Posted on 01/11/2002 7:59:12 AM PST by an amused spectator
Bush, aides knew of Enron troubles
By Anne E. Kornblut, Globe Staff, 1/11/2002
WASHINGTON - As legal troubles mounted for energy giant Enron, White House officials acknowledged yesterday that Enron chairman Kenneth Lay, a major donor to President Bush, had called two Bush Cabinet members late last year to discuss the company's collapsing finances.
White House officials, eager to control the political damage at the start of a criminal inquiry, said the administration had not offered assistance after Lay called the Commerce and Treasury secretaries. Bush, who has known Lay since his years in Texas, sought to distance himself further, saying he has not talked to Lay since last spring.
Enron tumbled from the heights of the energy trading market to junk bond status in a matter of weeks last fall, prompting investigations into accounting practices that forced the firm to file for Chapter 11 bankruptcy on Dec. 2. The retirement plans of thousands of employees, who had invested heavily in company stock, became worthless. The company was already facing scrutiny on Capitol Hill, where Democrats accused the politically connected firm of wielding unfair influence over national energy policy.
The disclosure about Lay's phone calls gave fresh momentum to the Democratic effort to investigate Enron's dealings, fast becoming the biggest potential embarrassment the Bush administration has faced. Matters grew worse for the Texas company late yesterday when its auditor, Arthur Andersen LLP, said a ''significant but undetermined'' number of its documents and electronic files relating to its auditing of Enron had disappeared or been destroyed.
Attorney General John Ashcroft, meanwhile, recused himself from a Justice Department inquiry into Enron announced on Wednesday. Ashcroft received a $25,000 donation from Lay and another $25,000 from the company and its employees during his 2000 reelection bid for US senator from Missouri, which he subsequently lost. Deputy Attorney General Larry Thompson has taken over the lead role in the investigation, Justice Department officials said.
According to a White House spokesman, Lay suggested in a phone call to Commerce Secretary Donald Evans on Oct. 29 that Enron might follow the example of Long Term Capital Management, a hedge fund that received a private bailout arranged by a public reserve board in 1998. But in that case, LTCM's financial woes were viewed as a threat to the whole economy; neither Evans nor Treasury Secretary Paul O'Neill - whom Lay spoke with on Oct. 28 and Nov. 8 - felt that Enron posed such a danger, officials said.
After receiving a report on the matter by Treasury Undersecretary Peter Fisher, Evans and O'Neill decided that Enron's impending bankruptcy filing ''was isolated and unique, and focused on Enron Corp., and was not symptomatic of anything sector-wide,'' White House press secretary Ari Fleischer said.
''I want to remind you that communication is not a wrongdoing,'' Fleischer said, when pressed repeatedly about the phone calls. ''What took place here was, they received phone calls and took no action. The charge has been, did the government take any action. And the answer from these two officials is no. And I think if you were going to go down this road, I think it's also fair to say, who in the entire town had any contact with Enron or phone calls?''
But Representative Henry Waxman, the California Democrat who for months has pursued information about the relationship between Bush and Enron, turned the question on its head. Why, Waxman asked, did the administration fail to act despite having advance knowledge of the largest bankruptcy filing in history?
''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,'' Waxman said in a statement. ''I am deeply troubled that the White House stood by and let this happen to thousands of families.''
White House officials said Bush learned that Enron was headed toward bankruptcy court last fall, but that he was not a part of the decision to steer clear of assisting the firm. Bush said he had never discussed the company's financial troubles with Lay.
''I have never discussed, with Mr. Lay, the financial problems of the company,'' Bush told reporters during a meeting with his economic team. ''The last time that I saw Mr. Lay was at my mother's fund-raising event for literacy, in Houston. That would have been last spring. I do know that Mr. Lay came to the White House in - early in my administration, along with I think 20 other business leaders, to discuss the state of the economy. It was just kind of a general discussion. I have not met with him personally.''
According to a letter from the White House to Waxman dated Jan. 3, however, Enron executives met with Vice President Dick Cheney six times over the past year. Cheney heads the president's energy task force, and discussed the energy crisis in California earlier last year with Lay personally.
In response to questions about Enron's questionable shareholder dealings - which left thousands of former employees destitute because they were not allowed to dump their Enron stock as prices fell, yet allowed high-ranking executives to sell their shares when the prices were still high - Bush called on O'Neill to review pension rules, possibly in order to put a limit on how much an employee can invest in a single company.
In recent days, White House officials have begun to point to Enron's bipartisan - albeit lopsided - political donations as one sign that the administration was not alone in its relationship with the energy trader.
Lay and other Enron employees have been a major source of contributions for Bush throughout his career; the chairman, who is based in Texas, was a ''pioneer'' for the Bush 2000 campaign, a designation given to those who raised more than $100,000 each. Lay gave another $100,000 for the Bush inaugural and thousands more to pay for the Florida recount. During his two gubernatorial races, Bush received $122,500 from Lay.
In addition, since the beginning of the last election cycle, in March 1999, Lay has given $282,910 in unregulated soft money to the Republican National Committee, on top of the money he gave Ashcroft. Lay has donated to an array of candidates in previous years, including giving $1,000 to then-New Jersey governor Christie Whitman in 1999; $2,000 to Senator Bob Dole in 1996; $1,000 to President George H.W. Bush; and $1,000 to Mitt Romney, who tried in 1994 to unseat Senator Edward M. Kennedy. Lay also has given to Democrats, donating $500 to Representative Edward J. Markey of Massachusetts in 1996.
According to the nonpartisan Center for Responsive Politics, Enron gave more in political donations than any other energy firm during the 2000 election, contributing more than $2.43 million to candidates and parties; 72 percent of the donations were to Republicans.
In the current election cycle - during which the company fell from soaring profit reports to filing for bankruptcy protection - Enron gave $168,834 in donations, 88 percent of which went to Republicans.
The ties between Enron and the Bush administration reach beyond donations. Karl Rove, Bush's chief political strategist, had more than $100,000 in Enron stock before he agreed to divest it - and still held onto $68,000 of it while he discussed the energy business with Lay at the beginning of Bush's term. Lawrence B. Lindsey, the president's chief economic adviser, made $50,000 from consulting for Enron in 2000.
Anne E. Kornblut can be reached at akornblut@globe.com.
The underlined portion is an out-and-out lie.
In recent days, White House officials have begun to point to Enron's bipartisan - albeit lopsided - political donations as one sign that the administration was not alone in its relationship with the energy trader.
Kornblut's "example" of gifting to Democrats?:
Lay also has given to Democrats, donating $500 to Representative Edward J. Markey of Massachusetts in 1996.
Another lie by obfuscation. Kornblut apparently was too busy doing her nails or somesuch to investigate the McLarty and Ron Brown connections. ;-)
The verdict is in: Paid Liberal Troll
Does anybody have the slightest doubt how "troubled" Waxman would be if the Bush Administration had tried to intervene?
The same magnitude stock-price decline happened with numerous stocks, most notably internet plays, in 2000-2001. We're just beginning to see that the Enron fiasco was due to poor auditing. The precipitous stock crash for the internet-type companies was ~probably~ due to normal business reasons, which are pretty clear by now: get funding, sell vaporware, take the money and run.
If I'm not mistaken Enron was in the proccess of changeing it's 401k manager at the time of the free fall, if true they employees could not do anything with their accounts.
From the article:
In early 2001, Enron decided to contract out its 401(k) administration to an outside company. The transfer required a freezing of accounts, which took place over a period in October and November. The time frame is under dispute, and is the subject of many lawsuits. The company claims the period was 12 trading days, from October 26 through November 12. One employee has testified that accounts were frozen as early as September 26. One lawsuit claims that different accounts were frozen for different time periods. Another claims the lockdown started on October 17.
This general period was horrible for Enron. Some of the highlights: On October 16, it announced that it had to take a $1.1 billion charge for bad investments. On October 22, the Securities and Exchange Commission (SEC) announced a probe of Enron. On October 29, Moody’s downgraded Enron’s credit ratings. On October 31, the SEC upped its probe to a full-fledged investigation. On November 8, Enron reduced its claim for net income since 1997 by 20 percent.
On October 26, the day Enron claims it froze its 401(k) accounts, its stock was at $13.81. By the time 401(k) investors could sell again, the stock was at $9.98.
This lockdown is troubling, but the facts are murky. Enron claims it was routine and previously scheduled. But considering events, one would think that prudence should dictate that Enron postpone the transfer until less tumultuous times. One retiree claims Enron pushed its stock aggressively. But another retiree who left his entire account in company stock says he was advised to diversify. Did executives push stock on employees while selling from their portfolios? We’ll know more someday, as the Federal Trade Commission, the Department of Labor, and a gazillion attorneys are all investigating the issue.
EXACTLY!! AA was a huge supporter of Bill and the gang. I would like to know what period was covered by the documents that were purposely destroyed. I'll bet a paycheck that what is missing is what would point a conclusive finger at more wrongdoing by Bill.
To: lewislynn
On October 26, the day Enron claims it froze its 401(k) accounts, its stock was at $13.81. By the time 401(k) investors could sell again, the stock was at $9.98..... (that's a 30% loss in value)
In other reports, I have read that at its highest point Enron stock was somewhere in the $80 -$90 range. Let's say $80 to be conservative. Then at $13.81, Enron would already have lost over 80% from its high point. I can tell you I would have been 100% out of Enron in my 401(k), given the choice which they apparently had, long before it hit $13.81!
22 posted on 1/11/02 12:28 PM Pacific by FairWitness
These were the same employees who rode the stock all the way down from $90 to $13, so the chances of them wanting to sell during the lockdown period were probably zero. I wonder how many immediately sold after the lockdown period expired. I'll bet it was not very many at all.
Any current or former Enron employees care to comment?
Basically the story is "they new they were going to go bankrupt but did nothing to interfere with the workings of the free-market." Oh the Horror!!!
What Rep. Godzilla Nostrils really meant was: "I tried to catch the Bush administration offering a sweetheart deal to Enron, but since they didn't (DAMN), I have to use the 'He hurt the little people' tactic now."
Can you believe this P.O.S. CLYMER???? He's unbelievable!!!
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