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. Last Updated: 07/27/2016

Lay Offered Treasury Chief Board Seat

WASHINGTON -- Enron Corp. chief executive Kenneth Lay offered then-Treasury Secretary Robert Rubin a seat on Enron's board of directors in 1999, when Enron was lobbying intensely to block government efforts to regulate its derivatives-trading business.

Letters and other documents released by the U.S. Treasury Department under a Freedom of Information Act request by The Washington Post and other news organizations show how Lay sought to influence then-U.S. President Bill Clinton's administration on issues affecting Enron. Lay also sought help from Bush administration officials last fall before the company filed for bankruptcy protection.

Lay wrote to Rubin two days after Rubin announced he would step down as Clinton's treasury secretary and about two months before he turned over the job to Lawrence Summers. Rubin turned down the offer of an Enron board seat.

A few months later, Lay referred to his connections with Rubin in a letter to Summers, urging Treasury officials to back off from proposals to regulate Enron's trading in known derivatives that were tied to energy commodities. Enron was preparing to launch an online operation to trade energy derivatives.

The Clinton administration decided against government oversight of derivative traders such as Enron. In December 2000, Congress adopted that policy in legislation that exempted from government oversight the kind of energy derivative contracts traded by Enron.

"The debate was not about deregulation, it was about an absence of regulation," Commodity Futures Exchange Commissioner Thomas Erickson, a Clinton appointee, said in an interview. Erickson was opposed to the portion of the bill that removed energy derivative contracts from government oversight.

Enron relied on derivatives in two ways. It traded them to earn profits across all its businesses. Executives also used derivatives in financial transactions that distorted the financial picture that Enron projected to investors.

Senator Dianne Feinstein, Democrat-California, has introduced legislation to give the Commodity Futures Trading Commission more authority to oversee energy derivatives by revoking some provisions of the 2000 law, though it is unclear how much chance it has of passing. That would return the rules to what they were before the 2000 legislation, when the commission had some jurisdiction over companies such as Enron, Erickson said.

Federal bank regulators oversee banks that deal in over-the-counter derivatives. The Securities and Exchange Commission oversees securities firms that trade them. But there is no direct monitoring of the actual trading of over-the-counter derivatives. So derivatives traders such as Enron that are not affiliated with a bank or securities firm operate without government monitoring. As the government was trying to decide what kind of oversight -- if any -- was proper for these kinds of traders, Lay made his overture to Rubin.

In a May 14, 1999, letter, Lay wrote: "If you are considering joining any corporate boards, I would very much like to talk to you. Given the way Enron has evolved, not only do we badly need a person with your experience and insights (gained both at Goldman Sachs and at the U.S. Treasury), but also I think you would find serving on our board intellectually and otherwise interesting."

Lay said in the letter he also had placed a call to Rubin "in the hope that I mention this to you personally."