FBI probes Army chief on Enron
msnbc.com
By John R. Wilke
THE WALL STREET JOURNAL
WASHINGTON, D.C., April 15 — Army Secretary Thomas E. White is the subject of a federal investigation into possible insider trading in the sale of shares of Enron Corp. last year, lawyers close to the case said.
FEDERAL BUREAU OF Investigation agents are interviewing Mr. White’s friends and former colleagues regarding whether he sought or acted on inside information from them on the company’s precarious financial condition in scores of calls he placed last fall, as he sold off his stock.
Investigators appear to be focused most closely on calls and contacts Mr. White had in October, when he sold off $3.08 million in stock — or half of his holdings — as the company’s condition worsened.
Mr. White has said that he did indeed discuss Enron’s deepening problems in many of the calls, but that he did so out of concern about his friends at the company, and that he didn’t possess or act on any inside corporate information. “I never sold any stock based on what anyone told me at Enron,” Mr. White told reporters on March 27.
Senior Justice officials have said they would pursue the Enron case wherever it goes and had earlier asked the Pentagon to preserve any documents or records related to the case, including Mr. White’s phone records. The disclosures of the timing of his stock sales and his contacts with Enron officials couldn’t be ignored by investigators looking into every aspect of the Enron case; the continuing controversy has brought calls for Mr. White’s resignation and an unwelcome spotlight on the Bush administration’s close ties to Enron.
It may be difficult for the FBI to make a case. Several of those interviewed said they told agents the calls were largely personal and didn’t involve inside information. Mr. White has said specifically that he had no knowledge of the off-the-books partnerships that were used to inflate Enron’s profit, conceal debt and enrich a handful of company executives; these partnerships are now the subject of a federal criminal investigation.
One former executive who was interviewed by FBI agents in Houston three weeks ago was asked whether Mr. White sought information about the partnerships, the departure of Enron’s chief financial officer or other management changes, and the stock price. “The answers to those questions was no,” the executive said. “If he really had inside information, he’d have sold out a lot sooner.”
Another former Enron official who was also interviewed by the FBI said that Mr. White called her after reading about Enron’s mounting problems. “He saw the ship was sinking, and I can guarantee you that what he was most concerned about were his friends and former engineering employees, many of whom lost everything,” said Christie Patrick, a former Enron lawyer who worked with Mr. White.
Mr. White was required to sell his holdings after he became Army secretary, and has said that he lost money on the shares, which were sold over several months last year as their price was falling. Investigators are trying to determine whether Mr. White got information to help him narrow those losses.
Mr. White also is facing questions over his use of a Pentagon aircraft for personal business and his role at Enron’s Energy Services unit, where the former Army general was an executive for 11 years. The Pentagon’s inspector general is investigating the personal use of military aircraft; on a recent official trip to Seattle, Mr. White stopped off in Aspen, Colo., to close on the sale of a $6.5 million vacation home.
The Pentagon said Friday that it had widened its internal inquiry to include travel by the secretaries of the Navy and Air Force, who like Mr. White are sometimes required for security reasons to travel on official aircraft when outside of Washington.
The inspector general’s office has said that the widening inquiry doesn’t mean there was wrongdoing.
Mr. White has told congressional investigators that he had 73 contacts with current or former Enron employees in the 10 months since he joined the administration. Of those, 49 occurred between Aug. 14, 2001, the day Jeffrey Skilling resigned as Enron’s chief executive, and Dec. 3, a day after Enron collapsed in the largest bankruptcy-court filing in history.
Between June and October last year, Mr. White sold 405,710 shares of Enron stock for $12.1 million. He sold half of those shares during October, as Enron’s accounting problems became known within the company, including the sale of 121,663 shares at $16.10 a share, on Oct. 24, two days after Enron acknowledged a Securities and Exchange Commission inquiry and the chief financial officer, Andrew Fastow, quit.
He sold an additional 86,709 shares Oct. 30, the day before Enron announced the SEC inquiry had become a formal investigation.
In September and October, Mr. White said he spoke to or met with a half-dozen Enron executives, including its then-president, a board member, and Enron’s former chairman, Kenneth Lay. His disclosures came in response to requests by Rep. Henry Waxman (D., Calif.).
An FBI official referred questions about the investigation to the Justice Department, where a spokesman declined to comment. A spokesman for Mr. White said last week that Mr. White’s stock sales satisfied an agreement with the Senate Armed Services Committee.
“He was given a deadline to sell, he asked for and got an extension, then the war in Afghanistan came along and he was busy,” the spokesman said. “By the end of October, he’d totally divested himself of stock.” He said that Mr. White had not acted on inside information. “The secretary has answered all these questions repeatedly, and there is nothing new.” |
