Posted on 12/10/2001 7:47:51 AM PST by BluH2o
W A S H I N G T O N, Dec. 12 — When the energy-trading firm Enron collapsed recently after disclosing financial irregularities, thousands of employees lost their jobs and investors lost billions. Enron's fall also crippled one of President Bush's most loyal corporate supporters.
The Houston-based company was among the first to back Bush when he ran for governor of Texas. Enron and its executives went on to become the largest source of financial support for Bush's gubernatorial campaigns, giving more than $500,000, according to a study by the Center for Public Integrity.
"Enron was the number one career patron for George W. Bush," said center director Charles Lewis. "There was no company in America closer to George W. Bush than Enron." Lewis says the company's goal in backing Bush and other politicians was to encourage further deregulation of the energy industry.
"Enron made a decision that they needed government to go their way and they put the money out to make sure that happened," he said.
Loyalty and Access
Congressional hearings open this week into Enron's financial implosion, which culminated in a Dec. 2. bankruptcy filing. The Labor Department, the Justice Department and the Securities and Exchange Commission are all investigating Enron. It's unclear to what extent the inquiries are examining the longstanding ties between administration officials and the company, which was once the seventh-largest U.S. corporation in terms of revenue.
Enron CEO Kenneth Lay has been a friend of Bush and the Bush family for years. When Gov. Bush ran for president, Enron gave him access to a company jet. (The Bush campaign reimbursed the company roughly $25,000 for the flights.)
In April 2000, when Enron opened a new baseball stadium named for the firm, then-candidate Bush sat right in front of Lay in the Enron box.
Since 1999, Enron and its executives have given more than $2 million to the Bush campaign and other GOP causes. Democrats got about a quarter of that amount.
As Bush assumed the presidency, Enron had unusual access to the new administration's deliberations about energy policy and appointments to important posts. Lay served on the Bush transition team and helped interview candidates for the Federal Energy Regulatory Commission, which oversees the gas pipelines and electricity grids that are key to Enron's business. Earlier this year, the commission's chairman, Curtis Hebert, who was being considered for reappointment by the White House, declared himself "offended" by Lay's lobbying efforts. Hebert later quit the panel.
When Vice President Dick Cheney drafted a new energy policy, he met with Lay and other Enron executives. Enron was reportedly the only company to be granted such a meeting.
Lay declined to be interviewed for this story.
Washington Posts
Enron alumni also fill prominent slots in the Bush administration. The president's chief economic adviser, Larry Lindsey, and the top trade negotiator, Robert Zoellick, both served as advisers to the company. Secretary of the Army Thomas White was an Enron executive before joining the administration. When he assumed the Army post, White was forced to sell more than $25 million in Enron stock, according to a financial disclosure form he filed.
Rep. Henry Waxman, D.-Calif., has been pressing Cheney to detail his contacts with the troubled company.
"There is a very intimate connection between Enron and the Bush administration. How could they not have known what was happening?" Waxman said in an interview last week. "I think we need to find out what people in the administration knew, many of whom used to work for Enron. We ought to find out whether they ignored warning signs."
In the past, the White House has resisted requests for information about its dealings with the energy industry. The General Accounting Office, the investigative and auditing arm of Congress, threatened to sue Cheney earlier this year after he declined to turn over documents about his meetings with Enron and others interested in the energy policy he was developing. After the Sept. 11 attacks, GAO said the effort to get Cheney's records was no longer a priority.
Despite the administration's numerous ties to Enron, the White House has deflected questions about the company's failure. Reporters who asked White House Press Secretary Ari Fleischer about Enron were referred to the Treasury Department.
However, Fleischer said last week that Congress has grounds to investigate how Enron fell so far so fast.
"It's very understandable why people in Congress… charged with oversight of any implications of Enron's bankruptcy would seek hearings," he said.
If you can prove otherwise instead of looking for apologies or shooting the messenger, have at it.
How about the self proclaimed conservative opinions at etherzone.com...Power Scam: THE ENRON BUSH CONNECTION
You are completely correct.
The Democrats are just trying to find an 'issue' to ride back into the White House and whittle away some of Bush's high numbers. Class warfare spins well for them.
They are trying an 'enron' around the truth.
Correct. The valid point that Enron's connections with the Bush family did it no good at all (bankruptcy) needs to be stated over and over on the TV news shows that seek to use this business failure as a lever to make Bush look bad, somehow, some way.
The Bush administration should not stand in the way of any Congressional investigation. To the general public, perception is everything and stonewalling or attempting to thwart investigations of Enron's financial dealings that caused the collapse simply look bad for Bush. Let it all hang out, but never stop pointing out that the 'connections' didn't pay off and there was no corruption going on between the Bush White House and Enron.
Thank you for the link from the Buchanin supporters. It was very entertaining to read how Bush's refusal to involve the federal government in California's energy woes was deliberately intended to create an artificial energy crisis and "ensure Enron's unconscionable profit".
Unfortunately, there is no evidence that Enron's contributions gave them any benefit. I find the quote below laughable
One of the global energy cartel's most visible players, Enron saw its corporate profits rise 34 percent in the fourth quarter of 2000. Enron shareholders should ask -- did dividends come from price gouging US citizens?
While it may be acceptable for the company to dictate the terms of the company match, this sounds blatantly illegal if it involves the employee's 401(k) contributions. If it is only the company's matching funds that were lost, then the employees really have nothing to complain about since it wasn't their money to begin with.
I thought that "political payoffs" were when you gave money to a politicians and then recieved some benefit. There is no quid pro quo when the donor goes bankrupt.
I've heard this categorizaton a lot, and I have to take issue with it.
If a company gives me stock options as part of my compensation, it's my money. Not the company's money. Mine. And why should the company have the right to prevent me from using that money as I see fit? I don't understand how FReepers can get so insensed about wanting the government to allow them to do whatever they want with their social security funds, and yet have no problem at all with a private company doing even more harm to their employees by both denying them control, and failing to provide any security.
I'm not advocating that companies should be required to guarantee returns on stock, because that goes against the market. However, it seems wrong for a company to pretend to offer a form of compensation that seems to be used only to keep the stock price artificially high and protect the wealth of the executives.
I agree, but what we are talking about here is distinctly different than stock options. The company offered to match the contributions that employees made to their 401(k) plans, on the condition that the money the company contributes was used to purchase company stock. Companies are not required to provide matching contributions (Ford, in fact, just announced that it would not provide matching funds next year), so anything they do provide can be treated as "found money."
Also, it should be noted that the company's requirement to purchase company stock with these matching funds does not absolve the employees of their responsibility to watch their own contributions carefully. It sounds to me like many of them failed in this regard.
If these were real stock options, the employees would have been truly screwed. They would have owed taxes on stock that was given to them at $50 per share (as an example), even though the stock is now worth less than $1 per share.
This is not some give-away package. The naievety of the posters here is blatant. "Gosh, the company's bankrupt! How could Jr. benefit from that?" Figure it out, Einsteins. The company's bankrupt, not the execs!
As for any employee who used his or her OWN money to buy company stock -- I can't hold everybody's hands as they work their way through this daunting, dangerous, often unfair thing called "life." If they have a legitimate complaint about being deceived in terms of the value of the company, then they need to take that up with their company executives and (more importantly) the auditing firm that declared the company's books to be in good shape.
Stupid is as stupid does.
I agree that these are different than stock options, but I have to say I still look upon this as more than "found money." 401(k) matching is part of compensation. A company is not required to provide it, but once provided, ownership of that money belongs to the employee, not the company.
The employees were sold a bill of goods at Enron. They were told they were getting something for retirement.... Actually, they were used to help ensure the executive team's lucrative exit. Is it illegal? Probably not. Is it immoral? I have little doubt.
The key here is that the purchase of company stocks was a condition of the company providing the matching funds in the first place. In other words, the "compensation" was ultimately not supposed to be a cash contribution to the employee's 401(k) account, but a contribution of X shares of Enron stock.
It looks like the executives at Enron have simply exploited a gaping loophole in U.S. tax law. Suppose Enron stock is trading at $100 per share. If the company had a profit of $10 million dollars, they would have been forced to pay a substantial portion of it (say $3.5 million) in corporate taxes or paid it out in company dividends (where it would be taxed at individual income tax rates that could be as high as 39%).
Instead of exposing themselves and their shareholders to that kind of tax liability, Enron simply paid the money to their employees on the condition that it be used to purchase Enron stock. The $10 million "investment" in the company drives the stock up to $105 per share, at which time the executives sell off some of their stock at the higher price. The money they make on the stock sale is taxed as a capital gain, not income, which means that anyone holding the stock for more than twelve months pays no more than a 20% tax on their gain.
The employees have been exploited here in a sense that they thought they were getting much more than they actually received, and there was probably some kind of fraud involved if the auditing firm gave the company a clean bill of health. I would need to know exactly how a top auditing firm could screw this up so badly before I could say exactly who was at fault here.
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