The Enron Scandal Grazes Another Bush in Florida
The New York Times
January 27, 2002
FALLOUT
By LESLIE WAYNE
The Enron (news/quote)
scandal, which has become
the consuming interest in
Washington and around the
country, is starting to have a
particular resonance in Florida,
where it is touching another
Bush: Governor Jeb Bush.
Florida's state pension fund lost
$335 million from its Enron
holdings. Enron has spread lavish
campaign donations on local
politicians, including Mr. Bush.
Earlier this month, Mr. Bush
startled some by holding a
fundraiser at the Houston home
of a former Enron executive.
Florida is also home to thousands
of Enron investors and retired
employees, who have seen their
Enron shares become worthless.
Yet as these events unfold, Mr.
Bush has deftly sidestepped this
political minefield, avoiding, at
least for the moment, any
negative association with Enron.
"Both parties are holding their
breath right now," said Susan
MacManus, a political science
professor at the University of
South Florida at Tampa. "Both
are scared as rabbits that Enron
really has the potential to affect
things here — the Democrats are
worried it won't have an impact
and the Republicans are worried
it will."
Mr. Bush particularly has been
able to steer clear so far of the
enormous damage to the state
employees' pension fund, which
lost more than any other public
pension fund. Almost until Enron
collapsed, the Florida fund
continued to pour money into
Enron stock. As governor, Mr.
Bush is one of the fund's three
trustees, although the fund has
said that Mr. Bush never ordered
the purchase of Enron shares or
the hiring of the money manager
who did.
"You've got to credit Jeb Bush,"
said Richard Scher, professor of
political science at the University
of Florida at Gainesville. "He's
been wonderful in keeping the
issue quiet. Nothing has been
coming out. He's been very
shrewd in how he's handled it
politically and lucky the
legislature is in session and drawing attention away. The
Enron Florida angle has not come home to roost yet."
Even Mr. Bush's decision to travel to Houston and raise
money on Jan. 17 at the home of Richard Kinder, a
former Enron president, has yielded no political advantage
for Democrats.
"Jeb Bush showed complete insensitivity and arrogance
by doing the fundraiser at the former Enron president's
home last week," said Bob Poe, chairman of the Florida
Democratic party. "It raises questions as to what links he
might have with Enron. He's drawn attention to himself
with it. But if any of this sticks to him, who knows?"
To some extent, how Enron affects Mr. Bush may also
depend on whether the scandal taints President Bush.
"He is the president's brother and, to some, they are
always stuck together at the hip with glue," said Ms.
MacManus, the political science professor. "Democrats
would love to link the two together if something bad
happens to one of them."
In his recent state of the state address, Governor Bush
avoided any mention of Enron, and Karen Unger, his 2002
gubernatorial campaign manager, says the intention is to
keep it that way. "Enron is not a partisan issue," she said.
"It's not much of a campaign story."
Ms. Unger said Mr. Bush would "focus on his record of
accomplishments and on issues that Floridians are
concerned about." Ms. Unger also said Mr. Bush "saw no
problem" in the Houston fundraiser since the event's host,
Mr. Kinder, was no longer an Enron employee, having left
in 1996 to form his own energy company.
But the way Enron spread money around the state to gain
support in the legislature for its plan — never enacted —
to deregulate the local electricity market and build more
power plants is beginning to gain attention. Starting in
1995, Enron began to give the maximum $500 donation to
many candidates, giving a total of $154,425 in the key
1996 and 1998 state house races, with over 80 percent of
the money going to Republicans. Mr. Bush's 1998
gubernatorial campaign received $6,500 from Enron,
including $1,000 from the former chief executive,
Kenneth L. Lay, and his wife.
"Enron was a big behind-the- scenes player in the push to
deregulate Florida's electrical markets," said Holly Binns,
a spokeswoman for the Florida Public Interest Research
Group, an environmental organization.
"Were there any specific connections between Enron and
Governor Bush? You cannot tell for sure. But I would be
extremely surprised if the level of contributions by Enron
to the national Republican party and to President Bush
did not provide access to Governor Bush."
For many Floridians, Enron's most disturbing impact has
been the massive losses suffered by the Florida State
Board of Administration's $123 billion pension fund, one
of the largest public employee funds. The fund lost $325
million from its 9.1 million Enron shares, and $9 million
from Enron bonds. It is one of several public pension
funds that suffered multimillion-dollar losses from their
Enron holdings.
As Enron's problems surfaced, the state fund, under the
advice of one of its money managers, Alliance Capital
Management (news/quote), continued to buy the
company's shares.
Last October, after Enron announced $1.2 billion in losses
and the Securities and Exchange Commission opened its
investigation, the fund bought $7.1 million more of Enron
stock. After Enron's chief financial officer, Andrew S.
Fastow, was ousted on Oct. 24, the fund bought $16.1
million. When Enron announced last November that it
had overstated its profits, the fund bought still another
$11.7 million.
Having bought shares for as much as about $80 in the
past, the fund, as it continued buying, rode the stock
down from $43 to 28 cents a share in the two months
before Enron's bankruptcy filing.
On Nov. 30, just days before Enron's bankruptcy filing,
the Florida fund sold 7.6 million shares for 28 cents each
— getting just $2.1 million for its investments.
Alliance Capital was one of 60 outside money managers
handling portions of the fund. Each money manager has
broad discretion, under the supervision of the fund's
Tallahassee staff.
Currently the Florida pension fund is suing Enron over
the losses and has said it might sue Alliance as well. Fund
managers say they are troubled that they were never told
that a top Alliance executive, Frank Savage, is a member
of Enron's board.
Florida's pension fund managers say that Alliance, the
fund's manager of large-capitalization growth stocks, was
repeatedly questioned by the fund's staff about Enron as
its shares continued to slide. A spokesman for Alliance
Capital, John Meyer, declined to comment on the matter
yesterday.
At no time, however, was Governor Bush a part of these
discussions: as a trustee, Mr. Bush does not get into the
details of specific investments, but instead oversees the
fund's general policies and direction, said Coleman
Stipanovich, deputy executive director of the fund.
"We had a fair amount of discussions with Alliance about
what was happening with our Enron shares," Mr.
Stipanovich said. "There were plenty of red flags and we
would talk about them. But Alliance ignored the red flags
and relied way too much on the accountants and their
auditor's reports." In the end, he said, the fund fired
Alliance as one of its money managers.
Whether these financial losses will cost Mr. Bush some
political capital remains to be seen. "The Enron issue is
right out there to be seized on," said Mr. Scher, the
political science professor. "But no one has done anything
with it yet."
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