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. Last Updated: 07/27/2016

Bush Cabinet: Enron Chief Asked Us for Help

WASHINGTON -- On Oct. 29, the U.S. government's economic brain trust gathered for a weekly luncheon, Commerce Secretary Donald Evans pulled Treasury Secretary Paul O'Neill aside. Evans related a phone call he had received that day from Kenneth Lay, chairman of Enron Corp., the once high-flying Texas energy firm that was suddenly in deep financial trouble.

Lay and other executives had been among President George W. Bush's biggest financial backers over his political career, and Evans was chairman of Bush's presidential campaign. Lay wanted help, Evans said. It turned out that O'Neill had received a similar call the day before. In a brief conversation, O'Neill and Evans decided there was "no way" they were going to do anything to help Enron.

Then they sat down for lunch, not saying a word to the other attendees -- and they waited 73 days to tell Bush about the calls.

That was the chronology presented by the administration last week as part of a cascade of disclosures about the extent of the administration's contact with Enron executives in the weeks before the energy giant filed for bankruptcy court protection Dec. 2. As the revelations of contacts between Bush Cabinet officials and Enron executives reverberated in the nation's capital, the country's largest corporate bankruptcy spread from a major economic debacle to a full-fledged political skirmish between the White House and Capitol Hill.

In the coming months, as Justice Department and congressional investigators swarm over Enron's corporate wreckage, the credibility of the administration's account will come under scrutiny. Investigators also will press Enron executives for their version of events, sometimes under oath and the threat of criminal prosecution.

Bad Deal for Employees

Congressional investigators Saturday released two e-mails from Lay to Enron employees, including an assurance Aug. 27 -- less than two months before Enron's Oct. 16 announcement of huge charges and losses -- that his efforts to restore shareholder confidence "should result in a significantly higher stock price."

On Aug. 14, Lay wrote, "I want to assure you that I have never felt better about the prospects for the company. ... Our performance has never been stronger; our business model has never been more robust; our growth has never been more certain."

Representative Henry Waxman, Democrat-California, ranking minority member of the House of Representatives Committee on Government Reform, said his staff obtained the e-mails as part of its Enron investigation. Waxman wrote a letter to Lay on Saturday saying that the e-mail apparently misled employees "into believing that Enron was prospering and that its stock price would rise."

"At a minimum, they create the appearance that you misled Enron employees about the value of their investments in Enron and the security of their jobs," Waxman wrote. "If this were accurate, it would be a gross betrayal of your employees' trust, as well as possibly illegal conduct."

Special Treatment

Was Enron -- a brash, aggressive company that nearly rewrote the nation's rules on energy distribution -- really so reserved when it came to seeking help from the White House? Did O'Neill and Evans really give no sign to their colleagues, let alone the president, about the phone calls from a politically active company headed for an implosion?

Some Democratic lawmakers believe they can attack the White House coming and going: If anything was done to help a political intimate, Bush can be filleted for breaking his promise to restore honor and integrity to the White House. If nothing was done in response to the calls, some Democrats plan to argue the administration should have done something to protect shareholders and employees.

The Bush administration has treated Enron -- which, along with its executives, contributed more than $220,000 to Bush's campaign -- as radioactive since the company disclosed in October that it had overstated profits by $586 million over the past four years because of what it called accounting errors. Lay was one of the Bush "pioneers" who raised at least $100,000 for the presidential campaign, but the president and his aides have played down any close friendship.

From 1999 to 2001, Enron made $1.9 million in unregulated "soft money" contributions to Democrats and Republicans, but nearly three-quarters of its political giving went to Republican candidates, according to the Center for Public Integrity, a watchdog group.

Andersen Tainted

Andersen -- once the creme de la creme of accounting firms -- has been knocked to its knees after a series of revelations about its audit of bankrupt energy trader Enron Corp.

After the No. 5 accounting firm's startling admission Thursday that it destroyed a number of Enron documents, Andersen faces legal wrangles and a desperate race to restore its once pristine credibility, say experts.

The beleaguered accounting firm, already sullied by other snafus, earlier admitted it erred in its audit of Enron off-balance-sheet partnerships. The murky deals led investors to dump Enron stock, which led to its collapse.

"It's an extremely serious situation for Andersen," said Jerry Bernstein, a former federal prosecutor who heads up the white collar crime and corporate compliance unit in New York at law firm Holland & Knight. "First of all, you have the potential for a criminal violation, then you have a huge civil liability exposure from shareholders who are looking for deep pockets to compensate them."

Questions remain about the destroyed documents, including who shredded them, when and, most important, why. What is clear, however, is that Andersen's most valuable possession -- its reputation -- is now tainted.

Its shattered credibility may discourage prospective clients and even drive away existing ones, said Sharav.

The company could also face some tough decisions from regulators given the magnitude of the Enron saga that Andersen is now mired in, say experts.

In Washington, the SEC said it views Andersen's disclosure as an "extremely serious matter."

(WP, Reuters, AP)