Campaign Gifts, Lobbying Built Enron's Power In Washington
"By last year, [ENRON] its lobbying expenses exceeded $2 million a year and covered a raft of big-name
consultants, such as former Montana governor Marc F. Racicot, the new Republican National
Committee chairman, and former top aides to House Majority Leader Richard K. Armey (R-Tex.)
and House Majority Whip Tom DeLay (R-Tex.) "
By Dan Morgan and Juliet Eilperin
Washington Post Staff Writers
Tuesday, December 25, 2001; Page A01
During the administration of the first President George Bush, a new party fundraiser named
Kenneth L. Lay was invited to spend the night at the White House. The
sleepover was an early coup for the chairman of Enron Corp. and a harbinger of things
to come.
Over the following decade, Lay and Enron poured millions of dollars into U.S. politics,
cultivating unequaled access and using the entree to lobby Congress, the
White House and regulatory agencies for action that was critical to the energy company's
spectacular growth.
Now, with Enron's sudden bankruptcy, public attention has turned not only to the
financial practices that brought the company down, but to what its far-flung
political operations say about the country's campaign finance system.
Some Democrats in Congress are spoiling for an opportunity to use Lay and Enron to
embarrass the Republican Party, which received most of the company's largess
over the years. They want to look into such things as Enron's relationship
with Phil Gramm (R-Tex.), ranking minority member on the Senate Banking Committee
and chairman of the committee at a time when his wife, Wendy L. Gramm,
was serving on Enron's board. Last year, Gramm's committee approved legislation that
included a key provision exempting parts of Enron's massive energy trading operation
from federal oversight.
"I think the Enron story is going to turn out to be an enormous political story," said
Rep. Henry A. Waxman (D-Calif.), ranking minority member on the House Energy
and Commerce Committee.
The ties of Lay to the White House and GOP leaders, he added, were so multilayered that
Republicans are likely to be reluctant to pursue them. But he made clear
that he intends to do so and expects the Democratic-controlled Senate to follow suit.
Enron also cultivated relationships with Democrats, however. Lay played golf in Vail, Colo.,
with President Bill Clinton, and Enron gave hundreds of thousands of
dollars to Democratic campaign committees and Democrats in the House and Senate,
including Sen. Charles E. Schumer (N.Y.) and Rep. Martin Frost (Tex.), the
ranking minority member on the House Rules Committee.
A Routine Cost for Some
Advocates of campaign finance reform say the Enron case vividly illustrates the ties between
politics and big money, though it's unclear that the company's political
operations were radically different from others for whom political contributions
have become a routine cost of doing business.
"There are aspects of [the Enron case] that remind us of the savings and loan scandal,
in the sense that a powerful institution used big money to buy influence and
protect itself while ordinary citizens ended up losing their life savings," said Fred Wertheimer,
president of Democracy 21, a Washington interest group, referring to
a banking controversy in the 1980s.
Enron's ties to Republicans and the present Bush administration were especially close.
Lay raised large sums for George W. Bush's campaign.
Enron, Lay and its employees have contributed $572,350 to him over his career,
far more than any other company, according to the Center for Public Integrity in
Washington.
Several top administration officials have been Enron advisers or stockholders.
Enron, Lay and other senior executives contributed $1.7 million in soft-money
donations to politicians in the 2000 election cycle, two-thirds of it to Republicans,
according to the Center for Responsive Politics.
Republicans clearly are sensitive to the potential political dangers. The National Republican
Senatorial Committee recently returned a $100,000 check collected
from Enron in November, after deciding that "it was appropriate to give it back,"
spokesman Dan Allen said. The Republican Governors Association last week
returned an Enron donation of $60,000.
What was unique about Enron, competitors and allies agree, was a brash and sometimes
counterproductive political style.
Stories of Enron's hardball style are legion. In October 1999, for example, Jeffrey K. Skilling,
then Enron's president, expressed his displeasure at Rep. Joe Barton's
position on a deregulation bill pending in the energy subcommittee Barton chairs.
The meeting grew "heated and awful," said one person who was present, until Barton (R-Tex.),
a usually mild-mannered man who keeps a Bible on his desk, exploded. "Jeffrey Skilling, I may not
have your millions of dollars, but I am not an idiot," one witness recalled Barton saying.
The meeting ended without Enron getting the changes it wanted.
"Skilling did not get Washington," the source added.
"In their lobbying, they acted like the 800-pound gorilla they were," said Christopher Horner,
a Washington lawyer who briefly directed Enron's government relations in 1997.
Lay and Skilling declined interview requests, but Enron officials say they have no regrets
about their use of money. "It got us name recognition," company spokesman Mark Palmer said.
"Given the aggregation of our foes, we had to make sure that
people knew what our argument was."
Jump-Starting Deregulation
Almost from its start in 1985 as a gas pipeline company, Enron needed help in Washington,
and it got it in a series of actions by Congress and the Federal Energy
Regulatory Commission (FERC) that undermined the traditional monopoly of utility
companies over power plants and transmission lines.
Enron lobbied for several of the initial actions that set the stage for the era of a deregulated
wholesale electricity market.
It supported the 1992 Energy Policy Act, which opened the utility companies' wires
to electricity merchants such as Enron. It also worked with the Commodity
Futures Trading Commission -- then chaired by WENDY GRAMM -- for a regulatory
exemption for futures trading in energy derivatives, which later became Enron's
most lucrative business. Soon after Gramm stepped down in 1993, she was appointed
to Enron's board.
Independent sources knowledgeable about these dealings, however, said Enron was not
the main interested party. They said the lead was taken by several major oil
companies, including British Petroleum Co. and Phillips Petroleum Co., which were concerned
about the effect of CFTC regulation on their offshore trading in crude oil contracts.
Wendy Gramm, an apostle of free markets, needed little convincing, the sources said.
That same year, Lay served as chairman of the committee organizing the Republican National
Convention in Houston. Hedging its bets, Enron made a major contribution to a "street fair" in
honor of Sen. John Breaux (D-La.), a key energy policymaker,
at the Democratic convention.
Key orders by FERC in 1996 also supported Enron's transformation into a
freewheeling trader of gas, electricity and more exotic products, such as
telecommunications services and sulfur-dioxide emissions credits.
The new rules ensured that Enron and other merchant companies could buy electricity
from independent power plants and sell it to distant customers, using
transmission lines borrowed from utility companies.
Even Enron's harshest critics credit Lay with putting new issues -- such as electricity
deregulation -- on the Washington agenda. Lay,a former Interior Department
official with a PhD in economics, became "the ambassador" for deregulation,
one former employee said.
Throughout the 1990s, Enron's agenda was opposed by coal-burning utilities,
especially ones in the Southeast, which viewed the emerging wholesale electricity
market as a threat to their turf. Many of these, such as Atlanta-based Southern Co.,
had impressive political funding and connections of their own.
But with the explosive growth of Enron and the GOP takeover of Congress in 1995,
the company's soft-money donations -- unregulated and unlimited gifts to political
parties and organizations -- jumped sharply. They went from about $136,000 in the
1993-94 election cycle, to $687,000 in 1996 and $1.7 million in 2000, according to
the Center for Responsive Politics.
Frustrated by Washington
For all its connections, sources say, Enron often found Washington frustratingly slowand unreliable.
The company placed a substantial bet on federal support for limits on the greenhouse gases
causing global warming. Enron officials hoped to exploit a new market in
industry for carbon-emissions credits, similar to the one that developed for sulphur
credits after clean-air legislation was enacted in 1990.
Lay joined the Union of Concerned Scientists and environmental groups in calling for curbs
on carbon in the atmosphere. The Clinton administration was supportive,
but this year the Bush administration reneged on a campaign pledge to impose
limits on greenhouse gas emissions from coal-burning power plants.
A multimillion-dollar lobbying campaign in Congress to secure legislation requiring states
to institute retail electricity deregulation fared even worse.
Enron hired former New York representative Bill Paxon, a leading conservative, to run
Americans for Affordable Electricity, which commissioned studies and
recruited business support for deregulation. But the legislation never made
it out of a congressional subcommittee.
At the same time, Enron was growing restive over the slow pace of deregulation in the
wholesale electricity market, the core of its business. Large parts of the
country, especially the Southeast, were still monopolized by regulated utilities
that limited the opportunity for trading gas, electricity and energy derivatives.
Political Pragmatism
Enron's political pragmatism was demonstrated in the 1998 New York Senate election,
when it dropped its support of the Republican incumbent, Alfonse M. D'Amato,
after Democrat Schumer endorsed Enron's goal of wholesale deregulation, sources said.
Lay reciprocated by hosting several fundraisers for Schumer, and Enron's
political action committee contributed $7,500 to the Schumer campaign.
The company's lobbying team expanded along with its political spending. It outgrew the
two-person operation that existed in 1989 and began to reflect Enron's
interest in everything from pipeline safety and derivatives trading to Overseas Private
Investment Corp. loan guarantees.
By last year, its lobbying expenses exceeded $2 million a year and covered a raft of big-name
consultants, such as former Montana governor Marc F. Racicot, the new Republican National
Committee chairman, and former top aides to House Majority Leader Richard K. Armey (R-Tex.)
and House Majority Whip Tom DeLay (R-Tex.)
The hazards of Enron's efforts to connect with both parties were evident last year, when shortly
before the November election, the company picked a Clinton administration Treasury official, Linda
Robertson, to run its Washington office.
A perturbed DeLay, whose campaign and related funds had received more than $100,000
from Enron and Lay, briefly "excommunicated" Enron, a House source said.
Robertson was not invited to a series of meetings of electricity lobbyists held in DeLay's
office last July, though an Enron official did finally attend the sessions.
Enron had more success when Congress overwhelmingly approved legislation last year
containing a provision precluding the Commodity Futures Trading
Commission (CFTC) from regulating Enron's trading in energy derivatives.
These instruments are traded largely between electricity dealers and big wholesale
consumers, which use them to hedge against price swings that could adversely affect their businesses.
The exemption, tucked into broader legislation that established the legality of unregulated
derivatives trading by banks, was NOT supported by a Clinton
administration working group, largely because of opposition from the CFTC.
Since the departure of Wendy Gramm, some in the agency had lobbied for tighter control
over the exploding energy derivatives market. The legislation passed through the
Senate Banking Committee, then chaired by Phil Gramm, who has received
$97,350 from Enron employees and its political action committee since 1989.
A Gramm spokesman said the senator does not recall talking to his wife, an Enron
director, about the energy provision and played "no role" in negotiating it.
Wendy Gramm did not return phone calls seeking comment.
Enron was a primary player, with Koch Industries Inc., a large, privately held oil and gas
company based in Wichita, in pushing for the exemption, a source said. But
the company's main effort was focused on the House Agriculture Committee, where the
legislation originated. Its chairman and ranking Democrat, Texas Reps.
Larry Combest (R) and Charles W. Stenholm (D), respectively, were among the top recipients
of Enron campaign donations in the House since 1989.
The CFTC objected strenuously to the initial draft marked up by the committee, but the Texas
congressmen helped work out a compromise between Enron and the
agency. The compromise was then offered by Rep. Jerry Moran (R-Kan.), the home-state
congressman of Koch Industries and a recipient of campaign donations from
Enron and Koch in the last election cycle. Moran did not return a phone call seeking a comment.
Early this year, Lay seemed to be at the height of his political power, getting a private meeting
with Vice President Cheney to discuss the administration's energy
policy proposals and weighing in on key nominations to FERC.
Curtis Hebert Jr., FERC's chairman at the time, has reported that Lay called him and implied that
Enron would urge the newly installed Bush administration to keep him in the job -- if he changed his
views to support Enron's position for faster electricity deregulation. Lay contended that Hebert called
him to ask for support.
Hebert was not reappointed. He was replaced by Texas lawyer Pat Wood III, a strong advocate
of deregulation who had the backing of Lay and Enron.
Ironically, since Enron's fall, both FERC and Congress seem to be moving in the direction of the
deregulated markets Lay and Enron lobbyists had pushed for.
© 2001 The Washington Post Company |
