Enron Collapse Entangles Bush Administration
"Bush's team has close ties to Enron and its chairman,
Kenneth Lay, a major Bush campaign contributor.
Last autumn, Lay called O'Neill and Commerce
Secretary Don Evans, Bush's 2000 campaign manager,
to warn them of Enron's mounting financial problems,
the White House said."
……………………………………………………………………………………………..
Rep. Henry Waxman, a California Democrat
who already has been seeking information about
contacts between the White House and Enron,
questioned whether the Bush administration could
have done more to help the company and its
employees.
``The White House had knowledge that Enron was
likely to collapse but did nothing to try to protect innocent employees and
shareholders who ultimately lost their life savings,'' he said in a statement. ``I
am deeply troubled that the White House stood by and let this happen to
thousands of families.''
Thursday January 10 9:20 PM ET
By Arshad Mohammed
WASHINGTON (Reuters) - The
collapse of Enron Corp.
entangled the Bush
administration on Thursday as
the White House said two
Cabinet officers were warned of
its looming financial crisis and
Attorney General John
Ashcroft recused himself from the
criminal probe into the energy
trading giant.
Trying to inoculate himself
from the political fallout,
President Bush ordered a review by Treasury
Secretary PAUL O'Neill
of U.S. pension and
corporate disclosure rules.
The review aims to avoid a repeat of
the Enron collapse, in which
thousands of employees lost
their pension savings and the
company filed the largest
bankruptcy in U.S. history.
In a series of stunning
disclosures that followed Wednesday's announcement
of a criminal investigation into Enron, the energy
firm's auditor, Andersen, said its employees had
destroyed documents related to Enron's balance sheet.
Bush's team has close ties to Enron and its chairman,
Kenneth Lay, a major Bush campaign contributor.
Last autumn, Lay called O'Neill and Commerce
Secretary Don Evans, Bush's 2000 campaign manager,
to warn them of Enron's mounting financial problems,
the White House said.
In an indication Enron may have been making feelers
about a financial rescue, White House spokesman Ari
Fleischer said Lay raised the case of
Long Term Capital Management, a hedge fund that
received a government-orchestrated private bailout in
1998.
But O'Neill and Evans both said they opted to do
nothing. O'Neill rejected the suggestion that Enron
had asked for a bailout. ``Absolutely not,'' he told
Reuters.
``It was an information request, telling me that they
had problems and that he thought that we would want
to have our technical people talk with their technical
people to understand where they were so that we
could execute our responsibility with regard to the
function of the capital markets,'' O'Neill said.
Evans, on CNBC television, said Lay had alerted him to
media reports that Enron's credit rating was under
review, and mentioned Enron's large presence in
energy trading markets.
``He said, 'I want you to know that Moody is currently
reviewing it. If there's any kind of support you could
give us we would welcome that.' But he certainly didn't
ask for me to call them (Moody's Investors Service) or
anything like that,'' Evans said. He said Lay called on
about Oct. 29, which would be a day after the first of
two calls by Lay to O'Neill.
The Justice Department on
Wednesday announced it had opened a criminal probe
into Enron, whose December bankruptcy threw
thousands out of work, devastated investors and wiped
out the pension plans of many employees when its
stock price plunged.
Ashcroft removed himself from the investigation, which
is expected to focus on whether the firm misled
investors about its accounts, because Enron gave him
political contributions for his run for a U.S. Senate
seat in his home state of Missouri.
DOCUMENTS DESTROYED
Andersen, the Big Five accounting firm that served as
the company's auditor, on Thursday said its employees
had deleted documents related to its review of the
company's finances, and congressional sources said
thousands were destroyed.
Rep. Henry Waxman, a California Democrat
who already has been seeking information about
contacts between the White House and Enron,
questioned whether the Bush administration could
have done more to help the company and its
employees.
``The White House had knowledge that Enron was
likely to collapse but did nothing to try to protect innocent employees and
shareholders who ultimately lost their life savings,'' he said in a statement. ``I
am deeply troubled that the White House stood by and let this happen to
thousands of families.''
Bush, who worked in the oil industry and has known Enron's chairman since
he was governor of Texas, appeared to distance himself from Lay.
``I have never discussed with Mr. Lay the financial problems of the company,''
Bush said, adding that the last time he saw Lay was last spring at a literacy
fund-raising event organized by his mother, former first lady Barbara Bush.
Enron has been a major donor to Bush over the course of his political career,
the Center for Public Integrity said on Thursday. The nonpartisan research
and investigative reporting organization said Enron, its employees and
directors have given $623,000 to Bush from 1993 to November 2001.
O'Neill and Evans said they both had decided against taking any action to
save Enron, and confirmed their individual decisions in a conversation.
``I don't know why there would be a bailout from the government for a
company that's gotten itself into trouble,'' O'Neill said on CNBC.
Fleischer said Bush was not informed of the decision but believes O'Neill and
Evans acted ``wisely.''
Evans told reporters ``I didn't think he (Bush) needed to know. It was a pretty
easy decision.''
Lay's call came some days before Enron announced an eventually aborted
merger with a rival, Evans said. ``They weren't anywhere close to talking about
bankruptcy,'' he said.
Bush and his team had acted properly, Fleischer said. ''Communication is not
a wrong-doing. What took place here was they received phone calls and took
no action.''
Treasury spokeswoman Michele Davis said Lay called O'Neill on Oct. 28 and
Nov. 8 -- after Enron's key Oct. 16 disclosure that it was taking huge charges
related to its partnerships, which provided the first hint of its spectacular
unraveling.
BUSH CONCERNED ABOUT WORKERS
Speaking to reporters after meeting with economic advisers on Thursday,
Bush placed the emphasis on workers and investors who suffered as a result
of Enron's troubles and ordered two reviews to recommend how better to
protect them in the future.
He said the first review, by the Treasury, Commerce and Labor departments,
would analyze pension and 401(k) rules and recommend ways to reform them
so that ``people are not exposed to losing their life savings as a result of a
bankruptcy.''
A review of corporate disclosure rules would be conducted by the Presidential
Working Group on Financial Markets, which includes the Treasury
Department , Securities and Exchange Commission ,
Federal Reserve and Commodity Futures Trading
Commission.
Once the world's largest energy trader, Enron slid in mere weeks from Wall
Street stardom to the largest bankruptcy filing in U.S. history on Dec. 2. Its
downfall, after withdrawal of a rescue takeover bid by rival Dynegy Inc., threw
thousands out of work and hammered investors.
The episode sapped the life savings of many Enron employees who held large
amounts of company stock in their 401(k) retirement plans, while top
executives allegedly pocketed fat profits by selling before a plunge in Enron's
share price.
``I have great concerns for ... (those) who put their life savings aside and, for
whatever reason, based upon some rule or regulation, got trapped in this
awful bankruptcy and have lost life savings,'' Bush told reporters at the White
House.
dailynews.yahoo.com |
