By KAREN GULLO, AP Writer
Monday, August 13, 2001 WASHINGTON (AP)
The FBI is under the microscope, facing a barrage of investigations into everything from alleged threats against whistleblowers to lost weapons.
It's quite a switch for an agency that is used to doing the investigating and operates largely in secret. The scrutiny is coming from all directions. Congress, the Justice Department and outside experts are looking into a series of bungles that have dogged the FBI in recent years.
FBI officials say the bureau is cooperating fully with investigators.
"While it's a significant burden, FBI employees understand the need for this oversight and at the same time are fulfilling their law enforcement and national security responsibilities," said spokesman Mike Kortan.
The scrutiny and a steady stream of headlines extolling the latest blunder have taken a toll on morale, observers say.
"It's something very different from what they are accustomed to," said Michael Bromwich, a former Justice Department official who investigated problems with the FBI laboratory. "The spotlight is on the FBI."
FBI officials were bracing for the release Monday of portions of a review highly critical of the bureau's handling of the Wen Ho Lee case.
Lee, who had worked on top-secret nuclear weapons programs since the 1970s, was indicted on 59 felony charges alleging he transferred nuclear weapons information to portable computer tapes. He spent nine months in solitary confinement, but all but one charge against him was eventually dropped.
At least six other investigations into the FBI under way. Officials confirmed last week that the Justice Department's Office of Inspector General, an internal watchdog, is investigating allegations of retaliation against agents assigned to look into the bureau's handling of the 1992 standoff with white separatists in Ruby Ridge, Idaho.
As part of the inquiry, Inspector General Glenn Fine is looking into allegations that senior FBI officials are immune from disciplinary measures and punishments imposed on lower-ranking agents.
The Senate Judiciary Committee also is scrutinizing an alleged double standard that protects top managers from punishment.
Lawmakers are especially interested in whether the FBI's Office of Professional Responsibility, which for years had primary responsibility for investigating wrongdoing at the bureau, helped foster a double standard.
Robert Mueller, the newly installed FBI director, said the bureau would admit its mistakes, correct them and hold agents and senior officials accountable under his leadership.
He'll inherit a dizzying array of inquries when he takes over Sept. 4.
The inspector general is also investigating:
-The FBI's performance in detecting and investigating Robert Hanssen, a veteran agent who has admitted spying for Russia
-Why the FBI failed to turn over documents to lawyers for Oklahoma City bomber Timothy McVeigh. That incident forced Attorney General John Ashcroft to postpone McVeigh's execution nearly a month.
-How the FBI keeps track of weapons, laptops and other equipment following the FBI's disclosure that hundreds of guns and computers are missing. One gun was used in a murder.
Not all of the inquiries have gone smoothly. Fine's investigators initially encountered problems obtaining documents from the FBI early in the Hanssen investigation, said sources familiar with the probe, speaking on condition of anonymity. They said the bureau now is cooperating.
Meanwhile, a commission headed by former CIA and FBI director William Webster is investigating the Hanssen matter and the Justice Department has hired consulting firm 
Arthur Andersen LLP to study the FBI's management structure.
All of these findings will be reviewed by a team of top Justice Department officials who are doing their own assessment of the FBI and will make recommendations to Ashcroft about how to best overhaul the bureau.
John Ashcroft Contribution - Arthur Andersen LLP $4,375
FBI TO BE SUBJECT OF MANAGEMENT STUDY
The firm of Arthur Andersen LLP has been hired to conduct an extensive management study of the Federal Bureau of Investigation (FBI). Under the contract, the Arthur Andersen will evaluate the FBI's organizational structure and mission; review the Bureau's policies, practices, and procedures in a number of different areas, including records and data management, and the way the agency handles procurement and maintenance of information technology systems; and examine its approach to human resource management, including the recruitment, selection, hiring, and retention of employees, as well as its approach to human capital planning and resource deployment. In addition, the firm will review how the FBI reacts to crises, emphasizing the effectiveness of its communication structure, its decision making and command authority, and the relation of Headquarters officials to those in field offices. The study will be used by the Department of Justice's Strategic Management Council to form recommendations due to Attorney General John Ashcroft at the beginning of 2002.
FBI has only itself to blame for woes
Enron's Astonishing Plunge From Success To Debacle
New York Times
Published Jan 13 2002
Not long ago, Enron Corp.'s name was part of the lexicon of corporate and political power. The company's contacts and influence in the White House and Congress bred envy among competitors. Enron was a driving force behind a radical shift in the United States' energy policy, and its fortune seemed guaranteed for years.
(Kenneth Lay chats with George H.W.Bush)
Yet in a matter of weeks, Enron has become synonymous with a corporate scandal, one that has touched politicians and regulators in Washington, accountants and executives on Wall Street and employees and other shareholders who lost tens of billions of dollars as the company tumbled into bankruptcy protection.
The ultimate cause of Enron's shocking collapse, competitors and lawyers say, was a culture of greed and arrogance. As some of the company's secrets began to be revealed last fall -- stunning Wall Street with tales of mysterious partnerships that had been used to pretty up Enron's books -- the stage was set for disaster.
The company's growing financial weakness, exacerbated by whispers in the energy markets, set off a swift loss of confidence among traders and bankers. Sources of financing evaporated, a merger deal collapsed and, finally, Enron hobbled into bankruptcy court.
As creditors quarrel over its remains, investigators in Congress, the Justice Department and the Securities and Exchange Commission (SEC) are demanding answers.
Enron executives had hoped to make the company a model for a new American industry. And indeed, the tale of the company's rapid rise and astonishing collapse will be studied for years -- but as an object lesson in the dangers of relying on financial juggling for big profits and the hazards of a business that corporate executives and directors, Wall Street analysts and government regulators barely understood.
Paying the price
It all started in the heady takeover days of the 1980s.
Enron, an asset-heavy company in the business of moving and selling natural gas, decided to transform itself. It would become part of the commodities-trading world, buying and selling electricity and gas as if they were pork belly futures.
To accomplish the transformation, chief executive Kenneth Lay had as his protege Jeffrey Skilling, a consultant with McKinsey & Co. Skilling, who brought a new dynamic to the once-staid business, understood how the markets could be used to liberate Enron from its reliance on the old world of hard assets. He proposed a system whereby Enron would essentially become the investment banker of natural gas.
Business boomed. In 1990, Skilling left McKinsey to run Enron Finance Corp., a company division that was created just for him.
By 1995, Enron had become the biggest player in the natural gas industry, controlling one-fifth of the North American market.
As the money poured in, the apparent success of Skilling's vision brought him the brass ring: In 1997 he was named Enron's president and chief operating officer.
Skilling, dizzy with the profits that accrued as Enron moved first into one new trading market after another, wanted to rid the company of all its hard assets. But other executives pressed forward with plans to give Enron a global reach, building power plants around the globe and becoming a force in the global water business. On the trading side, it splashed its way into the trendy market for high-speed data and Internet capacity.
All told, these efforts represented a collective investment of more than $10 billion, but they were producing next to nothing in returns.
Regardless, few of Enron's problems were evident to the company's supporters on Wall Street. Through the chief financial officer, Andrew Fastow, the company set up a series of limited partnerships, organized in such a way that, by company executives' reckoning, they could be treated as separate entities. It seemed an elixir that provided the answers to many of Enron's growing financial problems: If there were any assets or debts on the books that the company did not want, they could simply be shed to the partnerships.
However, the partnerships proved to be the poison that would finally be the company's undoing.
A changed market
Enron wasn't merely the largest player in the nation's deregulated energy markets. It helped create them.
It moved aggressively, seeking to gain the biggest shares of trading in these new and fast-growing markets -- lining up supply contracts to buy power and gas while at the same time cutting deals to sell the energy to customers, often over the long term.
Analysts estimate that at its peak Enron accounted for about 25 percent of the nation's energy trading -- not producing much energy itself but serving mostly as a middleman.
More significant, Enron dominated the trading of financial contracts, or derivatives, based on the value of gas and electricity traded at physical "hubs" around the nation.
At some hubs, rival energy traders say, Enron accounted for a much higher percentage of trading of some products, giving it enormous influence in the marketplace. The company's dominance only increased after it introduced EnronOnline, an Internet-based trading service, in 1999.
The company's critics observe that while energy prices were rising, Enron was riding high, but that it began to falter last summer -- in the same period when prices for electricity and gas collapsed.
In other words, they say, it may not be a coincidence that Enron's house of cards tumbled down at the same time energy costs sharply retreated, as profits from high prices were no longer able to offset severe problems in the company.
Missed signals
Flying high after being unshackled from regulation, Enron crashed quickly last fall following a series of revelations about its bookkeeping practices -- in particular, concealing huge chunks of debt by transferring them into still-murky partnerships.
By reducing the debt on its books, the company looked healthier and its profits looked more robust, even as the results of its trading operations and energy sales were flagging. Stock analysts and shareholders could breathe easier, as could credit rating agencies such as Standard&Poor's and Moody's Investors Service, which assess a company's health for lenders.
Yet within a matter of weeks, the company found itself in bankruptcy, under investigation and the target of lawsuits from burned investors and former trading partners.
Many questions remain unanswered, but one thing is certain: As a result of Enron's successful lobbying efforts, Washington was largely out of the business of regulating the products the company sold.
If the regulators in Washington were asleep, it was because the company had made their beds and turned out the lights. The company's financial successes were in no small part the byproduct of its campaign to deregulate the marketplace. It created what one executive referred to last year as a "regulatory black hole."
However, there were still traditional corporate mechanisms and institutions in place that should have raised alarms and kept executives in check.
"The fact that things declined so fast strongly suggests a breakdown of basic corporate governance," said David Ruder, a former SEC chairman who teaches at the Northwestern University School of Law.
For all the blame now being assigned, experts say the biggest failure -- at least judging by what has become public so far -- appears to rest with the company's auditor, Arthur Andersen.
With the disclosure last week that Andersen employees had destroyed large numbers of documents related to the firm's audits of Enron, investigators will be aiming many of their toughest questions at the accountants.
The politics
Beginning in the early 1990s, Enron pursued its campaign for energy deregulation by hiring dozens of Washington's most influential lobbyists and showering Democrats and Republicans on Capitol Hill with large campaign contributions.
By the time President Bush was inaugurated in January 2001, Enron and a number of its executives, including Lay, had contributed more money to Bush during his political career than anyone else, $550,000-plus. Enron then wrote a check for $100,000 for Bush's inaugural committee, and Lay added $100,000.
Last winter, the perennial questions about access given to large campaign contributors were asked about Enron. Lay had weighed in on nominees to the Federal Energy Regulatory Commission, supplying Bush's chief personnel adviser with a list of preferred candidates.
After the terrorist attacks of Sept. 11, there was almost no discussion in Washington about Enron's connections to the White House. Even in the weeks before the company filed for bankruptcy in December, Democrats, whose Senate campaign committee received a $100,000 donation from Enron, said little about the company's ties to the Bush administration.
Now, four congressional inquiries have begun to investigate Enron's collapse after it was revealed that many employees lost their life savings when its stock collapsed while some company executives were able to cash out $1 billion worth of stock.
The Enron issue finally hit the White House last week after the officials acknowledged that Enron executives had had six meetings last year with administration figures, including Vice President Dick Cheney.
The Justice Department announced that it was opening a criminal investigation of the company's collapse, including whether it had defrauded investors by deliberately concealing information about its finances. Attorney General John Ashcroft and his chief of staff recused themselves from the inquiry because Lay and Enron had contributed more than $50,000 to Ashcroft's 2000 senatorial campaign.
More disclosures followed. On Thursday, the White House disclosed that Lay had called Treasury Secretary Paul O'Neill and Commerce Secretary Donald Evans before the company filed for bankruptcy. Evans said Lay had sought government help with its dire financial condition.
On Friday, the administration said Peter R. Fisher, an undersecretary of the Treasury, was contacted repeatedly last fall by Enron's president, Greg Whalley, for help arranging bank loans.
"I'm very worried that we have not gotten to the end of the onion skin here; there's more to peel back," a longtime GOP strategist said. "I'm concerned this will distract the White House from its domestic agenda."