Sen. Gramm's wife gets Enron subpoena

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.

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.)

The government volunteered to insure the investments of all kinds at 100%, but that decision was made in the 30's and it was considered unassailable. Perhaps that was the mistake of policy that was first, Reagan & Congress' failure to reverse that long-standing policy as they deregulated.

A situation developed in the S&Lindustry that it was conventional wisdom to invest heavily in certain markets. These markets were in fact booming. The government said in both cases that these markets were expanding too fast. The managers who made the decisions to invest were doing so under the conventional wisdom of professionals of their kind. If they didn't think that way, then they wouldn't work in certain states even. That is how strong the sentiment was.

Then the government took actions to destroy the markets that the S&L's had invested in so heavily in. The government actually took these people down like sharpshooters whether they aimed to or not. All the board members did is what Wendy Gramm did, they did what 90% of the population would do under the circumstances, they followed the conventional wisdom of their professional peers and rubber stamped the loans. Under these circumstances, either Wendy Gramm should be sued silly by GWB's attack dog lawyers or we should all agree that the 20,000 prosecuted by papa bush were unjustly assaulted. These 20,000 were mostly only raped financially, some went to jail, let's do it to Wendy now then if I'm wrong. Some seniors on a budget were ruined by GWB's people, why don't we do it to Wendy then?

One thing that Enron employees COULD have done when they were unable to sell their retirement shares. They COULD have SHORTED an equivalent number of shares in the open market. Their retirement funds would have been worth zilch, but they would still be sitting on a PILE of money in their brokerage accounts. Moreover, if they never closed the short sales, they never would have had a taxable event to eat up part of the proceeds. That works very well when a company goes bankrupt.

I know that it was government policy that damaged the S&L's during the eighties. The 86 tax act killed real estate projects that were backing the loans of the S&L's. There were also lots of wheeler/dealer high flyer executives at S&L's who used the Federal insurance to gamble on shaky investments.

However, I have not seen the information you relate on 20,000 suits against board members. Can you provide more of a source to verify your claims?

I appreciate your interest, I'm certain I read it in National Review, in a big article. I simply remembered all these things from the article except that I did work on a peripheral related industry during the time. The 20,000 number is from memory of the article. I probably saw it referenced in WSJ also.

It is possible that the article could've exaggerated on this point, but there must've been some truth to it. I remember reading a description in the WSJ of it how they paid private lawyers $150/hour to come up with lawsuits, with orders to hit 100% of them, regardless of circumstance.

--just quoting from the article here: "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. "

If she wasn't aware of what was going on, in her position there, exactly who would be aware of it? Key words here are 'audit and compliance committee'.

ain't lookin real swell for mizz gramm

Please forgive my ignorance of the applicable protocols, but I do need to know what gives you the right to "combine two threads." I was more than content to tend the one thread that I was active on, but it seems that your actions have deprived me of that right.

Please present your crednetials for the combining of threads and the corresponding dictates to posters of where they will post.

I may be playing with dynamite here, but what do you think of my post at #157 where I take the position that these powerful men should have better control over/take better care of their wives than to allow them to be put in the sad situation in which Wendy Gramm now finds herself? (This from a decades long, diehard Phil Gramm supporter).

Every adult, male or female, is responsible for his or her own actions, but I still think that these husbands are placing their wives or allowing them to be placed in precarious situations.

"Answer me this, WHY were the employees PROHIBITED from selling their stock??!!"

Please accept my apology on this one. My wife handles pensions at her company and she set me straight on this point. I can't wait to hear the excuse for this from Enron.

However, I still deride the nanny state concept. If the pension and investing plan of your place of employment worries someone, they should go somewhere with more flexibility. Freedom.

--don't look at it as "us" if you can see what I mean. Take the moral high ground, forget partisanship as to any party in this matter. Just want to see all the real crooks caught, and let it go there. It's a scandal, it's a whopper scandal, whomever is involved you can't do anything about it. Now if it looks like the dims are gonna skate when they are involved up to their necks as well, then swell, go after them. I'm content to let the investigations run it's full course, it's good for BOTH parties and even better for the nation if ALL the crooks get purged out of politics, out of business, out of government service, and away from where they are predators on other human beings.

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