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.)
As an accountant, I think the alleged behavior of Arthur Andersen's people was pretty scandalous. I guess I shouldn't be surprised, though. The Repubs & Demos all look out for each other.
Carolyn
So people can be sued unjustly, you said they couldn't be. We should not sweep these injustices perpetrated by our government on our people under the rug. George HW Bush' reputation should always be tainted by his actual track record as president.
Creditors can virtually control the company when it cannot pays its debts. Why do you think the employee's can't get their money back ? Its because it has to go to Citigroup first. If anyone has something to loose in this its the creditors and they would be the first to go running to the gov't for help, which apparently Rubin, the head of Citigroup did.
That being the case, Lieberman, whose largest contributor is Citigroup, ought to be asking hard questions about Citigroup but he is not. I wonder why ?
You are wrong. The S&L directors had duty to ensure that the officers of the organizations followed all applicable laws relating to their industry. And you are right, many did nothing, because they were too stupid to know better. They had no idea that they should not be sitting on a board when they did not understand the business.
And if they were not guilty of fraud, they were guilty of 'going along for the ride.' The real reason they were sued was because there was a TON of fraud in that industry. I have never seen such disregard for law. Let's see, where do I begin? Huge loans to 'pals'. Floating overdrawn checks (for directors) and not recording the liabilities. Insider deals. The list goes on. I know because I saw if first hand...I audited S&Ls - and not for the federal government.
It was sad, because some of the directors were good people, but got caught because they thought that sitting on a board meant nothing. But if they had it rough, that was nothing compared to what the employees and the depositors suffered.
It sounds like you sat on one of those boards.
Choosing one of the largest accouting firms in the world is malfeasance ? Interesting premise. I wonder if the investment industry and the SEC would agree with your premise.
I don't.
If Wendy Gramm did something wrong, or neglected her responsibility of oversight, then she should be prosecuted.
Whatever HW Bush did, I do not hold with tearing an innocent person to shreds. But at the very least it seems the Gramm's will be the political sacrifice.
Many S&Ls made many highly speculative real estate (and other risky) loans that were predicated on the value of the underlying properties increasing in value. The recession occurred, and the increase didn't happen. Many many debtors defaulted, causing the S&Ls to do the same.
The federal government had to do something about it, and began looking at the way S&Ls were doing business. Many of them had directors that knew nothing and didn't want to. Though many of them were not crooks, they were negligent, and paid dearly for it.
Hope that helps.
Why do the Republicans have one set of standards for a prominent Texas Republican's wife like Wendy Gramm and another for those 20,000 more ordinary Americans?
Was there funny business? Who knows? But there's no question that the press are playing this dishonestly. It has all the signs of being orchestrated from central source, presumably the DNC.
The responsibility of the directors includes making loans. Loans that are guaranteed by federal money are also to be made in accordance with federal guidellines. Whenever their is gross negligence involved in making the loans the responsible party is the director. The lawyers for the creditors have every right to bring suit against the directors.
Before this is over, I am certain every director including Gramms wife will be a party to a lawsuit for negligence. I don't think Mrs. Gramm will be sued for an error in auditor selection but I do think that all the directors will be sued for gross negligence.
Those with deep pockets or their insurance companies (which they all will have) are likely to settle.
His number may be pulled out of the air but his point is valid. Directors will get sued. Especially directors in banks because they often personally approve loans. There is so much money on the table in this case that he will get his wish. The directors will have insurance for their acts and wealth. The lawyers for the creditors (just like the federal gov't RTC) are charged with recovering as much as possible from all sources. They will have to sue the directors.
I doubt though that auditor selection will get them anywhere.
The primary reason for this subpeona probably has more to do with getting the fact AA was the "auditor of record" on the record than anything else.
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