January 11, 2002
A Familiar Capital Script
By DON VAN NATTA Jr.
ASHINGTON, Jan. 10 — The rapidly exploding Enron (news/quote) inquiry presents elements reminiscent of earlier Washington scandals, including carefully phrased denials and accusations of easy access. And in a matter of hours today, it sent the White House into a full- scale effort to contain the potential damage to President Bush at a time when he wants to focus on the war on terrorism and the flagging economy.
The White House spent much of the day trying to distance the president from a torrent of bad news about the fall of Enron, the Houston energy conglomerate.
Although no one has suggested that Mr. Bush has done anything wrong, the connections between his presidency and Enron are uncomfortably close. The company's chairman, Kenneth L. Lay, has been a close friend of Mr. Bush for many years, and Mr. Lay and other Enron executives have contributed more money to Mr. Bush over his political career than anyone else, an amount exceeding $550,000. Mr. Lay contributed an additional $100,000 for the Bush inaugural committee.
Those connections were made vividly clear today when the White House disclosed that Mr. Lay discussed his company's precarious financial condition last fall with Treasury Secretary Paul H. O'Neill and sought assistance from Mr. Bush's best friend and presidential campaign chairman, Commerce Secretary Donald L. Evans.
Throughout the day, White House officials denied that Mr. Bush had been aware of the company's troublesome finances or had ever been asked to come to its rescue.
But on Capitol Hill, Democrats were already beginning to ask of the president, "What did he know and when did he know it?" And questions were being raised about whether a criminal inquiry into Enron's collapse should be led by a special counsel rather than by the Justice Department, because Attorney General John Ashcroft received $57,499 in campaign contributions from Enron and Mr. Lay, according to the Center for Responsive Politics.
Mr. Ashcroft, as well as his chief of staff, recused themselves from the criminal investigation, which will try to determine whether the company or its executives committed fraud before it went bankrupt. But critics still questioned whether the Justice Department, which includes many other political appointees, could independently investigate the company.
Just as Enron's collapse was stunning because it occurred so quickly and so completely, the latest disclosures have reawakened Washington's scandal machinery, which had been practically dormant since Sept. 11. The capital may once again face months, if not years, of yet another investigation of the White House featuring the volatile mix of money, influence, access and politics.
Elements of a classic political scandal are here: A Texas corporation, led by Mr. Bush's most generous campaign contributor, files the largest bankruptcy petition in American history. A handful of executives are able to sell $1 billion worth of the company's stock before its collapse, but thousands of employees are barred from selling, losing their life's savings and retirement accounts.
And just this week, the White House disclosed that Enron executives, and the company chairman, had meetings and discussions with cabinet members, White House officials and Vice President Dick Cheney before and during the corporation's implosion.
On top of everything else, the accounting firm that audited Enron's books, Arthur Andersen LLP, disclosed today that a "significant but undetermined" number of documents related to the company had been destroyed.
"This is the perfect storm," said Philip M. Schiliro, the chief of staff for Representative Henry A. Waxman, Democrat of California. "It's the biggest bankruptcy in American corporate history, a bankruptcy where a small number of executives enriched themselves to the tune of hundreds of millions of dollars while thousands of employees were left with worthless stock. And in 2001, Enron is the most influential company in Washington. When you piece it all together, there are many questions that need to be answered."
President Bush said today that he had never discussed Enron's financial woes with Mr. Lay, who has supported Mr. Bush politically since his unsuccessful campaign for Congress in 1978. Mr. Bush said he last saw Mr. Lay in Texas at an April 30 fund-raiser for the literacy foundation of the former first lady Barbara Bush. At the time, Enron's price per share was nearly $60; its closing price today was 67 cents.
On Capitol Hill, Republicans and Democrats alike have pledged to work together to get to the bottom of the matter. Some Democratic officials also expressed glee that questions about White House influence peddling seemed to be emerging as a major political story of 2002.
"If their goal was to give this story a head of steam, they have succeeded," Jennifer Palmieri, the press secretary of the Democratic National Committee, said of the White House's handling of the Enron matter. "I think they are very spooked by this."
Five Congressional committees have sent out subpoenas on the matter. The first of many hearings expected this year is set for Jan. 24 by the Senate Governmental Affairs Committee, which is headed by Senator Joseph I. Lieberman, Democrat of Connecticut, who may be thinking of running for president in 2004.
Several congressmen demanded again today that the White House release records of all its contacts with Enron executives, including telephone and e-mail messages.
"In contrast to the six contacts the White House disclosed," Mr. Waxman said, "I suspect there were dozens of conversations between administration officials and Enron representatives during the past year. The public and Congress should have this information, especially since 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."
Political operatives and advocates of campaign finance reform said the Enron matter's staying power would depend in large measure on how the administration handled it in the coming days and weeks.
"The Enron scandal clearly moved to a new stage today," said Fred Wertheimer, president of Democracy 21, a public policy group, "and it has reached a point where it will now demand serious national attention."
Just as the Congressional committees and the news media are gearing up for what promises to be an inquiry that could last months, if not years, the principals have hired lawyers with golden tongues and lengthy experience in dealing with scandals.
David Boies, a leading trial lawyer, represents Andrew S. Fastow, Enron's former chief financial officer. W. Neil Eggleston, a prominent Washington lawyer, represents Enron's outside directors.
And Robert S. Bennett, the Washington lawyer who represented President Bill Clinton in the Paula Jones matter, is now Enron's lead Washington lawyer.
Mr. Bennett said today that he welcomed the criminal inquiry because it would "bring light to the facts." But he also warned that the Congressional inquiries could easily degenerate into a "circus atmosphere."