Posted on 01/12/2002 8:25:23 AM PST by Bad~Rodeo
WASHINGTON, Jan. 12 (UPI) -- A Senate panel probing energy conglomerate Enron Corp.'s sudden collapse sent a subpoena Friday to Texas Republican Sen. Phil Gramm's wife, Wendy Gramm, panel sources confirmed, while a new contact with a Bush administration official -- by a prominent Democrat -- was disclosed by the Treasury Department.
Wendy Gramm has been a member of Enron's board of directors for eight years and of the crucial Audit and Compliance Committee as the giant company's financial condition was deteriorating.
Her subpoena is among 51 issued by the Senate Permanent Subcommittee on Investigations chaired by Sen. Carl Levin, D-Mich., seeking documents from Enron, the Arthur Andersen LLP accounting firm, and current and former officers, employees and board members of Enron.
Of the 51 subpoenas, 49 went to individuals, one to Enron Corp. and one to the Andersen firm seeking documents as far back as January 1999.
Phil Gramm is the second-largest recipient in the Senate of financial contributions from Enron, receiving $97,350 from the company between 1989 and 2001, according to data provided by The Center for Responsive Politics. The senator receiving the largest contribution from Enron is Sen. Kay Bailey Hutchinson, R-Texas, who received $99,500.
The subpoenas came as government and congressional scrutiny of the collapse intensified.
Friday evening, the Treasury Department disclosed that Clinton administration Treasury Secretary Robert Rubin contacted a department under secretary in early November to suggest he call ratings agencies who were poised to downgrade Enron's credit rating.
A Treasury spokesperson said Rubin, now chairman of the executive committee of a banking conglomerate with hundreds of millions of dollars of exposure to the Enron collapse, Citigroup, called Under Secretary for Domestic Finance Peter Fisher to ask what he thought of Fisher contacting the ratings agencies to encourage them to "worth with" Citibank and other Enron banks.
The spokesperson said Fisher responded negatively, saying he did not think such a call was appropriate and Rubin responded that he thought that was a reasonable position. "Fisher made no such call," the Treasury spokesperson said.
It was Fisher to whom Enron President Lawrence Whalley made six to eight calls in late October and early November, calls a Treasury spokesperson earlier Friday said Fisher took to be suggestions he call Enron's banks.
Then too, the department maintains, Fisher decided not to do anything.
Over Thursday and Friday, it was disclosed that Enron's chairman, Kenneth Lay, contacted top Bush Treasury Secretary Paul O'Neill, Commerce Secretary Don Evans and Alan Greenspan, chairman of the Federal Reserve, in October about Enron's financial difficulties.
Secretary of Commerce Evans said Lay sought assistance from the federal government, but Lay said in a statement late Thursday that he only sought to alert top financial leaders that his mammoth firm was having difficulties. O'Neill said he agreed with Evans that nothing was to be done.
President Bush, who has received political and financial support from Enron and Lay in all his political races, said the Enron chief did not contact him.
Several prominent Democrats have attempted to use the various Enron entreaties as evidence of a close association with the Bush administration but no one has accused White House officials of wrongdoing.
When Enron received no outside financial assistance and as the ratings agencies ultimately downgraded its credit standing, the company reported to stockholders that it had $500 million of previously unreported debt. The subsequent selloff of Enron stock was swift and dramatic -- and left many of the company's 21,000 employees with life savings that diminished to near nothing as the stock fell below a dollar a share.
As several employees later told a congressional hearing, they were prohibited from selling their Enron stock from their 401K retirement plans even though top executives sold $1 billion in shares while they still retained their value.
The company sought protection under Chapter 11 of the U.S. Bankruptcy Code on Dec. 2.
Arthur Andersen, the company's auditing firm, reported in testimony in December that it told Enron officials that some of their financial transactions might be illegal. Joseph Berardino, Andersen chairman, also testified that Enron withheld financial information from Andersen. He admitted that his firm's accountants may also have made some mistakes.
Then Thursday, Andersen disclosed that a "significant" number of correspondence, electronic files and other data may have been destroyed, some of it after investigations had begun.
Well before the Enron debacle began gathering steam, on Sept. 5, Sen. Gramm announced that he would not seek re-election after serving 18 years in the Senate. During his retirement announcement, Gramm said that he had achieved his goals as a senator and would move on to another career.
Gramm's spokesman, Larry Neal, declined comment on the subpoenas, but said Enron had nothing to do with Gramm's decision not to seek another term.
"He outlined in detail in his retirement announcement his reasons for leaving, and those were his only reasons," Neal said.
The House Energy and Commerce Committee, run by Republican Rep. Billy Tauzin, R-La., also wants to talk to Wendy Gramm. Tauzin requested the interview with Wendy Gramm by name in a Dec. 10 letter to Enron.
The spectacular financial collapse of Houston-based Enron has drawn broad scrutiny from a host of federal agencies and congressional committees.
On Wednesday, it was revealed that the Justice Department had opened a criminal investigation into the Enron matter.
On Thursday both U.S. Attorney General John Ashcroft in Washington and U.S. Attorney Michael T. Shelby in Houston recused themselves from the investigation. Selby's office announced that he and several other attorneys had relatives who were employed by Enron.
Ashcroft received a $25,000 contribution from Enron during his run for re-election to the Senate from Missouri and in an unsuccessful attempt to win the Republican presidential nomination.
The Securities and Exchange Commission also has opened a probe into whether Enron officers were capitalizing on their knowledge of the firm's financial condition when they sold millions of dollars in stock prior to its nosedive.
The agency also wants to determine whether Enron financial claims to investors were misleading and whether Arthur Andersen's audit of those statements was proper.
The House Energy and Commerce Committee led by Tauzin and Ranking Minority Member John Dingell, D-Mich., Friday announced that it was demanding a host of financial records -- including some that Arthur Anderson says were destroyed -- as well as interviews with Enron's financial oversight officials.
That request covers 43 areas of Enron's finances and corporate behavior including all earnings-related documents and memos, details about the finances and discussions related to several outside investment vehicles operated outside the company's normal procedures.
In the Senate, a Commerce Committee subcommittee -- led by North Dakota Democrat Byron Dorgan -- already has held a hearing on the loss of pension funds when the stock price collapsed. At that hearing, a top Arthur Andersen official said he thought there was a possibility that criminal acts had been committed by the company.
Dorgan plans more hearings into the loss of the retirement funds but so far has been unsuccessful in getting Lay to appear before the committee.
The Senate Government Affairs Committee also announced an investigation on Jan. 2 into the collapse, choosing to focus on whether government agencies failed to detect, or ignored, signs of the impending collapse. The committee plans a hearing on Jan. 24, according to Chairman Joe Lieberman, D-Conn.
The House Government Reform Committee has been slower to formally step into the fray, but its ranking member, California Democrat Henry Waxman, has been vocal about the possibility that Enron used undue influence on administration officials to avoid additional scrutiny of its finances and practices before the collapse. Waxman also has been engaged in a fight with the Bush administration over releasing details of meetings between Enron officials and high-ranking Bush administration officials, when the White House was preparing a national energy policy.
On Jan. 3 the vice president's office provided Waxman with a list of contacts between the vice president or his staff and Enron officials. The letter, from David S. Addington, the vice president's counsel, said that neither the vice president nor his staff had ever discussed Enron's financial status with the company's representatives.
(Mark Benjamin is UPI's chief congressional correspondent, and Nicholas M. Horrock is UPI's chief White House correspondent.)
Post a source or be quiet.
I have no position on what you are arguing about but this is priceless!
This is the same thing I've said to you, REPEATEDLY, when you've TRIED to CLAIM that Ron Brown was NOT murdered. And you've NEVER posted ANY information or source for your claim ... nor have you been willing to debate any of the facts I have presented. We're just supposed to "believe" YOU.
As I said, priceless.
Of course there would still be some management consulting, etc, being done by the new Arthur Andersen accounting firm, but I'd think that would be small beer compared with their accounting revenues.
This sort of reminds me of the current President being on the board of a certain company and on a committee involved with finances of the firm; and how certain stocks were sold just before the old proverbial stuff hit the fan!
Me either.
Or Democrat for that matter.
"Enron gave seven of its 14 directors consulting contracts, sales to their business or donations to their nonprofit institutions, according to company and public records. The recipients include three members of Enron's audit committee, which is responsible for financial oversight.
Lord John Wakeham, a former leader of the British House of Commons, sits on the audit committee. Enron gave him a $72,000-a-year consulting contract. John Mendelsohn, president of the M.D. Anderson Cancer Center in Houston, is also on the audit committee. In the past five years, Enron and Chairman Kenneth Lay have donated $567,900 to the cancer center."
...
"Wendy Gramm, 56, has held positions at the Federal Trade Commission and the U.S. Office of Management and Budget and was chairwoman of the U.S. Commodity Futures Trading Commission. She is director of regulatory studies at the Mercatus Center of George Mason University in Fairfax, Va. She is married to Sen. Phil Gramm, R-Texas. In the past three years, Enron and the Ken and Linda Lay Family Foundation have donated more than $50,000 to the university and the Mercatus Center, according to university records."
"The board's audit committee was headed by Robert Jaedicke, a professor emeritus of accounting from Stanford University's Graduate School of Business."
This was written December 2, 2001. Does anyone know when Wendy Gramm replaced Jaedicke as head of the audit committee?
Looks like they erred in implicitly signing off on those controls.
so say you.....are you privy to the 'covenants' of the agreements between Enron and its various creditors?
And if Enron has filed for bankruptcy protection, Citicorps along with other creditors will have to hash out a lot of stuff with the Bankruptcy Judge....basing decisions on all these agreements.
It will certainly be interesting....
Sorry...as much as I like Senator Gramm, I'm not buying this.
No I am not, but to entertain the possibility these loans had no covenants that give serious control to the creditor is beyond silly.
And if Enron has filed for bankruptcy protection, Citicorps along with other creditors will have to hash out a lot of stuff with the Bankruptcy Judge....basing decisions on all these agreements.
Yes, of course and you can bet that Citigroup thought they would have more total power in court.
Perhaps ... but the damage has been done. Look at all the headlines. Look at the Leno jokes. Remember this is all about PERCEPTIONS and thanks to the control of the mainstream media by the democRATS, the public will be left with the IMPRESSION that something illegal was done by Republicans, whether it was or not. I seriously doubt they'll be left with the impression that democRATS were even involved in the Enron business because how are Republican going to even get the message out except via the mainstream media. Pile up enough of these impressions (you think this is the last scandal the democRATS will raise?) and the GOP might just loose the next election because the public will decide that there really isn't a difference between democRATS and Republicans. That's all democRATS have to do to win the next election because they outnumber us.
What a shame that Bush/Ashcroft squandered an opportunity to blow the democRAT party out of the water by proving them criminals of the first order ... criminals who committed TREASON, MURDER, ELECTION TAMPERING and you name it.
Which leaves us with the question why? Why can't you name ONE investigation that the Bush adminstration has or is conducting into the crimes of the Clintons. Oh you can name a few that were on-going when Clinton was in power that the Bush DOJ has stopped, but name one that Ashcroft started ... besides Pardongate, which was forced upon him by the media and which he turned over to a democRAT lackey who seems to be in the process of burying it. Why hasn't Ashcroft reopened the investigations of Filegate or the death of Ron Brown or the death of Vince Foster? Clearly there was something seriously wrong with the investigations in each of those cases. Anyone familiar with the facts in those cases can see that the Clinton investigations into those matters were coverups. And why hasn't Ashcroft investigated the Riady non-refund? Why hasn't he investigated the many allegations in Chinagate that Reno saw fit to simply ignore or bury. Instead, we hear the DOJ has just agreed to shut down the criminal investigation into the treason of Loral and the DNC for the paltry sum of $14 million ... pocket change. Something is not right in the fact that the Bush administration is letting the democRATS get away with such serious crimes ... crimes that threaten the very foundations of our Republic.
Think about it ...
Now the democRATS, who could be only 3 years from returning to the Whitehouse, know that a President who controls the media (like they do) and the law enforcement arm of the Federal government (like Clinton did) can get away with ANYTHING. Now the democRATS know that the GOP is TOOTHLESS when it comes to keeping them from committing crimes. They can plead the 5th, lie or just pretend a memory lapse and the Republicans do NOTHING. Now the democRATS even know that they can steal elections (they came within a hair of doing so in Florida and they succeeded in several other states). Now the democRATS even know that after they commit the crimes, and Republicans are back in power, Republicans STILL won't do anything even though they have them dead to rights in a number of cases. The democRATS know that they can ILLEGALLY examine the FBI files for damaging information on their opponents to use in BLACKMAILING them ... and the Republicans will do NOTHING. The democRATS know they can KILL high level members of the government and Republicans will do NOTHING. The democRATS know that they can abuse the IRS, FBI and MILITARY, turning them into instruments for distracting the public from reports that might damage them or even use them to harass their enemies ... and the Republicans will do NOTHING. The democRATS know that they can get campaign funds from ANY source (even the enemy) and Republicans will do NOTHING.
Exhume and autopsy the bodies of Brown and Foster, to start with. Show that Republicans ARE really better than democRATS. Show the public that Republicans, unlike democrats, do believe that no man is above the law. The courts, and such serious crimes, are the ONLY way you are going to get the message out to the public at large ... show them what the current democRAT leadership is really like.
Or ignore the crimes the democRATS committed and leave people like me (life-long Republicans) wondering whether we really can trust Republicans to properly investigate crimes by Republicans ... or even whether they might not commit crimes just like the democRATS did to stay in power. After all, why should we trust Republicans, if they won't even investigate crimes as serious as MURDER ... BY DEMOCRATS?
Maybe, maybe not. The other major area is disclosure. Even if you have all the controls in place oto produce the information you report you still need to decide what gets reported. Disclosing the facts relevant to the needs of the user is sometimes subjective.
I am ignorant of the facts of this situation but based on experience its possible the issue was what was disclosed and whether it needed to be. This is again an area that the auditor uses his professional opinion to decide.
In my view, there are not systemic problems in the OTC derivatives market. Losses due to derivatives over the past decade can't be attributed to regulatory gaps. Some of the problems occurred because of internal control systems within companies or institutions that were weak or avoided. Others have been due to bad business decisions. Structural changes in the regulatory agencies would not have prevented the so-called derivatives problems of the past decade. In fact the market extracted strong discipline for those who behaved inappropriately.I also do not believe that all products, all transactions, and all aspects of business have to be regulated. I do not see a regulatory gap if some transaction is not regulated. Indeed, my view is that regulations should be written only if there is a systemic market failure that cannot be remedied by alternative mechanisms. Businesses and other institutions should be free to conduct business without unnecessary burdens. The market is a stern disciplinarian, and government is generally not as efficient or effective. Furthermore, there are many avenues for discipline and regulation beyond federal regulators, or even financial market regulators. State level securities and fraud laws and even the Federal Trade Commission have authorities that aid in enforcing fraud and abuse, including telemarketing fraud. Thus instead of looking for regulatory gaps to fill with more regulation, markets, consumers and the economy might fare better if efforts were spent looking for unnecessary regulatory burdens to eliminate. http://www.house.gov/financialservices/71798gra.htm
They could have felt the internals were good or 'safe' enough OR they could have been in on it, too, right? I mean, up until the fan gets the stuff, no one would be the wiser and the opportunities for big $$$$$$ would be mighty tempting, would it not?
If Wendy Gramm has her way, she will replace Hillary Clinton in the White House next year. Like Mrs. Clinton, Wendy Gramm is the smart, ambitious wife of a smart, ambitious politician. Her husband Senator Phil Gramm of Texas is a candidate for the Republican Presidential nomination. Like Clinton, she too is a graduate of Wellesley College near Boston. Gramm also holds a PhD in economics from Northwestern University in Illinois and has had a successful career apart from her husband.This phenomenon -- spouses with professional careers of their own paired with political candidates -- not only reflects the changing role of women but also creates new ethical dilemmas and ambiguities in election campaigns.
Mrs. Gramm is the granddaughter of a laborer in the Hawaian sugar cane fields and the daughter of the first Korean-American officer of a U.S. sugar cane company. Mrs. Gramm declined to be interviewed by FRONTLINE.
She and Phil Gramm met in 1969 when the future senator was a professor of economics at Texas A&M University. He interviewed her for a job at the school. "As a single member of the faculty, I'd be very interested in having you come to Texas A&M," she quotes him as saying at the time. In a recent interview with The New York Times, Mrs. Gramm recalled her initial response to his subsequent marriage proposal: "Yuck." Gramm persisted, and the couple wed in 1970 (it was Gramm's second marriage). They have two sons, Marshall and Jeff.
In 1979, Phil Gramm, then a Democrat, was elected to the U.S. House of Representatives. Five years later in 1984, he switched his party affiliation to the GOP and won the Senate seat that he still occupies. The move to Washington began a succession of appointed federal jobs for Mrs. Gramm.
She headed the economics bureau of the Federal Trade Commission's Division of Consumer Protection and served as administrator of information and deregulatory affairs in the Office of Management and Budget. In 1987 The New York Times described her as "one of the Reagan administration's most vigorous deregulators." President Reagan called her "my favorite economist," naming her chairman of the Commodity Futures Trading Commission, the powerful regulatory agency which oversees the nation's commodities and futures exchanges.
Her dual roles as CFTC head and Senator's wife put her in a difficult position. There were times when Senator Gramm sought the support of some of the same agricultural and business interests that she was regulating. On trips to Texas during his 1989 Senatorial campaign she worked both on CFTC business and for her husband's reelection.
After leaving the CFTC in early 1992, Wendy Gramm accepted lucrative directorships on the boards of several corporations she had regulated.
Several of these corporations were also financial supporters of her husband's Presidential campaign. One of the boards on which Mrs. Gramm sits is Enron Corporation, a Texas natural gas company, which has given almost $35,000 to Phil Gramm over the years. She was named to the company's board, just five weeks after stepping down from the CFTC, which around the same time, exempted Enron and a group of other oil and gas companies from federal regulation on some of their commodities trading. The move was a big financial boon to Enron.
Enron pays Wendy Gramm $22,000 a year for her service on its board, plus $1,250 for every meeting she attends. The CEO of Enron, Kenneth Lay, is regional chair of the Gramm for President Campaign. When Senator Gramm kicked off his campaign last February with a record-setting fund raising dinner, Lay and his wife were present.
Another board Wendy Gramm sits on is that of Iowa Beef Processors (IBP), a large meat processing company. Based in Dakota City, Nebraska, IBP is a powerful corporation next door to a key election- year state, Iowa. Support for Senator Gramm at IBP came in handy last August at the Iowa straw poll in Ames. IBP sent a memo to its management level employees encouraging them to attend the straw poll, which is not restricted to Iowa residents, and informing them that $25 tickets and bus transportation would be provided by the Phil Gramm-for-President campaign. Gramm campaign buses picked up the IBP employees at eight separate locations in the states of Iowa, Nebraska, and Illinois and transported them to the straw poll, where their votes helped Gramm tie front-runner Bob Dole and gave the Gramm campaign an important boost.
In a written statement to FRONTLINE, an IBP spokesman said, "Many of the campaigns provided tickets and bus transportation to the event, some bringing in people from as far away as Kansas. While the Gramm campaign paid the way for the IBP employees who attended, our people were not told to vote for Senator Gramm or any other candidate."
FRONTLINE learned that the request for IBP's help in the straw poll came from the late Alec Courtelis, the former finance chair of the Gramm-for-President campaign. (Courtelis, long a leading Republican fundraiser, died this winter) Courtelis also sat on IBP's board of directors and was responsible for bringing Wendy Gramm onto IBP's board.
While no one has accused Mrs. Gramm or anyone else of breaking any laws, the IBP case nonetheless shows how questions can arise when a candidate's spouse is appointed to a well-paying corporate directorship and when that company helps promote the husband's candidacy.
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