Posted on 06/30/2002 9:08:22 PM PDT by lewislynn
June 29, 2002, 11:52PM
WASHINGTON -- It took Enron Corp. millions of dollars spread over dozens of lawmakers, lobbyists and political parties to reach an apex of influence in the nation's capital.
Other Houston-based energy companies took note, and it wasn't long before El Paso Corp., Reliant Energy and Dynegy also were pouring millions into federal campaigns and lobbying, where money and access and influence all run in the same pipeline.
But now, after spending millions toward achieving Enron-like levels of prestige in Washington, Houston-based El Paso, Reliant and Dynegy find themselves facing degrees of Enron-like opprobrium.
Ongoing federal investigations into the business practices of all four struggling companies are expected to lead to new federal regulations that may ultimately prove harmful to them and the Houston economy.
And for all the money the now-struggling companies once spent on candidates, parties and inaugurals, there are few friends left in Washington.
The current climate of disfavor is a stark contrast to last year, when executives from all four companies -- especially Enron and Reliant -- had White House policy-makers' attention in formulating the national energy plan.
Its wealth and access gone, Houston's once go-go energy sector is no longer likely to enjoy the influence it once had in Washington on a range of national issues.
"Politicians are going to be much more careful, and energy companies are going to have to work much harder for (access)," said Steven Weiss, spokesman for the Center for Responsive Politics, a Washington group that tracks campaign contributions.
For many corporations, investing in politicians and lobbyists has evolved over the years into a necessary, expensive and fairly routine cost of doing business.
But the revelations surrounding Enron and its auditors at Arthur Andersen focused public attention on ties between private business and government officials and helped speed congressional passage of the first meaningful changes in campaign finance law in 30 years. Congress and the Securities and Exchange Commission also are developing more stringent regulations for business.
"I believe this sector is going to find it much more difficult in the current political environment, much like they are finding in the capital markets, for the foreseeable future," said Rep. Ken Bentsen, a Houston Democrat.
Bentsen, who received more campaign money from Enron than any other House member, returned a portion to the company's former employees.
While many of the reforms being debated in Washington would enhance disclosure requirements and tighten accounting principles for all public corporations, some measures targeting the energy industry would be less welcome for energy traders and others.
"Both the effects of the Enron situation and, quite frankly, some less-than-appropriate behavior by other energy traders, may have the effect of bringing excessive regulation on the market to the detriment of the Houston economy and Texas economy," Bentsen said.
There are several key differences between Enron and the other Houston companies.
"Among other things, the close relationship that President Bush had with (former Enron Chairman) Ken Lay really distinguished the Enron situation from the others," Weiss said.
At Reliant, both former CEO Don Jordan and his successor, Steve Letbetter, were "Bush Pioneers," members of an elite group that each helped raise at least $100,000 for Bush's 2000 presidential campaign.
Reliant, a major Enron competitor, was a key player in the push to deregulate the energy markets, and also played a role in the development of the Bush administration's energy policy.
Records released in connection with lawsuits and a congressional investigation into the development of the White House energy policy show numerous meetings between administration officials and Reliant.
The meetings were scheduled during the time administration officials were drafting the policy, and also in the months after its May 2001 release, when the document was being refined.
During the 1999-2000 election cycle, Reliant spent $761,077 on national political parties and campaigns, according to the Center for Responsive Politics.
In addition to those donations, Reliant spent $1 million on both in-house and hired lobbyists in Washington in 1999, and $1.5 million in 2000.
"Reliant was the biggest player of the other three, and probably still is," said George Strong, a Houston consultant and longtime state and federal lobbyist for Enron.
These days, the once-formidable Reliant is under federal investigation for its trading activities, including so-called round-trip trades that allowed its marketing and trading arm to inflate revenues and trading volumes over a three-year period.
A spokesman for Reliant had no comment about the company's campaign contribution history or Washington lobbying.
Reliant may have had a higher profile, but El Paso was actually the biggest Washington spender after Enron among the other three Houston companies, according to campaign finance data from the Center for Responsive Politics.
El Paso poured $3.1 million into federal campaigns and party activities since 1995, those records show.
Like Reliant and Enron, representatives from El Paso met with Energy Department officials working on the administration's energy policy, documents show.
El Paso is under scrutiny by federal regulators for allegedly manipulating natural gas prices in the California markets during that state's energy crisis.
Like many other corporations and industries, El Paso did its peak campaign spending during the 1999-2000 election cycle.
And similar to other energy-based companies pushing for deregulation of the markets, the bulk of El Paso campaign spending was directed to Republicans, the primary supporters of deregulation and other industry-friendly polices.
Norma Dunn, spokeswoman for El Paso Corp. in Houston, attributed the comparatively high $1.4 million the company gave to candidates and parties in 1999 and 2000 to the busy presidential election season.
"We support candidates who support issues that are important to us," Dunn said.
The Federal Energy Regulatory Commission is looking into whether El Paso engaged in wash trades, a form of sham transaction in which the same party buys and sells the exact same amount of power in a deal with an energy trading company.
The practice, which El Paso has denied engaging in, was used by some companies to artificially inflate revenues and trading volumes.
Another potential hit on Houston's economy has come from Dynegy, a far smaller player in the Washington power game.
Dynegy and former CEO Chuck Watson have kept comparatively low profiles in Washington, maxing out federal campaign spending in 1999-2000 at $366,775.
In 2000, Dynegy spent about $120,000 on lobbyists in Washington -- a nominal sum that would rank it as a minor player.
"I think the message is that we have always tried to be strategic first with political contributions, but we have always believed that it's important to have a stake in the process," said Dynegy spokesman David Byford.
Instead of pouring money into political parties or the company's political action committee, Byford said Dynegy preferred to work through trade organizations and relationships with lawmakers.
These days, Dynegy is under federal investigation for its accounting on a natural gas deal known as Project Alpha. The company is also being probed for trades it did with CMS Energy Corp.
While Dynegy's stock has plummeted, the company is also working to convince credit-rating agencies not to downgrade its debt ratings.
Although Dynegy does not frequently appear on the schedules of administration officials drafting the energy policy, all four Houston-based companies participated in at least one meeting together.
All four were invited to a March 29 meeting between energy officials and California energy suppliers less than two months before the administration's policy was released.
But among the four Houston-based companies, Enron was the leader in getting Washington's ear. Since 1995, Enron Corp. and its executives gave $4.7 million in unregulated soft money to the parties and direct contributions to federal candidates through its political action committee, according to the Center for Responsive Politics.
Since 1997, Enron spent an estimated $8.7 million on federal lobbyists.
Lay, dubbed "the poster child for cash-and-carry government" by Democratic Sen. Fritz Hollings of South Carolina, had a personal relationship with President Bush and was among Bush's largest contributors.
Relationships and access forged in part through political support helped Enron gain, among other things, dozens of contacts with Bush administration officials during development of the White House energy policy.
"What Enron got for its money was a decade of exemption from legitimate government oversight and regulation," said Seth Amgott, communications director for Washington-based Common Cause, a government watchdog group.
Now, for all the millions poured into Washington, the four energy companies are facing a future with new restrictions fashioned by the same officials they supported and lobbied in the past.
Limiting flexibility and innovation will likely be among the downsides of new regulations, according to Bentsen and others.
For example, Congress is considering forcing all energy trading into regulated markets, which could push those operations to New York or London.
Raymond Plank, chairman of the board at Houston's Apache Corp., said revelations about the energy sector demonstrate the need for reform to restore confidence in the industry and remove price volatility in the markets.
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