Friends in high places M
When George W Bush arrived in the White House, it was
hardly surprising that he looked after Enron - the
company had been looking after him for years. In the final
extract of his book, Robert Bryce describes how the firm
bought its way into Washington's corridors of power
guardian.co.uk
Wednesday November 6, 2002
The Guardian
Surely it's just a coincidence. What
else would explain why Enron Oil and
Gas, a subsidiary of Enron Corp, would
have been in business with George W
Bush back in 1986? Bush the Younger
was many things, including the eldest
son of the vice president of the United
States. A successful oilman he was
not. Bush's forays into the energy
business had been nothing short of
disastrous. In 1984, Bush had no
choice but to merge his faltering firm,
Bush Exploration Company, with
another company, Spectrum 7. But by
mid-1986, Bush had done his magic on
the privately owned Spectrum 7. The company wasn't producing
much energy of any kind, and Bush was actively trying to sell
again. Despite Spectrum 7's lousy record, it somehow got into
business with Enron Oil and Gas. And on October 16, 1986,
Enron Oil and Gas announced that it had completed a well a few
miles outside of Midland, Texas, that was producing 24,000
cubic feet of natural gas and 411 barrels of oil per day. Enron
owned 52% of the well; 10% belonged to Spectrum 7.
Now, the oil and gas business is full of speculators, and wells
are often drilled with multiple investors with varying backgrounds.
But the early Bush-Enron connection points out just how small
the energy business is. Lay's ties to George W Bush go back to
1980, when Bush made his first bid for the White House. Bush,
who had recently served as director of the Central Intelligence
Agency, needed campaign funds after his surprise win in the
Iowa caucuses. So Lay, who had probably met Bush through
mutual friends in the energy business in Houston, gave money
to Bush's campaign. Though Bush didn't win, Ronald Reagan
made him vice president. Bush went on to chair the panel that
pushed Reagan's task force on deregulation. One of Reagan's
biggest moves in deregulation involved the lifting of federal
controls on natural gas markets, a move that Lay had long
favoured.
When the elder Bush got to the White House, he didn't forget
Lay. Bush rewarded Lay during his presidency with one of the
most coveted perks of being a presidential pal, a sleep-over at
the White House.
When Bush the Younger decided to run for governor of Texas in
fall 1993, one of his first stops on the campaign trail was
Houston. During his visit, George W Bush asked Lay to be the
finance chairman of his campaign in Harris County, which
includes Houston. Lay didn't take the job. He preferred to give
George W Bush a $12,500 (£8,000 at today's rates) cheque and
work behind the scenes. In his stead, Bush's campaign in the
county was headed by Lay's second in command at Enron, Rich
Kinder. In all, Lay, Kinder, and other Enron executives donated
$146,500 to George W Bush, almost seven times more than the
amount they gave to the incumbent candidate, Democrat Ann
Richards. The donations by the execs, combined with money
from Enron's political action committee, made the Houston
company Bush's biggest campaign contributor.
After George W Bush defeated Richards, Enron gave $50,000 to
Bush's inaugural committee. Lay began lobbying Bush almost
immediately. In December 1994, before Bush moved into the
Governor's mansion in downtown Austin, Lay began sending him
regular letters on energy policy, tax issues, lawsuit reform and
other matters. That month, Lay asked Bush to appoint Pat
Wood, who supported the deregulation of electric utilities, to the
state's public utility commission. Bush complied with Lay's
request. And later on, Bush would appoint Wood - again at Lay's
recommendation - to the federal energy regulatory commission.
And while Lay maintained close ties to the Bush family
throughout George W Bush's stint as governor of Texas, those
connections would be even more valuable to him and to Enron if
Bush the Younger could throw the Democrats out of the White
House. In December 1999, while Bush was pounding the
campaign trail, Lay again wrote to his friend, addressing it to
"George and Laura" [Bush's wife]. "Linda and I are so proud of
both of you and look forward to seeing both of you in the White
House."
Lay had been one of Bush's first "pioneers", each of whom
pledged to raise $100,000 for Bush. He had also made Enron's
fleet of aircraft available to his campaign. The Bush campaign
used Enron's jets to fly to different events on eight different
occasions - more than any other corporation. During the 2000
election cycle, Lay contributed more than $275,000 to the
Republican National Committee. Enron's total donations to the
party exceeded $1.1million. When the outcome of the election
was in doubt after the polls closed in November 2000, Lay and
his wife, Linda, gave $10,000 to help finance the Bush
campaign's Florida operation during the recount after the
election.
After Bush prevailed in the election (thanks to assistance by the
US supreme court) Ken and Linda Lay gave another $100,000 to
help finance Bush's inaugural gala. In all, Enron and its top
execs kicked in $300,000 for the inauguration festivities.
Naturally enough, the day after the inauguration, Lay went to a
private lunch party at the White House, where he got to
schmooze with the new president one on one. A few weeks
later, Lay had dinner with the president.
It wasn't long before Enron's bet on George W Bush was paying
off in more important ways, too. Although the California energy
crisis was raging throughout his first few months in office in
2001, the president refused - for nearly six months - to consider
the possibility that the golden state's power markets were being
manipulated. In some parts of the state, electricity rates had
gone from $30 per megawatt hour to an alarming $1,500 per
megawatt hour. Rolling blackouts - and threats of blackouts -
had the state in a near constant uproar. By the time Bush had
spent about 180 days in the White House, the state of California
had spent nearly $8 billion buying power on the open market just
to keep the lights on.
Despite the crisis, Dianne Feinstein, a senator from California -
the most populous state in the union - couldn't get an
appointment with Bush. The White House had plenty of time for
Enron, though. On April 17 2001, Vice President Cheney had a
private meeting with Enron chairman Ken Lay. During the
meeting, Lay offered suggestions for Cheney's energy task force
and lobbied Cheney against price caps in California. Cheney
quickly adopted Lay's argument.
The day after his meeting with
Lay, Cheney mocked the idea of price caps. He told the Los
Angeles Times that caps would only provide "short-term political
relief for the politicians." In late May, Bush visited California and,
like Cheney, attacked the idea that price caps - something the
California governor, Gray Davis, and Feinstein had been begging
for - might help the state restore order to its electricity system.
Bush and Cheney were wrong. Enron and several other power
companies had been manipulating the California energy market
for months and collecting huge revenues for their efforts. Using
strategies with colourful names like Death Star, Get Shorty, Fat
Boy, and Ricochet, Enron had apparently figured out ways to
play the state's power system and drive up prices. Finally, on
June 18 2001, after weeks of rising intrigue, the federal energy
regulatory commission approved limited price caps for California.
The move quickly settled the state's power markets.
Enron's connections in the White House went much further than
George W Bush. The new president's chief economic adviser,
Larry Lindsey, was on Enron's payroll before going to the White
House, earning $100,000 in consulting fees from the Houston
company. Marc Racicot, the former governor of Montana,
lobbied for Enron before Bush named him to lead the Republican
national committee. Robert Zoellick, Bush's choice for US trade
representative, served on an Enron advisory council. Thomas
White, Bush's secretary of the army, was the vice chairman of
Enron Energy Services, a money-losing charade of a company.
Nevertheless, when White left Enron, he owned more than $25
million in the company's stock. Bush's chief strategist and
political guru, Karl Rove, owned more than $100,000 of Enron
stock when Bush took office.
Bush's White House provided Lay and Enron with
unprecedented access. In addition to the meeting with Lay,
Enron officials met with Cheney's task force (the national energy
policy development group) five times and talked to it by phone
on at least six other occasions about the measure. Their effort
shows.
The national energy policy development group's final
report - Reliable, Affordable and Environmentally Sound Energy
for America's Future - released in mid-May 2001, contains a
number of provisions very favourable to Enron. For instance, the
report recommends the creation of a national electricity grid, a
move that could allow Enron to trade electric power more readily
in all regions of the country.
The report says permitting for gas pipelines should be
expedited, a factor that would help Enron, already one of the
largest pipeline companies in the world, build more capacity
more quickly. The report talks about the California crisis, the
need for energy efficiency, increased domestic natural gas
production and, of course, India. Didn't you know that the cost of
butane in Bombay is critical to soccer moms in Seattle?
Cheney's group recommended that "the president direct the
secretaries of state and energy to work with India's ministry of
petroleum and natural gas to help India maximise its domestic
oil and gas production".
Not only could Lay get Bush's ear on appointments, he could
get federal reports to mention countries like India, where Enron,
with the Dabhol electricity and liquefied natural gas project (also
mentioned in Cheney's report), was a major investor.
To be fair, the energy report also discusses America's growing
reliance on energy from Mexico and Canada. But the state
department, which participated in the writing of the energy
report, didn't add the India section; the White House did. Ken
Lay's money on George W Bush had been well spent.
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