latest on that. Terry:
TERRY MORAN reporting:
Well, Sam, those investigations you mentioned are certainly heating up. The latest development: this six-page letter from Representative Henry Waxman. He's the ranking Democrat on the House Government Reform Committee. It's a letter to Treasury Secretary O'Neill and Commerce Secretary Evans, and it can fairly be categorized as a blanket request for information and documentation by the two men's contacts with Enron. All this comes as the shock waves from Enron's collapse continue to reverberate in both political parties this weekend.
(VO) On Friday, the Bush administration disclosed that Energy Secretary Spencer Abraham called Enron chairman Ken Lay last November 2nd to ask about the company's situation. And former Clinton administration secretary, Robert Rubin, spoke yesterday for the first time about this November 8th phone call to Treasury Undersecretary Peter Fisher, seeking help in propping up Enron's credit rating.
Yesterday Rubin told ABC News: "I called Peter and said, `I think it is probably not a good idea. On the other hand, this is a national economic issue.'
Pres. BUSH: In light of the most recent bankruptcy, Enron, there needs to be a full review.
MORAN: (VO) The political storm broke Thursday morning at an Oval Office meeting with his economic team to announce administration action on the Enron collapse. President Bush was asked about his relationship with Ken Lay.
Pres. BUSH: Ken Lay is a supporter, and I got to know Ken Lay when he was the head of the--what they call, the Governor's Business Council in Texas. He was a supporter of Anne Richards in my run in 1994.
MORAN: (VO) Democrats say that answer understates how close Mr. Bush has been over the years with Enron's founder.
Democrats are also looking at phone calls from Lay to Commerce Secretary Don Evans and to Treasury Secretary Paul O'Neill last fall as Enron neared collapse. Lay was looking for help.
Mr. ARI FLEISCHER (White House Press Secretary): Secretary Evans talked to Secretary O'Neill and they agreed that no action should be taken.
MORAN: (VO) At the same time, Enron President Lawrence Greg Whalley called Treasury Undersecretary Fisher six or eight times, asking Fisher to intervene with Enron's bankers. As he did with Rubin's request, Fisher declined.
The flurry of calls and years of political contributions have some Democrats in the mood for a major investigation.
Sen. LIEBERMAN: This series of contacts between the highest official of Enron and the Bush administration is a source of concern.
MORAN: The main investigation so far is the nationwide criminal probe launched by the Justice Department. But in a sign of just how complicated this situation is for the administration, the attorney general, John Ashcroft, will not be leading that probe. He has recused himself because his campaign committees in his 2002 Senate rate--race took more than $50,000 from Enron. And finally, Newsweek has added some details to an October 15th call between Ken Lay and Commerce Secretary Evans. Evans was in Moscow at the time. The key information there is the date, October 15th. The next day, Enron announced a stunning, more than $500 million loss that led to its collapse. Sam:
DONALDSON: Thank you, Terry.
Joining us now from Pittsburgh is the secretary of the treasury, Paul O'Neill.
Welcome, Mr. Secretary.
Mr. PAUL O'NEILL (Treasury Secretary): Good morning.
DONALDSON: Well, on October 28th, which was a Sunday--I presume you were at home--Kenneth Lay...
Mr. O'NEILL: I was.
DONALDSON: ...Enron's CEO called you. What did he want?
Mr. O'NEILL: He called to tell me that he thought it would be useful for his technical people to talk to our technical people so that we could assure ourselves that the problems they were having were not going to cause dislocations in the US and world capital markets.
DONALDSON: Did he specifically bring up Long-Term Capital Management, which was a company that had a--help from government in a financial bailout?
Mr. O'NEILL: Well, first, let--let me correct what you just said. As I recall, Long-Term Capital didn't get any assistance from the government at all. The New York Fed, I believe, called together the major banks that were involved with Long-Term Capital, and the major banks decided to take some action to avert a problem in the US capital market. So I think Long-Term Cap--he mit--he mit--I think he may...
DONALDSON: It did--excuse me, Mr. Secretary. It did not get any direct government subsidy, but government officials...
Mr. O'NEILL: Right.
DONALDSON: ...helped organize a bailout. And did he not bring that up?
Mr. O'NEILL: I--as I recall, he mentioned that we should pay attention to the technical details because the technical problems could well be of the nature of Long-Term Capital.
DONALDSON: All right. Now, you then subsequently--according to what you've already said--called Peter Fisher, the undersecretary, and asked him to look into it. Is that correct?
Mr. O'NEILL: I did, yes.
DONALDSON: And did he do so?
Mr. O'NEILL: Yes, he did. And he came back to me and said he didn't think there were parallels, that he was talking with people in the capital markets, and it didn't look like it would cause problems at other places.
DONALDSON: Well, now, the president of Enron, Peter--rather, Lawrence Greg Whalley, called Fisher six or eight times. Which is it?
Mr. O'NEILL: Well, I honestly don't know. You know, as I've been watching this the last few days, I've been surprised to see--I didn't know there were six or eight calls. I knew that Peter was in touch with the president of Enron, and I didn't know unti--frankly, until I saw it on the news that Bob Rubin had called Peter as well. So, you know..
DONALDSON: What do you--what do you think of former Secretary Rubin's call? Was that proper?
Mr. O'NEILL: Well, you know, when I left Washington the last time, I--I went to New York and I made a deliberate decision that I was not going to trade on what I knew about the government and people that I knew in the government. And--and so, for me, I never would have made such a call. But Secretary Rubin, I think, did a great job when he was in the government. He'd gone on to be a very high-level official at Citigroup. And--and, you know, I--I--I think, at face value, Secretary Rubin's involvement, that he felt it was appropriate for him to make that call. And, you know, I'll let other people decide that. But I--you know, the whole idea of finding fault and--and--and--and other things in--in what I would consider to be kind of normal business of people calling when there are problems like this, you know, making a big deal out of it, I--I--I just don't understand it.
DONALDSON: But--but you would not have made that call? That's what you told me.
Mr. O'NEILL: Well, you know, because I decided when I left Washington, I was done with Washington.
DONALDSON: All right. Now, the spokesman--the spokesperson for the Treasury Department, Michelle Davis, said--and let me just take a look at what she said--that Treasury Undersecretary Peter Fisher inferred he, meaning Kenneth--meaning Whalley, was being asked to encourage the banks to extend credit to Enron lenders. Do you agree with that?
Mr. O'NEILL: I don't know. You--you have to rely on what Peter and Michelle have said about this.
DONALDSON: Well, didn't he discuss it with you, Mr. Secretary? Do you mean...
Mr. O'NEILL: He didn't. Never, no.
DONALDSON: All during this time, you asked him to look into it, and he--he didn't discuss it with you?
Mr. O'NEILL: Well, he just came back to me and said that he couldn't find any evidence that it was going to be a problem. You know, Sam, I think it helps to put these things in context. You know, the call I had from Ken Lay was three or four minutes. At the same time, I'm working on prosecuting the financial war on terrorism and putting together World Wide Web to--to interdict and confiscate the money the terrorists have used to do things like September the 11th. At that time, I was working very hard trying to get the Congress to pass a stimulus bill to help people who were affected by September 11th, slow down the economy, trying to get the Congress to pass a terrorist risk insurance bill, working on the problems of Argentina and Turkey and other places around the world that have got problems. You know, this is a three or four-minute telephone call...
DONALDSON: All right.
Mr. O'NEILL: ...and--and what I got from Ken Lay was no more than what I already read and--in the newspaper and seen on--on your and other television shows saying Enron was having problems.
DONALDSON: All right. Granted, lots on your plate, Mr. Secretary. But on November 8th, he called again. Did you make that call or did you place the call?
Mr. O'NEILL: No, he called me.
DONALDSON: What did he want?
Mr. O'NEILL: He called me to tell me that they were deep into conversations with Dynergy, another energy company, and that sustaining their credit rating was--was a critical aspect of their deal. It was an information call. He asked me for nothing.
DONALDSON: He asked you for nothing. You know, Bob Bennett, who is now Enron's attorney here in Washington, says, and I quote, that Whalley told Fisher, "It would be nice if you could get these banks to lend us some money, but I should tell you our credit is not good." Bennett said that Whalley then laughed, meaning that that was a joke. It doesn't sound like a joke to a lot of people.
Mr. O'NEILL: Well, what would you have me make of that, Sam?
DONALDSON: Well, I'm asking you. I mean, you...
Mr. O'NEILL: I'm--what--what are you asking me?
DONALDSON: Well, I'm asking you, if it does not appear from these separate little pieces that I've just read, that your own spokesperson says that Fisher inferred that he was being asked to do something. Then it says...
Mr. O'NEILL: OK, well, perhaps--perhaps so, but nothing was done.
DONALDSON: All right, nothing was done.
Mr. O'NEILL: What does--what does that tell you? I think it tells you we were doing the diligent thing to make sure that the world and US capital markets didn't get damaged, and we had no responsibility to help an individual, private firm and we didn't.
DONALDSON: Well, I want to show you what Enron spokesperson Mark Palmer has said about all of these calls, and not only to you but to Don Evans. He said, "At no time did Lay ask for any assistance from the government, nor did he intend to leave any impression that he was ask--asking for assistance." We've had what you've had to say, but, of course, Don Evans says flatly that he was asked to help out on the Moody's Investment Service. So that statement isn't correct, is it?
Mr. O'NEILL: You know, you can draw your own conclusions. Ken Lay didn't ask me to do anything, and, you know, there--we did nothing. I think we did the right thing. We made sure that in our area of responsibility, which is the US and the world capital markets, that the problems that were occurring at Enron had no spillover effect for the rest of the economy.
DONALDSON: Mr. Secretary...
Mr. O'NEILL: But, you know what the president has charged me to do now is to look at these events and see if there are necessary changes in the rules to protect individual employees and to protect investors, to see if there are weaknesses in the rules that we should correct, because the president's really concerned as he sees these stories about people losing their 401k plans, savings, and--and--and--and as a special concern, he wants to make sure that disclosures are appropriate so that investors are not misled or...
DONALDSON: Mr. Secretary, I think a lot of people think that's a good idea, of what the president has asked you to do. But coming back to what has happened, when you knew, no matter how long the phone calls were, that this big company was in deep, deep trouble, didn't you feel an obligation to tell the public so that the stockholders...
Mr. O'NEILL: Sam--Sam, you and your other friends in the print media were telling the people every day, I didn't learn anything from Ken Lay that wasn't public property.
DONALDSON: So you don't think that the secretary of the treasury and the secretary of the commerce, if they had spoken out, wouldn't admit more to investors and employees than a newspaper story?
Mr. O'NEILL: Well, I--you know, I don't think so. Would you have had me say something as I watched LTV Steel going down? Should I have gotten on top of the building and said, `LTV is going down.' I don't think--that's not the role of government officials to call attention to the things that are al--already being recorded in the media in--in a very--in a very strong way. I didn't know anything that you didn't know.
DONALDSON: All right, Mr. Secretary. Finally, I'm told that you didn't inform the president until last Thursday.
Mr. O'NEILL: Right. That's true.
DONALDSON: Wouldn't it have been better to give him a head's up...
Mr. O'NEILL: I didn't--I...
DONALDSON: ...because of this political problem that's coming, was one that could have been foreseen.
Mr. O'NEILL: I--well, frankly, I don't think so. You know, I get lots of calls from lots of people in big and small companies, and governments around the world. You know, do I run across the street every time I've had a telephone call with, say, the finance minister in Argentina and tell the president? Absolutely not. Why would I do that? I'm a big boy. I've got responsibility. I swore to uphold the laws and--and--and--and constitutional duties of the United States, and I'm going to keep doing that. And--and--and I'm not going to spend, you know, endless hours running across the street telling the president about telephone calls.
DONALDSON: Secretary O'Neill, thank you very much for joining us this morning.
Mr. O'NEILL: You're welcome.
DONALDSON: It's always good to see you.
Mr. O'NEILL: Nice to see you, too.
DONALDSON: Cokie:
ROBERTS: Joining us now from New York is Senator Carl Levin, Democrat of Michigan. He's chairman of the Permanent Subcommittee on Investigations which will be holding hearings into the whole Enron situation.
Thanks for being with us, Senator Levin.
Senator CARL LEVIN (Democrat, Michigan): Good being with you, Cokie.
ROBERTS: Now, starting with these phone calls that Sam and--and the secretary were talking about, were those calls proper? Should Ken Lay have been calling these Cabinet secretaries?
Sen. LEVIN: Well, it depends on what he said. I have no doubt they were asking for the government to take action. I think when Ken Lay denies it and other representatives of Enron deny that they were asking for things, I think that is a--just false. It's as false as some of their financial statements. As a matter of fact, I don't believe that for one minute. But I do accept when Secretary O'Neill says that nothing was done in response to those requests, and I have no doubt, again, that there were requests made. And I just don't believe Enron on that, but I do believe Secretary O'Neill when he says that no action was taken.
ROBERTS: Should the secretaries have informed the regulators? Forget about the public, as he said, there were newspaper stories out there, but should they have informed the SEC of these conversations?
Sen. LEVIN: Well, I don't know what the requirements are there. The SEC, of course, had already been involved in this matter, as they should have been. But what we're focusing on at the Permanent Subcommittee on Investigations, is--are the deceptive practices of Enron, and the failure of the auditors, Arthur Andersen, to try to block those deceptive practices, to say no--the failure of the board of Enron--to say no to the deceptive practices which cost the employees their jobs, their future retirements, which cost thousands--tens of thousands of stockholders to go under with this stock. And--and that's what we're focusing on. And there's a lot there to be investigated. Let me tell you, what Enron did here was to use outside entities in order to deceive the public and to increase the value of their stock.
ROBERTS: All right.
Sen. LEVIN: These were not accounting errors, by the way, these just weren't errors...
ROBERTS: These partnerships you're talking about...
Sen. LEVIN: ...these were outside partnerships.
ROBERTS: But Senator, you--you heard earlier in the broadcast, your colleague Senator Lieberman saying that the relationship between Enron and the administration, the fact that Ken Lay has been the biggest contributor to the administration, is an area of concern. Is that something that you will be looking into?
Sen. LEVIN: Yeah, campaign contributions are a major concern, but it's not the concern of our investigation. It's the concern of what we're trying to do in Congress, to pass campaign finance reform to put a ban on these big contributions by corporations. Corporations are not supposed to give any money at all to campaigns, and yet because of that loophole, as you well know, tens of thousand, hundreds of thousands of dollars went from Enron to the political parties, both political parties, and that's what we've got to put an end to to stop these kind of appearances of impropriety that are created, and the sale of access. I have no doubt that Enron had greater access because of huge campaign contributions.
ROBERTS: Greater access to Cabinet secretaries and to White--White House staff and secretar--and Vice President Cheney?
Sen. LEVIN: I have no doubt that they had greater access, not just to the administration, but to members of Congress because of huge campaign contributions, and that's what we've got to end.
ROBERTS: Now...
Sen. LEVIN: But it's the actions of Enron, the improprieties, the false statements. They were selling glass as real diamonds, and that is false. We've got to put an end to it. That is the major concern of my subcommittee. And that is what, it seems to me, the American people want us to focus on.
ROBERTS: Now, Congressman Waxman from California has sent letters to the secretaries asking for all of the documents, all of the meetings, any--any contacts at all between the administration and--and Enron. And implying that maybe--that even though Enron didn't seem to get energy policy changed to suit it, but maybe the administration was advocating a tax policy that would be helpful to Enron at the time that all these contacts were taking place. What's your reaction to that?
Sen. LEVIN: Well, I think it's appropriate to ask for all that material. Our 51 subpoenas, which we requested this--which we issued this week and have now been served, are the subpoenas to Enron, its board, its managers, to Arthur Andersen for all the documents involved in the creation of these entities and in terms of any stocks sales and option sales. That's what we're focusing on are the failures of this corporation, the deceptive practices of this corporation and the failures of its auditors and board that are supposed to be a check on manager--managers to be a check on managers. That's what our focus is on.
ROBERTS: Do you see a change in the laws coming as a result of this? Re-regulation of energy, for instance?
Sen. LEVIN: Well, I'm not sure about the re-regulation of energy, but I am confident that in terms of the practices of boards and auditors that we have got to tighten up the law significantly. We have to be able to rely on board members and on auditors to carry out their fiduciary duties. And that--those duties mean that a corporation is supposed to be in business for its stockholders and not for its managers.
ROBERTS: Of course...
Sen. LEVIN: Managers here line their pockets with--with hundreds of millions of dollars of stock sales at the same time a corporation was going under, and the stockholders and employees were left holding the bag.
ROBERTS: Now...
Sen. LEVIN: I think we've got to tighten the laws.
ROBERTS: One of those..
Sen. LEVIN: I'm sure the tightening will come as a result of these hearings.
ROBERTS: One of those board members was Wendy Gramm, the wife of Senator Phil Gramm of Texas. And--and Senator Gramm appears to have, in one of those late-night end-of-session moves, been the person who was successful in getting the--the Commodities Futures Trading Commission to exempt Enron from its oversight. I know it's uncomfortable for senators to look at other senator's actions, but is this part of the scope of your investigation?
Sen. LEVIN: The scope of the board is surely part of our investigation, the activities of the board, all members, including Wendy Gramm. I don't know whether or not--I think that Senator Gramm has denied, as a matter of fact, that that amendment that was added was added by him. So I don't even know that it's accurate that he was the one that added that amendment. But in any event, as I understand the background for that now--and again, as you point out, it was not a subject of the vote of the Senate--but as I understand now, that had broader application than just Enron. But I--I'm not sure of the details of that, because that's not the focus of my investigation. Others will be looking into other activities and other pieces of this puzzle.
ROBERTS: Senator, I--we're out of time, but I know that you are looking at the company. But there are a lot of Democrats licking their lips over this at the moment, and seeing an--an opportunity to get at the Bush administration. Do you think there's a danger for Democrats here?
Sen. LEVIN: Well, I think if anyone is doing that, they're making a mistake. I think the public has been burnt here. Democrats, Republicans and independents have been hurt. And it's our obligation, on a nonpartisan basis, to go after Enron, to go after its auditors, to go after board members, to look for improprieties here, to tighten the law. That is our responsibility. We're going to do it on a bipartisan basis. We have the support in our investigation of my ranking Republican, Senator Collins. I know that Senator Lieberman has the support of Senator Thompson in the broader investigation of the full committee. So this is going to be a bipartisan investigation, as it should be.
ROBERTS: Thank you very much, Senator Carl Levin.
Sen. LEVIN: Thank you, Cokie.
ROBERTS: Still ahead, who was to blame for the fall of Enron? But first, when we come back, those hurt most by its demise: the employees and other investors who lost hundreds of millions of dollars. Stay with us.
Announcer: THIS WEEK with Sam Donaldson and Cokie Roberts brought to you by...
(Commercial break)
DONALDSON: As we heard earlier, Enron chief Kenneth Lay blames his company's collapse on the recession. Well, a lot of people think other factors, including some that may result in criminal charges, are to blame. Our chief Capitol Hill correspondent Linda Douglass takes a closer look. Linda:
LINDA DOUGLASS reporting:
And Sam, one of the big questions is: Was there insider trading when the top officials sold their stock when the stock was up? The people who were hardest hit by this, of course, were the employees. They were stripped of their jobs and they were robbed of their retirement savings.
Offscreen Voice: We're going to investigate that.
DOUGLASS: (VO) Sixty-four-year-old Janice Farmer had begun living off her retirement fund when suddenly it vanished.
Ms. JANICE FARMER (Former Enron Employee): I trusted the management of Enron with my life savings. Senators, I won't mince words here, they betrayed that trust.
DOUGLASS: (VO) Enron's employees had put their money into company-run 401ks, made up mostly of Enron's stock. When employees begun suspecting trouble in the company last summer, they worried about their stock. CEO Ken Lay reassured them in a e-mail, saying: "Our performance has never been stronger. Our business model has never been more robust. Our growth has never been more certain."
In mid-October, Enron finally revealed it was losing money. But panicked employees were told that because the company was in a transition period, they would not be allowed to sell their stock. Many Enron officials had made a billion dollars selling their own stock months before.
Senator RON WYDEN (Democrat, Oregon): Enron was just sinking like the Titanic, and you've got the top officers up on the deck selling the shares and all of you are locked in the boiler room, not able to get rid of the stock.
DOUGLASS: (VO) There were other victims: big pension funds which held Enron's stock. Florida's lost $325 million, Ohio's lost $59 million, California's lost $45 million, New York's lost $58 million. And small investors whose brokers kept telling them Enron was hot. Widow Mary Bain Pearson lost $175,000.
Ms. MARY BAIN PEARSON (Enron Shareholder): I'm just a pebble in the stream. A little bitty shareholder. I didn't lose millions, I didn't even lose a billion. But what I did lose seems like a billion to me.
DOUGLASS: The employees and the shareholders have filed separate lawsuits trying to recover some of what they've lost. But it is not clear at all where Enron would get the money to pay those claims if they should win in court, Sam.
DONALDSON: Thank you, Linda.
Yes, more than 60 lawsuits have already been filed in an attempt to recover money lost by investors and Enron employees. But most of these suits have been put on hold by Enron's bankruptcy filing. One of them, however, a class action suit titled Amalgamated Bank vs. Kenneth Lay, is ongoing since it is directed at Enron officials and board members rather than the company itself. And joining us now is the lead attorney in this suit, Bill Lerach.
Welcome, Mr. Lerach.
Mr. WILLIAM LERACH (Shareholder Advocate): Good morning. Thank you.
DONALDSON: Company's go belly-up in capitalism all the time. What did Enron do wrong?
Mr. LERACH: Well, Enron did a great many things wrong. But most importantly, Enron falsified its financial statements, reporting over $600 million in phony profits and over a billion dollars of phony stockholder equity over a four-year period while the top insiders in that company were selling off $1.1 billion of their stock. We think this is one of the most massive security frauds we have ever encountered.
DONALDSON: Well, now, a federal judge has now agreed that she the authority to freeze these assets of the officials that you are suing, but she says you have yet to make your case that she should do that.
Mr. LERACH: We haven't had an opportunity yet to trace where the money is, whether it's offshore in the Cayman Islands or it's been used to buy yachts or whatever. We're going to be doing that, we hope, with the judge's permission in the next few weeks. And I think if we find any significant amount of that money is in danger of being secreted or dissipated, I think the federal court will take appropriate action to freeze it.
DONALDSON: Well, let's look at just three of these 29 Enron officials, or former officials, and some of their sales. And I want to ask you about it.
TEXT:
ENRON EXECUTIVE STOCK SALES
Stock sales from 10/19/98 to 11/27/01
Total shares Value sold Kenneth Lay 1.8 mil $101 mil Jeff Skilling 1.1 mil $66.9 mil Wendy Gramm 10,256 $276,912
Source: Amalgamated Bank v. Kenneth L Lay
DONALDSON: Kenneth Lay, the chief executive, from 1998 to last year, during the period that you are suing for, sold stock worth $101 million. Jeff Skilling, the former CEO sold stock worth $66.9 million. And Wendy Gramm, a board member, sold stock worth $276,912. But Mr. Lay says he only sold 24 percent of his holdings. He has lost most of his holdings along with anyone--everything else. And Wendy Gramm says she sold hers in 1998, long before any suggestion of this funny wrongdoing came to light. Why is it fair to go after them?
Mr. LERACH: Well, first of all, Mr. Lay only paid pennies a share for his stock. His stock was stock option stock. So it's wrong to say that he lost money when the stock collapsed because he didn't pay the inflated price for his stock that ordinary investors did. And you have to look past the playing with the percentages. A hundred and one million dollars of stock by a CEO or chairman of a company is a huge bailout, especially when it's compared to what's happening to the workers inside the company who are losing everything and who aren't on the inside knowing the profits have been falsified and the company is failing.
DONALDSON: You're suing for $25 billion, and I know that Arthur Andersen is also part of the suit. Where do you think you can get that money?
Mr. LERACH: Well, Arthur Andersen is a large company. They have the wherewithal to respond. In addition, there's directors' and officers' liability insurance running to the hundreds of millions. And, I must tell you, Sam, not all the defendants have been named yet. This case is going to continue to evolve and expand. There are other professionals, lawyers, investment bankers and the like who appear to be deeply implicated. A fraud of this scope and size simply cannot be perpetrated without the assistance of sophisticated professionals to get stuff ba--past the regulators.
DONALDSON: Are you going to name any politicians?
Mr. LERACH: No, I didn't think we're naming politicians as such as defendants. We're not concerned with the politics of the case, we're concerned with the economics of the case.
DONALDSON: Knowing what you know now, do you think people will eventually go to jail here?
Mr. LERACH: It's dangerous to speculate, but the fraud here appears to be very substantial. It must have been deliberate. I don't like to see anyone go to jail, but there has to be accountability in the system so that this kind of thing won't continue to happen. If there's not accountability for those who perpetrate it, then it will happen again and again.
DONALDSON: Mr. Lerach, thanks very much for joining us today.
Mr. LERACH: Thank you, Sam.
DONALDSON: When we come back, how did this happen? We'll examine the role of Enron's management, its accountants and government regulators. And then George Stephanopoulos will speak with the former Securities and Exchange Commission chairman, Arthur Levitt, right after this.
(Commercial break)
GEORGE STEPHANOPOULOS reporting:
We've seen that both Enron and Arthur Andersen will be playing defense in the courts, but Congress will also be asking who else is to blame. Here's Linda Douglass again with more on the blame game.
DOUGLASS: George, everyone is trying to figure out who is to blame for the collapse of Enron. Was it the government regulators? Was it the accountants? Was it the stock analysts? Was it the Enron officials cutting too many corners as they tried to get rich?
(VO) Enron reeked of success. Its revenues had tripled in three years, making it the seventh largest company on the Fortune 500. Brokers urged investors to, `Buy! Buy!' even though most did not really understand how the complex energy trading company made its money.
Mr. PATRICK McGURN (Institutional Shareholder Services): The company was such a good performer that people really weren't willing to say that the emperor potentially didn't have any clothes on.
DOUGLASS: (VO) Turns out Enron was built on a house of cards. It hid its debt by shifting it to mysterious partnerships, some of which were run by top Enron officials, such as Chief Financial Officer Andrew Fastow who made $30 million in the process.
In November, Enron was forced to admit it that it had overstated its profits by half a billion dollars. Did Enron's accountant, Arthur Andersen, help the company cover up a lie?
Sen. LIEBERMAN: Why did the Enron's auditors allow the company to overstate its profits for four years using what appear now to be very questionable accounting practices?
DOUGLASS: (VO) Enron was paying Andersen a million dollars a week to be a consultant and to audit its books. The SEC permits such arrangements, which some call a conflict of interest. Andersen now admits that some of its employees destroyed Enron documents which could be crucial to the investigation.
(OC) Now, the Enron employees are also, again, the victims. Their 401ks went up in smoke, and many people say that's because 60 percent of those retirement funds were made up of Enron stock. Some in Congress are now saying that the percentage of company stock that should allowed in a 401k should only be 20 percent. George:
STEPHANOPOULOS: Thanks, Linda.
And now we're going to turn to someone who's an expert on all these issues. Arthur Levitt was chairman of Securities Exchange Commission from 1993 to early 2001, and he joins us now from Santa Monica, California.
Good morning, Mr. Levitt.
Mr. ARTHUR LEVITT (Former Chairman, Securities & Exchange Commission): Good morning, George.
STEPHANOPOULOS: Mr. Levitt, I think a lot of people are wondering if the SEC should bear some of the blame. When--when 29 top officials of a corporation sell off $1.1 billion in stock--nearly half their holdings--shouldn't alarm bells go off at the SEC?
Mr. LEVITT: The SEC bases its security regulation not on merit regulation but on full disclosure. It's interesting, the issues that brought about the Enron debacle could have occurred in almost any other corporation, and some of the people now who are calling for reforms were the very same people who frustrated the SEC in our efforts to get full disclosure, in our efforts to get the accounting industry to have some semblance of auditor independence.
STEPHANOPOULOS: But--but these sales were disclosed, were they not?
Mr. LEVITT: The sales were disclosed, but the blame here falls on a whole host of factors. It's not just the auditors, it's the security analysts, it's the rating agencies that dropped the ball, it's the investment bankers who cooked up the scheme to hide matters from the general public. And I think this is a time we've got to take a look at how standards are set. This has been a long-standing battle that the Commission has had to fight, and we've been frustrated by the business community and their impact on the Congress to dissuade these standards-setters from doing the job they should be doing.
STEPHANOPOULOS: Mr. Levitt, Secretary O'Neill was on this phone--was on this program earlier. When he got those phone calls from Ken Lay, do you believe he had an obligation to call the SEC chairman?
Mr. LEVITT: I'm not sure whether it's an obligation, but historically when there have been economic problems of this kind--Long-Term Capital, for instance--or any of the other events that occurred while I was there--Alan Greenspan and Lloyd Benson and Bob Rubin always communicated with--with me so that we were aware of the problem at the same time and could do something about it.
STEPHANOPOULOS: So it would have been a good idea?
Mr. LEVITT: It just happened during--during my years.
STEPHANOPOULOS: This--this whole episode is over real serious problems in the accounting industry. Arthur Andersen just this weekend revealed that they shredded documents related to the Enron case, maybe even after the SEC investigation began. That's a crime, isn't it?
Mr. LEVITT: I think it is. I think it is a violation of our securities laws, and it's highly unusual, at best. Arthur Andersen was one of three firms that fought the commission on this issue of auditor independence about a year ago.
STEPHANOPOULOS: Now, this is the latest in a series of problems for Arthur Andersen. They paid millions of dollars in fines for the Waste Management case, the Sunbeam case. Do you think they can survive this third strike?
Mr. LEVITT: Well, that's very difficult to tell. I--I'm simply not sure. I think it's easy to look at this in a vacuum and say this will kill the firm. But I think it's premature to say that. They've got a real problem. But as I've said before, this could happen in other American corporations. And I think we've got to take a new look at the way standards are set, in the way the accounting industry is overseen, in the way rules are formulated in the business community.
STEPHANOPOULOS: Does that mean independent boards and banning accounting firms from being both consultants and auditors?
Mr. LEVITT: Not necessarily a blanket ban but it does mean the appointment, in my judgment, of an independent group to oversee the accountants. But more than that, I think it calls for a new look at the way America's boards are constructed. I think that we should have a majority of members of a board come from the public, rather than from within the corporations. And the audit committee should be empowered to prevent this kind of occurrence from happening by having to approve any consulting contract that is given to the auditor before it is awarded to the auditor.
STEPHANOPOULOS: OK, Mr. Levitt, thank you very much.
Mr. LEVITT: OK, George.
STEPHANOPOULOS: When we come back, the ROUNDTABLE weighs in on Enron. George Will joins us after this.
(Commercial break)
Announcer: THIS WEEK with Sam Donaldson and Cokie Roberts will continue in a moment after this from our ABC stations.
(Commercial break)
DONALDSON: Now our ROUNDTABLE and Enron, where we give our opinions. And as always, joining us, George Will.
Good to see you, George.
GEORGE WILL reporting:
Sir.
DONALDSON: And, of course, George Stephanopoulos back.
Does George W. Bush have anything to worry about here, George Will?
WILL: He has lots to worry about. Look, the Democratic Party is always an inherently vulnerable to the suspicion that it is associated with the wilder shores of the cultural left. The Republican's inherent vulnerability is big business in the sense that big business is corrupt. Furthermore, there's the whole stereotype of Texas culture. Furthermore, the president, in his statement in the Oval Office when he said, `Mr. Lay supported Anne Richards in 1994,' was being Clintonian. That is, slippery. That is, he was technically right, but on the real matter, wrong.
DONALDSON: Well, George Stephanopoulos...
STEPHANOPOULOS: Slapped on the wrist by George Will, that's not the...
DONALDSON: Well, Mr. Lay said in a television interview before that election that while it was difficult, he was actually going to support George Bush.
STEPHANOPOULOS: Well, yeah, he was, and he gave, like you say, three times as much to George Bush than Anne Richards in `94. It was an odd moment for the president. I think it was to distinguish between the kinds of trouble he is in. You know, you hear all week long this is like Whitewater. It's exactly like Whitewater in this respect: No matter how much you investigate, you're not going to find any abuse of power in the White House or by top government or Cabinet officials. You're not going to find that. Where--where Bush could be vulnerable is just this whole web of influence and contacts that he had with Enron. And these ties, as George says, to big business, particularly big oil.
ROBERTS: But, you know, the Democrats are in danger of overreaching, as they always are, or as either party is when it comes to something like this. And they--they understand that. And there some people urging caution and particularly since many Democrats also took large sums of money from Enron.
DONALDSON: But Senator Levin said to you, Cokie, that he was not going to...
ROBERTS: Right.
DONALDSON: He--he accepted all this that O'Neill and others were saying; they didn't do anything.
ROBERTS: But, you know, I do think that the president could do a couple of things that would make you crazy (looking towards George Will). The first would be to come after campaign finance reform. He doesn't care about it. He's made it clear he doesn't really care much about it, so why not support it, and then--and then he gets rid of that whole issue. The other thing that the White House could do that would make a big difference would be to stop all of the bandying about with the House members--Republicans and Democrats and the general accounting office--about the energy task force. Just throw them mounds of paper from the energy task force.
STEPHANOPOULOS: And if they don't--if they don't, they're going to get sued...
ROBERTS: Sued by the GAO.
STEPHANOPOULOS: ...by the GAO. But, you know, I spoke with a White House official late Friday and yesterday, and they are still insisting that they are going to go right down the line on this. And what they're doing is making these documents more valuable.
DONALDSON: Well, the stone wall seldom works.
WILL: Cokie's right. Look, there are four things. You've mentioned two of them. Campaign finance may get passed. It shouldn't, but it will because of this. He may lose--Cheney may lose his argument with the GAO. He shouldn't, but he may because of this. Gray Davis will be helped in his election in California because he can turn his mismanagement of their energy crisis back on evil Texans. And furthermore, the whole drive to privatize--partially privatize Social Security will be hurt by this. Shouldn't be, but...
STEPHANOPOULOS: Well, it wasn't going anywhere, anyway.
WILL: I understand.
STEPHANOPOULOS: Absolutely. But what else will be hurt, though? There's another part of Bush's agenda which will hurt him substantively but help him politically: this whole effort to deregulate, particularly in the environmental area. It's going to be much harder for him to do that. If he doesn't do it, though, it takes away one of the Democrat's best issues.
ROBERTS: But you know what, on the longer term, one of the things that--that both parties--but particularly Democrats because they have been the party of government--is going to have to worry about is that we have seen in the last few months since September 11th this tremendous surge and trust in government and a trust in the Congress, of all things, and the--and the president and the leadership. I think this is going to send that sinking.
STEPHANOPOULOS: But--no, but right now there might be more calls now for the use of government, for the tools of government, calls for the re-regulation...
WILL: I agree--I agree entirely with George. War is the health of the state. We've said often this fall scandal can be the health of the state. Because now attention will be turned back to the 1995 bill...
ROBERTS: But don't you think it all gets to...
WILL: ...where by one vote...
DONALDSON: They chose it...
WILL: ...they overrode Clinton's veto of a deregulate--of a weakening of the securities bill.
STEPHANOPOULOS: Make Congress cease...(unintelligible).
DONALDSON: Another aspect. I mean, let's assume that the administration doesn't have any culpability in this directly. Who did? Who is to blame? What happened here?
ROBERTS: It--it looks like a good many people are out there to blame.
STEPHANOPOULOS: I mean, there's two people are going down for sure. I mean, Jeffrey Fastow (sic), the--the man who set up the partnerships is in big trouble. Arthur Andersen looks like it it's going straight down the tubes. They've tried to blame it on--on Enron, but they're not going to get away with. The other day I spoke with a man who made a fortune short-selling Enron. His name is James Chanos. And he said all the clues were there. You had the insider selling, you had indecipherable footnotes on these--on these partnerships...
ROBERTS: And he was sending up warnings a year ago.
STEPHANOPOULOS: ...and you had front loading of profits. Those clues were all there. Arthur Andersen is to blame for a lot of it.
DONALDSON: Well, clear--clearly, employees of Arthur Andersen in Houston made the calculation it was better to take the rap, which could be criminal, for shredding these documents than actually letting the documents be made public.
WILL: I argued last Sunday, Sam, that this is not a Washington story. Primarily, it's a New York Arthur Andersen and Houston/Enron story. But, you know, in--in California and other states that have `three strikes and you're out,' you got to jail forever. Sunbeam, Waste Management and Enron, how many strikes does Arthur Andersen get?
DONALDSON: And what about the other accounting companies? How do we know that some of them haven't also been playing fast and loose?
STEPHANOPOULOS: We don't. In fact, that bill that George was talking about just a--just a minute ago, since then there have been four to 500 restatements by accounting firms of all of their different reports. And this is going to go across the board.
ROBERTS: But, you know, it's also true that Enron is not the only company to have done what its done in terms of the executives getting big bucks out and the employees being left holding the bag. And I do think that that's what most--most people care about. Most people want to make sure their 401ks are OK, most people want to make sure they're not getting stiffed. And--and really, Enron is just one example of that in recent years.
STEPHANOPOULOS: And--and that's why you can bet that the first Bush task force to report back is going to be the one for 401k reform. They're going to try to move something through very quickly on that. Harder to get reform of corporate governance. even though people will want it, all the lobbyists are going to come in and try to slow that down.
ROBERTS: And that's going to be a real test of the ideology of this administration as well. Does the ideology take over and--and the whole idea of regulation of corporations become forbidden?
WILL: Well, 120 large US corporations have 401ks for their employees in which at least a third of the stock held by them are those corporation's stock. That ought to change. But there's a larger point here that you point to. And conservatives have to understand that capitalism and free markets don't just spring up like crab grass. They're the product of a very complicated set of laws and enforcement and provisions.
ROBERTS: That's right.
WILL: Capitalism's a government program.
DONALDSON: And also you--I must understand and I think people do--in capitalism there are winners and there are losers. And not everyone can be protected against loss. But you would think that if there is a fraud involved..
STEPHANOPOULOS: That's right.
DONALDSON: ...the kind of mismanagement that we see here, there ought to be some protection.
ROBERTS: And the rule of law has to prevail.
STEPHANOPOULOS: Yeah, and the rule of--if it looks too good to be--if it looks too good to be true, it probably is. Don't even ask.
DONALDSON: You got the last word, George. Thank you.
And when we come back, there are more questionable transactions causing controversy in THIS WEEK's edition of the George Will commentary. George explains it right after this.
(Commercial break)
ROBERTS: George Will, Enron and football?
WILL: Cokie, Enron's accounting books should be filed under fiction. And after last Sunday, so should the NFL's record book. Going into the last regular season game, New York Giant Michael Strahan needed just one sack of the quarterback to set a record. Late in the fourth quarter, he still needed it. So quarterback Brett Favre, whose Packers had the game won, gave it to him. Watch this. Favre kept the ball and ran towards Strahan. Your Aunt Minn (ph) could have sacked Favre. Then Strahan's teammates gave Favre's friendly pats. Everyone was so nice.
In 1998, a Connecticut basketball player suffered a career-ending injury just one basket shy of the school scoring record. So, her coach and the visiting team agreed to exchange uncontested lay-ups. The player got the record. Everyone was nice.
Some say Joe DiMaggio got help with his 50-game hitting record. Official scorers may have turned what should have been errors into Dimaggio hits. The scorers were being nice.
In 1910, Ty Cobb was detested and Napoleon LaJoie was nice. On the last day of the season, one team tried to help LaJoie beat Cobb for the batting title. The team's third baseman played far back, LaJoie got eight hits, six of them bunts towards third. The team was being nice.
Last Sunday, many people said, `Michael Strahan is nice, and Brett Favre was nice, so what's the harm?' Well, here's the harm: The moral seriousness of sport derives from the integrity of the competition. Absent that, you have a sham like professional wrestling. Records are worth keeping and celebrating and striving to break because they certify excellence, excellence achieved under the pressure of competition. Rig the competition in order to be nice, and records will certify nothing. Sport is morally serious because athletic excellence cannot be faked. Niceness isn't nice when it produces fakery on the playing field.
ROBERTS: So much for nice.
Sam and I will be right back.
(Commercial break)
ROBERTS: Well, Sam, it's neither Enron nor football on dot-com.
DONALDSON: That's right. Some news organizations, including ours, want the trial of Zacarias Moussaoui, who is charged with complicity in the September 11th attack on America, to be televised. And prosecutors say that's too dangerous. You can see the arguments if you logon to sam.abcnews.com.
ROBERTS: And until next week, that's THIS WEEK.

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Sarah Palmer
Internal Communications Manager
Enron Public Relations
(713) 853-9843