Message-ID: <30853644.1075841127218.JavaMail.evans@thyme> Date: Mon, 14 Jan 2002 10:02:41 -0800 (PST) From: sarah.palmer@enron.com To: sarah.palmer@enron.com Subject: Enron Mentions (Part II) -- 01/13/02 Mime-Version: 1.0 Content-Type: text/plain; charset=ANSI_X3.4-1968 Content-Transfer-Encoding: quoted-printable X-From: Palmer, Sarah X-To: Palmer, Sarah X-cc: X-bcc: X-Folder: \ExMerge - Martin, Thomas A.\Deleted Items X-Origin: MARTIN-T X-FileName: tom martin 6-25-02.PST Newsweek Cover: 'Enron. Burned!' PR Newswire, 01/13/2002 Enron Chief Misled Employees, Waxman Says Inquiry: Kenneth Lay's e-mails pa= inted a bright future for the firm, even as its stock was faltering. Los Angeles Times, 01/13/2002 The World: School for Scandal Trying To Pass Damage Control 101 The New York Times, 01/13/2002 Bush, Enron chief rose out of the same circles of achievement Associated Press Newswires, 01/12/2002 ENRON'S COLLAPSE Complex Web of Relationships in Boom and Bust The New York Times, 01/13/2002 ENRON'S COLLAPSE Before Debacle, Enron Insiders Cashed In $1.1 Billion in Shares The New York Times, 01/13/2002 Enron Auditing Firm Destroyed Documents CNN Sunday, 01/13/2002 USA: US senator - Enron accountant could face charges. Reuters English News Service, 01/13/2002 Enron Gave $21,933 to Schumer / Donations largest to any Senate Democrat Newsday, 01/13/2002 Enron echoes past scandals Chicago Tribune, 01/13/2002 Learning From Enron The Washington Post, 01/13/2002 THE NATION NEWS ANALYSIS White House's Failure to Sound Alarm Faulted That = no warnings were issued as Enron collapsed raises the specter of special tr= eatment, critics charge. Los Angeles Times, 01/13/2002 Interview With John Dingell, Tom Davis Fox News: Fox News Sunday, 01/13/2002 Interview With Paul O'Neill Fox News: Fox News Sunday, 01/13/2002 White House Says it Offered Enron No Assistance CNN: Sunday Morning, 01/13/2002 Enron-White House Relationship Continues Causing Controversy CNN: Sunday Morning01/13/2002 Interview: Bennett Roth and David Ivanovich discuss the Enron debacle and h= ow it might affect the Bush administration NPR: Weekend Edition - Sunday, 01/13/2002 Interview With Michael Weisskozpf CNN: Sunday Morning, 01/13/2002 Enron Collapse Brings Bush Administration Under Scrutiny CNN Sunday, 01/13/2002 Cabinet members say they didn't inform Bush about Enron calls for help Associated Press Newswires, 01/13/2002 O'Neill - I did not discuss Enron case with subordinates. EFE News Service, 01/13/2002 US regulators probe Enron share-sell sell-off by executives - report AFX News, 01/13/2002 Report: Enron gave more than $200K to Florida politicians Associated Press Newswires, 01/13/2002 Enron Gave To Florida Politicians; Pension Fund Lost $300M Dow Jones International News, 01/13/2002 ENRON INSIDERS' SALES DRAW IRE ; STOCK SHARES SOLD BY EXECUTIVES FROM 1999 = THROUGH MID-2001 WERE WORTH $1.1 BILLION. Orlando Sentinel, 01/13/2002 Insiders at Enron made millions New York Times News Service, 01/13/2002 Enron `gift' to Democrats for Dabhol project? The Hindu, 01/13/2002 The Statesman (India) - Dabhol jobless take crime route. The Statesman, 01/13/2002 AUSTRALIA: Enron Australia book wind-up moves slowly. Reuters English News Service, 01/13/2002 Former Enron employees deeply angered by their treatment as company went do= wn Associated Press Newswires, 01/13/2002 Former Enron employees coping with firm's collapse Associated Press Newswires, 01/13/2002 SEC, UK accountancy watchdog ICA in Enron crisis talks - report AFX News, 01/13/2002 Resist Revenge Los Angeles Times, 01/13/2002 Change the system that gave us Enron The Philadelphia Inquirer, 01/13/2002 POLITICS EMERGE IN ENRON FALLOUT The Boston Globe, 01/13/2002 CEO'S LONG PATH FROM FARM TO RIG The Boston Globe, 01/13/2002 Top Bush official savaged over Enron capitalism-as-usual comment by Charles= Whelan [Corrected 01/13/02] Agence France-Presse, 01/13/2002 Firms offering severance, but only if workers agree not to file unemploymen= t / A matter of compensation Houston Chronicle, 01/13/2002 Enron `players' worked D.C. ties Chicago Tribune, 01/13/2002 Enron's oily aftermath Chicago Tribune, 01/13/2002 Clinton link with Enron lowers the heat on Bush The Independent - London, 01/13/2002 Features - Sunday Comment - They can't pin this on Bush It was Clinton who = lavished over $4 billion on Enron. The Sunday Telegraph, 01/13/2002 ENRON / Shoes keep dropping; let's see the closet Houston Chronicle, 01/13/2002 Profile: Investigation of collapse of energy giant Enron; Treasury Secretar= y Paul O'Neill discusses phone calls made to him by Enron; Employees and sh= areholders are hardest hit by Enron's collapse; Shareholder advocate Willia= m Lerach discusses lawsuit being filed against Enron's executives; Former S= ecurities & Exchange Commission Chairman Arthur Levitt discusses who might = be to blame for Enron's collapse; Helping athletes break records defeats pu= rpose of athletic competition ABC News: This Week, 01/13/2002 ____________________________________________________________________ Newsweek Cover: 'Enron. Burned!' 01/13/2002 PR Newswire (Copyright (c) 2002, PR Newswire) Commerce Secretary Evans Phoned Lay on October 15, the Day Before=20 The Enron CEO Told Wall Street About the Company's Financial Troubles;=20 But Both Men Say They Did Not Discuss the Impending Crisis=20 Enron Bubble Bursting is Emblematic of Wholesale Systemic Failure;=20 Anderson Errors Could Cut Accounting's Big Five to Four=20 NEW YORK, Jan. 13 /PRNewswire/ -- Last fall, Commerce Secretary Donald Evan= s, who was halfway around the world in Moscow on a trade mission, reached o= ut to Enron CEO Kenneth Lay in Houston to discuss with him Enron's disastro= usly controversial, financially-draining electricity plant in India. Specif= ically, Evans suggested that Lay consult with Sig Rogich, a veteran Republi= can PR man (and another friend of the Bush family), who was on his way to N= ew Delhi to pitch his services to the government. Perhaps Rogich could soot= he the locals, who had been loudly accusing Enron of price-gouging, report = Chief Political Correspondent Howard Fineman and Investigative Corresponden= t Michael Isikoff. While such calls are typical, what makes this one notewo= rthy is the date on which it took place, October 15. On that day, Lay knew = that his world was about to fall apart. (Photo: http://www.newscom.com/cgi-bin/prnh/20020113/NYSU004 )=20 In a conference call with Wall Street analysts the next day, Lay would have= to disclose that Enron, the largest energy trading company in the world, h= ad lost an astounding $618 million in the third quarter. More important, he= would be forced to admit that Enron had lost $1.2 billion in a labyrinth o= f partnerships that hadn't been -- but should have been -- counted on the c= ompany's books. The company was near collapse. In the January 21 issue of N= ewsweek (on newsstands Monday, January 14). Fineman and Isikoff write that = while Evans was an old friend in the Texas energy business, he and Lay say = they did not discuss the impending crisis.=20 The company, which imploded last December 2, produced the largest bankruptc= y in American history and now the shockwaves have moved from Enron headquar= ters in Houston and Wall Street to Washington. The Lay-Evans call, it turns= out, was the prelude to a flurry of others (all initiated by Lay) in which= the Enron chief executive emitted increasingly urgent distress signals to = Evans, Treasury Secretary Paul O'Neill and Federal Reserve Chairman Alan Gr= eenspan. But Lay apparently got no help, Fineman and Isikoff write. White H= ouse officials insist that he never contacted them and they never contacted= him, even though he was running (into the ground) the seventh largest corp= oration in the country and the second largest in Texas. They flatly deny th= at President George W. Bush or Vice President Dick Cheney (or any aides) ha= d direct knowledge of Enron's predicament. No evidence surfaced last week t= o contradict their story and the Bushies point out with relief that someone= else had called O'Neill on Enron's behalf: Robert Rubin, the highly-regard= ed (Democratic) Treasury Secretary under Bill Clinton and now a leader of C= itigroup, one of Enron's largest creditors. And though Lay and Enron papere= d the Congress with campaign donations to Republicans and Democrats alike, = six committees were planning to investigate.=20 Lay built his business by getting regulatory relief from Congress - from Re= publicans, to be sure, but from the Democrats as well. There were silent pa= rtners in the myriad Enron off-the-books secret partnerships. They might in= clude, inconveniently, a fair number of the Democrat's top donors. Numerous= officials in and around the White House have or had extensive financial ti= es to Lay and Enron. They include political adviser Karl Rove, economic adv= iser Larry Lindsay and GOP Chairman Marc Racicot, who last week declared th= at he would cease lobbying work. Lay is also the biggest individual contrib= utor to President Bush's presidential and Texas gubernatorial campaigns. In= vestigators will also have numerous contacts to examine. On October 29, Lay= called Evans and discussed with him the impending lowering of Enron's cred= it rating. Lay talked with O'Neill twice, and Enron's president Greg Whalle= y, had several conversations with Under Secretary Peter R. Fisher. Lay's at= torney, Robert Bennett, tells Newsweek that his client was merely "doing th= e responsible thing" by informing officials of "the possibility of bankrupt= cy" at Enron.=20 Enron, writes Wall Street Editor Allan Sloan, turned out to be another bubb= le. However, unlike a Pets.com or a Webvan, whose implosions did little dam= age outside of costing dice-rolling speculators some money and techies some= jobs, the Enron bubble exploded like a grenade: stockholders and lenders a= re out tens of billions of dollars; at least 20,000 Enron employees have lo= st their jobs and many of them have lost their retirement savings too. And = the collateral damage keeps spreading. Prominent among the wounded is Arthu= r Anderson, Enron's outside auditor, which admitted last week that some emp= loyees destroyed documents, has been tarnished to the point that the Big Fi= ve accounting firms might shrink to the Big Four. Wall Street's credibility= has been shattered. Utilities deregulation, for which Enron was the poster= boy, is now on the back burner. The spectacle of impoverished, unemployed = Enronites has thrown a harsh spotlight on the risks of 401(k) accounts stuf= fed with company stock. And confidence in financial markets has been shaken= too.=20 Sloan reports that Enron's end is emblematic of a wholesale systemic failur= e. The multi-layered system of checks and balances that is supposed to keep= a company from running amok completely broke down. Executives of public co= mpanies have legal and moral requirements to produce honest books and recor= ds, but at Enron, they didn't do that. Outside auditors are supposed to mak= e sure that a company's financial reports not only meet the letter of accou= nting rules but also give investors and lenders a fair and accurate picture= of what's going on, but Enron's auditor, Arthur Anderson, failed that test= . Regulators didn't regulate and Enron's board of directors didn't direct. = In reconstructing Enron's fall, Sloan, who first reported on Enron's demise= in the December 10, 2001 issue of Newsweek and again on December 17, 2001,= identifies the "too-clever-by-half" financial structures that Enron plante= d that led to its undoing and how and why those off-the-books partnerships = worked for so long without detection.=20 (Articles attached. Read Newsweek's news releases at=20 http://www.Newsweek.MSNBC.com. Click "Pressroom.") To George W. Bush, the h= ead of Enron was 'Kenny Boy' - until now. As the shock waves from the large= st bankruptcy in U.S. history shake Washington, the scandal machine is cran= king up in search of a White House connection. Let the Enron Wars begin.=20 Lights Out: Enron's Failed Power Play=20 Commerce Secretary Donald Evans was busy, halfway around the world in Mosco= w, but not too busy to reach out to Ken Lay in Houston last fall. "Kenny Bo= y," as President George W. Bush had nicknamed him, was not just any CEO. He= was the Big Enchilada of Texas business, head of Enron, the largest energy= -trading company in the world -- and the biggest sugar daddy in Bush's poli= tical career. So although Evans was conducting a trade mission to Russia (t= he first trip abroad by a cabinet member after September 11), he took time = to call Lay to discuss Enron's money-losing power plant in India. Specifica= lly, Evans suggested that Lay consult with Sig Rogich, a veteran Republican= PR man (and another Bush family friend), who was on his way to New Delhi t= o pitch his services to the government. Perhaps Rogich could soothe the loc= als, who had been loudly accusing Enron of price gouging.=20 Ever since there have been Commerce secretaries (nearly a century), they've= made such phone calls: strands in a global web of American dealmaking. But= what makes this one noteworthy -- and worthy of suspicion to Bush's enemie= s -- is the date on which it took place, Oct. 15, for Lay knew that his wor= ld was about to fall apart. In a conference call with Wall Street analysts = the next day, he would have to disclose that Enron had lost an astounding $= 618 million in the third quarter. More important, it would soon become clea= r that Enron had lost $1.2 billion in a labyrinth of partnerships that prob= ably should have been -- but weren't -- counted on the company's books. Enr= on, one of the most innovative and admired companies in the world, was near= collapse. Didn't Lay and Evans, an old friend in the Texas energy bidness,= discuss the impending crisis? They both say no. But investigators -- at le= ast on Capitol Hill -- will want to ask, preferably in a hearing on TV.=20 As Enron's beleaguered employees and investors know all too well, the compa= ny imploded last Dec. 2, producing the largest bankruptcy in American histo= ry. But now the shock waves have moved from Houston and Wall Street to Wash= ington, rattling a White House that had been focused on the popular enterpr= ise of fighting the war on terrorism. The Lay-Evans call, it turns out, was= the prelude to a flurry of others (all initiated by Lay) in which the Enro= n chief executive emitted increasingly urgent distress signals -- and barel= y disguised pleas for help -- to Evans, Treasury Secretary Paul O'Neill and= Federal Reserve chairman Alan Greenspan.=20 Despite his munificence as a contributor -- perhaps, ironically, because of= it -- Lay apparently got no help. White House officials insist that he nev= er contacted them, and they never contacted him, though he was running (int= o the ground) the seventh largest corporation in the country and the second= largest (after Exxon-Mobil) in Texas. They flatly deny that Bush or Vice P= resident Dick Cheney (or any aides) had had direct knowledge of Enron's pre= dicament. No evidence surfaced last week to contradict their story and, as = they say in the law, the thing speaks for itself: Enron did collapse. Bushi= es pointed out with relief that someone else had called O'Neill on Enron's = behalf: Robert Rubin, respected Treasury chief under Bill Clinton and now a= leader of Citigroup, one of Enron's largest creditors. Lay, who, with Enro= n, gave $500,000 to Bush in 2000, had become a mere acquaintance. At a pres= s "avail," Bush referred to him stiffly as "Mr. Lay." Over at Commerce, a t= op aide laughingly called him "Ken Who?"=20 Still, the collapse of Enron was no laughing matter. In Houston there was g= rowing and justifiable outrage. Earlier in 2001, Enron's brass had feverish= ly unloaded company stock. But at the very time Lay was sounding his alarms= , the rank and file were barred from touching their modest, but Enron-heavy= , 401(k) portfolios. Inside the Beltway, the scandal-making machinery -- id= led since stripping a gear on the Gary Condit saga last year -- sputtered t= o life. Though Lay and Enron had papered Congress with donations to Republi= cans and Democrats alike, six committees were planning to investigate. (The= first hearing, later this month, will be led in the Senate by presidential= hopeful Joe Lieberman, who got a paltry $2,000.)=20 The Democrats were aware of the risks. Bush remains genuinely popular. Lay = built his business by getting regulatory relief from Congress -- from Repub= licans, to be sure, but from the Democrats as well. There were silent partn= ers in the myriad Enron off-the-books secret partnerships. They might inclu= de, inconveniently, a fair number of the Democrats' top donors. The public,= the handlers know, is likely to be disgusted by another partisan auto-da-f= e.=20 Even so, the Dems couldn't resist plunging in. Average workers had been scr= ewed. Wasn't there something the administration should have done to prevent= it? The Enron issue seemed aimed straight at the GOP's -- and Bush's -- ch= ief vulnerability: their profile as the party of Texas-based Big Energy and= the moneyed class in general. And, arithmetic favored the Democrats: Enron= /Lay had given nearly three quarters of its largesse to Republicans over th= e years. "We don't have to say much," said one top Democratic strategist. "= This story will carry itself for quite a while."=20 At the White House, aides projected an attitude of studied calm. Bush's fir= st mention of the Enron inferno was after Nov. 30, according to counselor K= aren Hughes, when he allowed that the seeming callousness toward company em= ployees "really stinks." Aides claimed that neither Bush nor Cheney knew of= Lay's distress calls until Evans and O'Neill mentioned them to the preside= nt last Thursday morning. "I know you think it strains credulity, but it's = the truth," said White House aide Mary Matalin. "Every tentacle of this lea= ds away from the White House."=20 That will be for investigators -- not spin doctors -- to decide. Numerous o= fficials in and around the White House have or had extensive financial ties= to Lay and Enron. They include political adviser Karl Rove, economic advis= er Larry Lindsey and GOP Chairman Marc Racicot, who last week declared that= he would stop all lobbying work. Investigators will have numerous contacts= to examine. Lay called Evans last Oct. 29 and discussed the impending drop= in Enron's credit rating with him. Lay talked with O'Neill twice, and Enro= n's president, Greg Whalley, had several chats with Under Secretary Peter R= . Fisher. Enron's attorney, Robert Bennett, told Newsweek his client was me= rely "doing the responsible thing" by informing officials of "the possibili= ty of bankruptcy" at Enron.=20 As Bennett knows (he represented Bill Clinton), a Washington scandal is hal= f circus, half court of law. The powerful presence in the latter is the Jus= tice Department where, as usual, there were Enron ties to untangle. Last we= ek the department made the rare decision to run its probe from Washington h= eadquarters. Why? Because the U.S. Attorney's Office in Houston had too man= y personal ties to Enron employees. Attorney General John Ashcroft had to r= ecuse himself, having taken $58,000 in Enron-related cash for his own faile= d 2000 presidential campaign. That left the probe to Deputy A.G. Larry Thom= pson, formerly a partner in an Atlanta law firm that has done extensive wor= k for -- you guessed it -- Enron. (Since he didn't personally represent the= company, officials said, he didn't need to bow out.)=20 The pivotal question is not likely to be about administration actions in th= e first instance, but its candor about them now. Bush's aides say they have= nothing to hide. But they and their boss strained nevertheless to distance= themselves from Lay. Just last spring he met privately with Cheney to disc= uss energy policy and influenced nominations to the Federal Energy Regulato= ry Commission.=20 Now, in the White House telling, he was some guy they hardly knew until 199= 5. In the Texas gubernatorial race of 1994, the president told the press, L= ay "was a supporter" of his Democratic foe, Ann Richards. True, but only in= the Clintonian sense. In fact, Lay supported Bush the First in 1988 and 19= 92, organized the GOP Houston convention for him and raised money for the B= ush library. Lay gave money to Richards in 1994, but he and Enron gave much= more to Bush: $146,000. Much of that money came in after Election Day, a B= ush ally recalled contemptuously. So "Ken Who" was never really a friend of= George's -- and certainly isn't considered one now.=20 With Tamara Lipper in Washington=20 It's the scariest type of scandal: a total system failure. Executives, lend= ers, auditors and regulators all managed to look the other way while the co= mpany ran amok.=20 Who Killed Enron=20 Enron was supposed to be the next new thing, a New Economy company with sub= stance to it. Unlike flaky Internet start-ups that substituted ethereal yar= dsticks like "eyeballs" and "stickiness" for revenues and profits, Enron ha= d real businesses, real assets, real revenues and what seemed to be real pr= ofits. It owned natural-gas pipelines and electricity-generating plants and= water companies. Not only would it do well, it would improve the planet by= substituting the efficient hand of the market for the clumsy hand of gover= nment regulation.=20 And it seemed to work. From humble beginnings as a natural-gas company, Enr= on rose in a mere 15 years to No. 7 on the Fortune 500, doing $100 billion = of business in 2000. Along the way, Enron became one of America's most admi= red companies, and a perennial favorite on "best places to work" lists. The= guys running the show were hailed as magicians with newfound secrets that = would change the future of business.=20 But Enron turned out to be another bubble. Unlike a Pets.com or a Webvan, w= hose implosions did little damage outside of costing dice-rolling speculato= rs some money and techies some jobs, the Enron bubble exploded like a grena= de. Today Enron is a smoking ruin, the biggest corporate bankruptcy in Amer= ican history. A year ago the stock market valued Enron at more than $60 bil= lion. Its stock has since lost 99 percent of its value -- and still seems o= verpriced. Stockholders and lenders are out tens of billions of dollars. Ma= ny of Enron's 20,000 employees lost their retirement savings when the compa= ny collapsed. About 5,000 of them, from computer jocks in Houston to newspr= int recyclers in New Jersey, lost their jobs, too. By contrast, chairman Ke= n Lay made $205 million in stock-option profits in the past four years alon= e, and other big hitters and board members made out, too. What's especially= galling is that a handful of executives and outsiders made millions by inv= esting in off-balance-sheet deals with Enron that played a large role in de= stroying the company.=20 The collateral damage keeps spreading. Prominent among the wounded is Arthu= r Andersen, Enron's outside auditor, which admitted last week that some emp= loyees destroyed documents. Andersen's reputation has been tarnished to the= point that the Big Five accounting firms might shrink to the Big Four. Wal= l Street's credibility has been shattered. Utilities deregulation, for whic= h Enron was the poster boy, is now on the back burner. The spectacle of imp= overished, unemployed Enronites has thrown a harsh spotlight on the risks o= f 401(k) accounts stuffed with company stock. Confidence in financial marke= ts has been shaken -- and rightly so. With the action in Afghanistan slowin= g down, Enron shock waves have finally reached Washington, raising the spec= ter of another 'Gate. L'affaire Enron is becoming a classic Washington scan= dal: criminal probes, investigations of destroyed documents, pols being ask= ed what they knew about Enron and when they knew it. There's no sex, alas -= - but there sure is lots of money.=20 Life would be simple if we could blame the whole thing on Enron chairman La= y. Or on George W. Bush, who goes way back with Lay, among the biggest indi= vidual contributors to Bush's presidential and Texas gubernatorial campaign= s. But Enron isn't that simple. It's something far more scary: a wholesale = systemic failure. The multilayered system of checks and balances that is su= pposed to keep a company from running amok completely broke down. Executive= s of public companies have legal and moral responsibilities to produce hone= st books and records -- but at Enron, they didn't do that. Outside auditors= are supposed to make sure that a company's financial reports not only meet= the letter of accounting rules but also give investors and lenders a fair = and accurate picture of what's going on -- but Arthur Andersen failed that = test. To protect themselves, lenders are supposed to make sure borrowers ar= e creditworthy -- but Enron's lenders were as clueless as everyone else. Wa= ll Street analysts are supposed to dig through company numbers to divine wh= at's really happening -- but almost none of them managed to do that. Regula= tors didn't regulate. Enron's board of directors didn't direct.=20 Why did all these people look the other way for so long? Money talks. Or, w= ith Enron, shouts. The company put lots of money in pockets of the people a= nd institutions that were supposed to police it. Enron's incessant dealmaki= ng generated huge fees for Wall Street investment banking houses. And guess= what? Wall Street loved Enron, with most analysts rating its stock and bon= ds as the greatest thing since money was invented, at least until they fina= lly heard Enron's death rattle. Even when it became clear last fall that En= ron was engaging in creative bookkeeping, almost no analysts recommended se= lling the stock, says Chuck Hill, who tracks analyst recommendations for Fi= rst Call/Thompson Financial. "They should have thrown in the towel a lot ea= rlier," he said. Enron paid huge fees -- $52 million in 2000 -- to Arthur A= ndersen for auditing and consulting services. Andersen allowed it to get aw= ay with accounting that was, at best, aggressive and, at worst, criminal. I= f Andersen had stood on principle, Enron would doubtless have changed accou= ntants. Enron famously made heavy political contributions. Pols got peanuts= compared with what Wall Street and Andersen got, but it was enough to help= Enron run roughshod over regulators at the national and state levels.=20 With so many dollar signs floating around and the company's stock soaring, = no one was interested in bad news -- a problem that's hardly limited to Enr= on. "A lot of people don't want to hear the straight truth," says Thomas Do= naldson, a business-ethics professor at the University of Pennsylvania's Wh= arton School. "Investors don't want the CEO to say something negative that = will drop the stock, even for the short term. There's a culture of puffery,= a culture of winking." The winking stopped last year when regulators and t= he financial markets finally reined in Enron -- at least five years after i= ts big-time financial shenanigans had begun.=20 Enron started out innocently enough, born of a mildly innovative 1985 deal = to combine two boring businesses: an Omaha-based natural-gas-pipeline compa= ny called InterNorth and a Texas pipeline company called Houston Natural Ga= s. Ken Lay, a soft-spoken statesman kind of guy with a Ph.D. in economics, = found a hyperaggressive financial whiz named Jeff Skilling working in McKin= sey & Co.'s energy practice in Houston. They had a brilliant insight. Inste= ad of just delivering gas to customers at a modest profit, Enron could use = newly deregulated pipelines to match buyers and sellers. In other words, En= ron became a gas trader, as well as a gas company. Because trading was much= more fun and much more lucrative than building pipes and drilling wells an= d selling gas at regulated, low-profit prices, Enron morphed into a trading= company with a utility attached to it.=20 And make no mistake, these guys were deregulation's True Believers. At a di= nner I had with Skilling in the late 1990s, he was like a religious zealot = who couldn't stop repeating his favorite mantra as the solution to all the = world's problems. There are rolling blackouts in the Midwest? Deregulate. S= ome energy companies look like they're price gouging? Deregulate more. And = if salad dressing had dripped onto my tie? ... You get the picture.=20 With Lay and Skilling in charge, Enron's revenues and profits climbed sharp= ly. People from all over the country clamored to join Enron and its crusade= . TV monitors in the Enron Building in downtown Houston displayed the stock= price. Employees could get pumped up by inspirational elevator messages on= the way to work. In the best dot-com tradition, employees were treated to = subsidized Starbucks, an on-site gym and lavish company outings. Enron wasn= 't just a business, it was a lifestyle that rewarded foam-mouthed aggressio= n. "There's nothing wrong with ambition, but there was simply a warped cult= ure at the top," says John Allario, 38, who worked six years in Enron's bus= iness-development department before losing his job in the collapse. "They w= anted to climb to the top of the mountain and pound their chest and crush a= nyone or anything that got in the way."=20 The most important measure of Enron's growth was its rising stock price. It= was the oil that made the Enron machine run smoothly. After faltering in 1= 997, Enron shares went on a run in late 1998, doubling, then doubling again= . Enron stock options were making employees rich and helped the company att= ract the best and brightest. Not wanting to miss out on a sure thing, Enron= ites stuffed company shares into their 401(k) plans. The company required m= ost employees to have a chunk of their 401(k)s in Enron stock -- but many e= mployees had far more stock than Enron required, and far less in diversifie= d investments, such as mutual funds.=20 But what made Enron successful -- innovation and daring -- got the company = into trouble when it decided in its arrogance that it could "financialize" = almost anything. Rather than sticking to natural gas and electricity, which= it understood, Enron in the mid- and late-'90s branched into whatever stru= ck its fancy: water, coal, fiber-optic capacity, weather derivatives (whate= ver those are) and newsprint. It bought and sold properties, and traded up = a storm. But many of its businesses tied up lots of capital while earning v= ery little or running in the red. In the late 1990s, by my count, Enron los= t about $2 billion on telecom capacity, $2 billion in water investments, $2= billion in a Brazilian utility and $1 billion on a controversial electrici= ty plant in India. Enron's debt was soaring. If these harsh truths became o= bvious to outsiders, Enron's stock price would get clobbered -- and a risin= g stock price was the company's be-all and end-all. Worse, what few people = knew was that Enron had engaged in billions of dollars of off-balance-sheet= deals that would come back to haunt the company if its stock price fell.= =20 And it was in those too-clever-by-half financial structures that Enron sowe= d the seeds of its undoing. Before we proceed to the story of Enron's final= days, let's get out our trusty lightsabers and take an accounting trip, on= e made more lively by some Enron financial techie's fondness for "Star Wars= ."=20 Our case involves something called JEDI, as in Jedi knight. JEDI stands for= Joint Energy Development Investments, which was an investment partnership = between Enron and the California Public Employees Retirement System, known = as Calpers. Enron and Calpers invested $250 million each into the partnersh= ip in 1993. JEDI prospered -- the Force must have been with it -- as Enron = deftly bought and sold energy stocks, power plants and other investments, e= arning a 23 percent annual return for Calpers. Very nice. So Calpers welcom= ed Enron's offer in late 1997 to do a sequel. They ramped up JEDI II, with = each side putting up $500 million. But first, Calpers wanted to cash in its= JEDI I stake, worth $383 million. Enron obliged. Instead of liquidating th= e partnership, Enron went looking for someone to ante up $383 million to ta= ke Calpers's place. That would keep JEDI I off Enron's balance sheet and it= s profit-and-loss statement. Making JEDI I part of Enron would have cut the= company's reported profits sharply, and increased its reported debt by mor= e than $500 million.=20 To solve this problem, Enron ginned up Chewco Investments - as in Chewbacca= the Wookiee. Chewco was a partnership of Enron executives and some undiscl= osed outsiders. Chewco didn't have $383 million sitting around. So Enron le= nt it $132 million and guaranteed a $240 million loan. This left about $11.= 5 million for Chewco to come up with. Not a whole lot, given the size of th= e deal. But $11.5 million was an important number. Why? Because it was more= than 3 percent of Chewco's capital. And what's magical about that number? = Clearly you're not an accountant. If outsiders put up at least 3 percent of= the capital, accountants are allowed to keep the deal off the parent compa= ny's books. But Enron couldn't even get this right. It turns out that Enron= had provided collateral for about half of Chewco's $11.5 million investmen= t. This meant Chewco had only about 1.5 percent at risk, not 3 percent. So = JEDI and Chewco should have been treated as part of Enron by Arthur Anderse= n from late 1997 on. But they weren't. In congressional testimony last mont= h, Andersen chief executive Joseph Berardino admitted the accounting was wr= ong, but said it wasn't Andersen's fault because no one told his firm about= the collateral Enron had provided. What Berardino didn't say then (and he = wouldn't talk to us) is that even if Chewco had met the 3 percent rule, the= result would still be outrageously misleading. Keeping JEDI and Chewco off= the books inflated Enron's 1997 profits by 75 percent. And the move inflat= ed profits for three more years, for a total of $396 million. Did keeping J= EDI and Chewco off Enron's books when their impact was so great "present fa= irly" Enron's financial situation, as Andersen certified? Not to me. But I'= m only an English major.=20 Now, to the death spiral. Enron had started 2001 in great shape. Its stock = was $83, close to its previous high of $90. CEO Jeff Skilling said in Janua= ry that the stock was really worth $126. But rather than heading north, Enr= on stock started falling as the year wore on. The continuous decline in Int= ernet and telecom issues helped drag it down, as did falling natural-gas pr= ices. What some Enron insiders knew -- but outsiders didn't -- is that the = falling stock price was going to cause trouble, big time. That's because En= ron was going to have to fork over lots of money, or give ruinous amounts o= f stock, to institutions that had lent billions to Enron's off-balance-shee= t entities. The commitment to provide that stock made the off-balance-sheet= entities creditworthy, because it reassured lenders about getting their mo= ney back.=20 Skilling quit unexpectedly in August, triggering speculation that something= was amiss (he said he wanted to spend more time with his family). Skilling= wouldn't talk to Newsweek, but his spokesman said that Skilling "left beli= eving the company was in very good shape." Asked if Skilling felt any respo= nsibility for Enron's failure, his spokesman said he believes that "what ha= ppened to Enron is a tragedy. He does not understand the reasons for it."= =20 The reasons, actually, are sort of obvious. The end began on Oct. 16, when = Enron held a conference call to discuss its third-quarter profits. Or, more= accurately, losses. Buried in its release was the fact that Enron's net wo= rth had mysteriously shrunk by $1.2 billion. That was because of a complex = off-balance-sheet deal involving four partnerships called Raptor, but Enron= didn't explain that.=20 For the first time, Enron found itself fielding lots of hostile questions f= rom its formerly docile constituency on Wall Street. Meanwhile, The Wall St= reet Journal had been picking away at the Enron facade, revealing, among ot= her things, that Enron's chief financial officer, Andrew Fastow, had made m= ore than $30 million in fees for running some of the supposedly independent= partnerships. That, plus the losses and the vanished $1.2 billion of net w= orth, started a Wall Street uproar. This went virtually unnoticed in Washin= gton, where all eyes were on Afghanistan. But a few days later the Securiti= es and Exchange Commission informed Enron that it had begun an informal inv= estigation. Enron did what comes naturally to any large company in trouble = -- it ran for a lawyer: University of Texas Law School Dean William Powers = Jr. It put Powers on its board and named him to chair a special board commi= ttee to deal with the SEC, and to investigate. Powers hired William McLucas= , a former head of the SEC's enforcement division and a partner at the Wash= ington law firm of Wilmer, Cutler & Pickering. McLucas assembled a legal ta= sk force and hired accountants from Deloitte & Touche to dig into the books= .=20 Guess what? Inside a month, McLucas & Co. found unpleasant truths that Enro= n's board (and presumably Andersen) had ignored or overlooked for years. Th= en again, McLucas didn't have a vested interest in ignoring them. McLucas's= conclusion: Enron's profits had been grossly overstated and its debts unde= rstated for five years.=20 On Nov. 8, Enron issued a report, clearly crafted by McLucas, saying that i= ts numbers dating back to 1997 could no longer be relied on. About 10 days = later, it issued its third-quarter report, containing additional damaging i= nformation. The end was nearing. As a trading company, Enron needed huge am= ounts of credit to carry inventory (and, as we've seen, to cover losses) an= d also needed the confidence of trading partners. With Enron's numbers hink= y, its credit failing, a cash crisis clearly on the horizon, Enron's belove= d free market did it in. Creditors fled, trading partners fled, money gushe= d out the door. After an aborted attempt to sell out to crosstown rival Dyn= egy Inc., which walked away from the deal at the last moment, Enron was out= of cash, out of credit, out of luck and out of time. It filed for bankrupt= cy on Dec. 2. And it may well never emerge from it. Its energy-trading busi= ness is still very valuable, but the bankruptcy is looking messy, even by b= ankruptcy standards.=20 Former Enron employees can't stop shaking their heads over the sorry saga. = "There was a time not so long ago when we all thought Ken Lay was just the = most wonderful person in the world," says Shane Yelverton, who had worked a= s a senior administrative assistant in Enron's engineering department. "But= now we're hearing all this stuff: that he was selling off stock, even whil= e he was telling us not to sell our stock. It's disgusting."=20 Charles Prestwood is more than disgusted. A pipeline operator who had been = with Enron since day one, he retired in October 2000 with $1.3 million of E= nron stock in his 401(k). Now, he's watching pennies. "All those dreams are= gone now," he says. "I've lost everything I had. I'm just barely surviving= ."=20 Remember John Allario, the former Enron employee who so elegantly described= the corporate culture in Enron's heyday? He's getting a measure of revenge= . Invoking his former CEO's last name, he started a Web site, laydoff.com, = that peddles I GOT LAY'D BY ENRON T shirts. "We've sold about 450 so far," = Allario said last week. "It's my way of showing the company that its former= employees whom they left in the lurch are still creative, and that we have= something to offer."=20 The Enron fallout promises to be severe and far-reaching. With a criminal i= nvestigation underway, some of the Enron players face the prospect of spend= ing time in the big house. The only question about Arthur Andersen is how m= uch the partners will have to pay to settle this mess, and whether the comp= any can survive as an independent entity. The accounting profession is wish= ing it were once again faceless and colorless, instead of being in the hars= h spotlight. Financial conglomerates like JP Morgan Chase and Citigroup are= going to be scrutinized over their multiple and often conflicting roles at= Enron: lenders, trading partners, investors, advisers, investment bankers.= =20 Small investors, understandably, are frightened when a giant, well-regarded= company collapses overnight. The obvious lesson: don't keep too many eggs = in one investment basket, especially in the company you work for. Utilities= deregulation has suffered a severe blow: if a huge company like Enron can = disappear overnight, how can you trust new market players to provide you wi= th essentials like electricity, gas and water? And maybe it's time to chang= e the name of the Houston Astros' home park, Enron Field, to House of Cards= .=20 The bottom line: Enron wanted to change the world. It did. But not quite th= e way that it had in mind.=20 With Keith Naughton, Kevin Peraino, Temma Ehrenfeld, Donna Foote in Los Ang= eles and Jamie Reno in San Diego /CONTACT: Rosanna Maietta of Newsweek, +1-212-445-4859/ 12:38 EST=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 National Desk THE NATION Enron Chief Misled Employees, Waxman Says Inquiry: Kenneth Lay's= e-mails painted a bright future for the firm, even as its stock was falter= ing. RICHARD A. SERRANO TIMES STAFF WRITER 01/13/2002 Los Angeles Times Home Edition A-26 Copyright 2002 / The Times Mirror Company WASHINGTON -- Key congressional investigators charged Saturday that Enron C= orp. Chairman Kenneth L. Lay misled his 21,000 employees late last summer w= hen he gave them a rosy picture of the company's financial health, even as = the giant energy conglomerate was sliding toward financial ruin.=20 Rep. Henry A. Waxman of Los Angeles, the ranking Democrat on the House Comm= ittee on Government Reform, released copies of e-mails sent by Lay to emplo= yees in August that suggested all was well with the company and that its st= ock would rebound. But Waxman said Lay must have known then that Enron was falling into deep f= inancial trouble.=20 The e-mails were sent as Enron shares tumbled in the wake of Jeffrey Skilli= ng's abrupt Aug. 14 resignation as company president.=20 "It appears that you misled your employees into believing that Enron was pr= ospering and that its stock price would rise," Waxman said in a letter to L= ay, asking him to respond by Friday.=20 Repeated calls seeking comment from officials at Enron's headquarters in Ho= uston went unanswered Saturday. But Enron spokesman Mark Palmer told Associ= ated Press that the company was on solid footing when Lay sent the e-mails = and that its financial problems did not become clear until later.=20 "Ken Lay was telling the truth," Palmer said. "We had had 21 consecutive qu= arters of earnings growth, the same number of consecutive quarters of volum= e growth. Our core business at Enron had never been in better shape."=20 In an Aug. 14 e-mail, Lay told employees "that I have never felt better abo= ut the prospects for the company."=20 Two weeks later, on Aug. 27, an e-mail advised employees that his work to s= hore up investor confidence in the company likely would "result in a signif= icantly higher stock price."=20 In other developments Saturday, two Republican House leaders, Reps. W.J. "B= illy" Tauzin of Louisiana and James C. Greenwood of Pennsylvania, called on= Enron accounting firm Andersen to turn over additional records to congress= ional investigators.=20 Late last week, the Chicago-based company disclosed that from September to = November it had destroyed thousands of documents involving Enron Corp.=20 Tauzin and Greenwood asserted in a letter to Andersen that the documents we= re "knowingly destroyed" and said they did not want to risk the loss of any= other paperwork. They gave the company until Monday to produce some docume= nts and until Friday for others.=20 Andersen spokesman Patrick Dorton said, "We are committed to being forthrig= ht and doing the right thing in this matter."=20 Also, the Center for Public Integrity, a Washington-based watchdog group th= at studies political fund-raising, said a review of federal disclosure form= s shows that 14 of the Bush administration's top 100 officials owned Enron = stock. Based on the disclosure forms, in which officials provide an estimat= ed range of their assets' values, the Enron holdings by the administration = officials were worth between $284,000 and $886,000.=20 Bush Officials Were Shareholders=20 Senior officials who owned stock included Defense Secretary Donald H. Rumsf= eld; Karl Rove, President Bush's chief political advisor; and Peter Fisher,= an assistant Treasury secretary. It was disclosed Friday that a top Enron = executive called Fisher several times in the fall asking him to help the co= mpany secure a bank loan. White House officials say Fisher did not interven= e in the matter.=20 Lay has been a friend of Bush, and he and other Enron executives have contr= ibuted about $550,000 to the president's political endeavors.=20 But Enron officials have been generous to Democrats as well, contributing t= o Al Gore, Bush's opponent in the 2000 presidential campaign, and to more t= han half the 50 Democrats in the Senate.=20 Enron officials have acknowledged that, during the latter part of last year= , they were desperately trying to save the company from the bankruptcy fili= ng that occurred in December. As a result of the company's collapse, thousa= nds of families who owned Enron stock lost money.=20 Last week, new details emerged about company executives, including Lay, see= king help from Bush administration officials to stave off the company's dem= ise. Those contacted included Treasury Secretary Paul H. O'Neill and Commer= ce Secretary Don Evans; both have said they took no action to help Enron.= =20 The e-mails offer a glimpse into the inside world of Enron at a time when i= ts financial problems were growing but before company executives turned to = O'Neill and Evans for help.=20 Though he cited personal reasons for leaving the company, Skilling's depart= ure Aug. 14 triggered a battering of Enron stock.=20 "I want to assure you that I have never felt better about the prospects for= the company," Lay's e-mail read that day.=20 "All of you know that our stock price has suffered substantially over the l= ast few months. One of my top priorities will be to restore a significant a= mount of the stock value we have lost as soon as possible."=20 He added that "our performance has never been stronger; our business model = has never been more robust; our growth has never been more certain.=20 "We have the finest organization in American business today."=20 On Aug. 27, Lay sent another e-mail to employees, who received a grant of s= tock options, and told them that "one of my highest priorities is to restor= e investor confidence in Enron."=20 He added that his efforts "should result in a significantly higher stock pr= ice."=20 Waxman, in his letter to Lay about the e-mails, noted that, by the time of = the second computer message, the stock price was at $37 a share, down from = a high the previous August of $90.56.=20 "You had already sold $40 million of Enron stock during 2001 and over $100 = million since October 1998," Waxman told Lay.=20 Enron stock hit a low of 26 cents a share Nov. 30.=20 As Stock Fell, So Did Severance=20 Waxman further noted that, while the company stock was plummeting, Lay soug= ht a $60-million severance package for himself. When employees objected, Wa= xman said, "you proposed reducing your package to $40 million."=20 And when Enron employees again objected, Lay decided in mid-November not to= accept the severance package compensation.=20 Waxman said he was bothered that Lay told his employees everything was fine= , but less than two months later he was telling Bush officials in Washingto= n that the company urgently needed help to prevent a bankruptcy filing.=20 "At a minimum," Waxman said, the statements by Lay "create the appearance t= hat you misled Enron employees about the value of their investments in Enro= n and the security of their jobs.=20 "If this were accurate, it would be a gross betrayal of your employees' tru= st, as well as possibly illegal conduct." Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Week in Review Desk; Section 4 The World: School for Scandal Trying To Pass Damage Control 101 By DON VAN NATTA Jr. 01/13/2002 The New York Times Page 1, Column 1 c. 2002 New York Times Company WASHINGTON -- WILL they ever learn?=20 The rules in the damage-control playbook are deceptively simple: be the fir= st to release the bad news (all at once, if possible). Do not misrepresent = information. And the cover-up is always worse than the crime. Yet, last week, Washington once again watched as a new administration seeme= d to ignore the old rules when it scrambled to deal with what may be its fi= rst full-blown political scandal -- its close ties to the Enron Corporation= , one of the largest contributors to President Bush's 2000 presidential cam= paign.=20 Almost every day, the White House disclosed new contacts between administra= tion officials and executives at Enron, the once-powerful, now-bankrupt Hou= ston energy trading conglomerate that first sought favorable regulatory pol= icies from the Bush administration before literally pleading for its help t= o survive. The White House is insisting it has done nothing for the company= . But by the end of the week, some strategists said the White House's trick= ling out of information helped the Enron story gather enough momentum that = it pushed terrorism off the front page.=20 Perhaps it is the political survival instincts of a new administration. Or = perhaps it is nothing more than a White House's stubborn refusal to give th= e press what it wants. Whatever the reason, every new scandal seems to doom= a president to repeat his predecessors' mistakes.=20 ''They are learning, very slowly, the way to do this, the fact that you hav= e to get out in front of these stories, but they haven't learned entirely y= et how to do it,'' said Lanny J. Davis, the Clinton administration spin doc= tor who made an art form out of the Friday night damage-control leak to a w= ire service reporter so news would hit the Saturday papers, thought to have= the least readership. ''Some things, you have to learn the hard way.''=20 Even the most experienced Washington hands said there might be nothing ille= gal in the late fall conversations between Kenneth L. Lay, Enron's chairman= , and two cabinet officers. Mr. Lay sought help for Enron's dire financial = condition from Commerce Secretary Donald L. Evans.=20 ''They were hesitant and not on top of things in the first hours of this cr= isis,'' said David R. Gergen, a longtime political strategist who worked in= the Nixon, Ford, Reagan and Clinton administrations. ''This is an administ= ration that is sometimes hesitant in the first moments of a crisis or chall= enge, but it recovers very well. I think they made a strong effort to get m= uch more out at the end of the week. The problem is, we just don't know if = there is any more, if there are things being held back.''=20 There are many moments in the modern presidency when the temptation to hold= back the truth prevailed, but always to the everlasting regret of the Oval= Office occupants. No one did more holding back than Richard M. Nixon, and = the Watergate cover-up sank his presidency.=20 In the first days of the Iran-contra scandal, Ronald Reagan appeared to be = following the damage-control scenario by releasing what the administration = said was virtually everything about the arms-for-hostages deal. Of course, = many more details emerged later, and it was again the cover-up that proved = far more politically toxic than the original allegation.=20 Bill Clinton insisted he ''did not have sexual relations with that woman.''= But his denial, maintained by his aides for eight months, dragged the coun= try through a scandal that lasted more than a year before it ended with Mr.= Clinton's impeachment by the House and acquittal by the Senate.=20 How long the Enron inquiry will last, some strategists say, depends on what= else may be waiting out there about the company's relationship with the Wh= ite House. ''I just worry that some other shoe is going to drop,'' said a R= epublican strategist with ties to the White House.=20 The Enron inquiry is unlike the scandals that bedeviled the Clintons, inclu= ding the Monica S. Lewinsky affair and the Whitewater land deal. Most of th= e information related to those scandals was located in the White House -- e= ven, literally, inside the Oval Office.=20 But Enron is a wide-ranging private sector debacle, being investigated by t= he Justice Department, the Labor Department, the Securities and Exchange Co= mmission and five separate Congressional committees. Documents have been de= stroyed by employees of Enron's auditor, Arthur Andersen.=20 ''It's somewhat more complicated because the information sits in various pl= aces, not all of which are under the control of the White House,'' said Suz= anne R. Garment, author of ''Scandal: The Culture of Mistrust in American P= olitics.'' ''The opportunities are multiplied for screw-ups.''=20 The allegations of influence-peddling are almost impossible to prove. The c= ampaign finance quid pro quo is always elusive. The White House attempted t= o chase away the allegations by arguing -- so far without being contradicte= d -- that Enron got nothing for its many years of generosity. Other than a = few meetings, the administration did not give it the energy policy it wante= d, or the bail-out assistance requested as Enron hurtled toward bankruptcy = last fall.=20 ''What you have here is a case where a contributor called up and asked for = something but did not get it,'' said Ari Fleischer, the White House press s= ecretary. Moreover, no evidence has emerged that President Bush is in any w= ay involved.=20 Mrs. Garment said the ''contributor calls could turn out to be nothing, but= they are precisely the kind of tendrils by which scandal classically creep= s up the brick wall.''=20 FORMER Clinton administration officials watched with incredulity as their c= ounterparts attempted to put out the Enron fire. ''Since Sept. 11, they hav= e all performed well under ridiculous pressure,'' said Jennifer Palmieri, t= he press secretary of the Democratic National Committee, ''but they have ne= ver been through anything like this.'' Yet some Democrats might also be ent= angled.=20 Some Republican administration officials were furious at some of the press = coverage. ''They act like there's some billing records or some cattle scam = or some fired travel aides or some blue dress,'' Mary Matalin, an aide to V= ice President Dick Cheney, said, referring to many points she used when att= acking the Clinton administration.=20 It took several days of disclosures from the Bush White House to jump start= the political scandal machine, hibernating since Sept. 11. Political resea= rchers and Democratic operatives sent out blast-faxes of past favors done f= or the Bush family by Mr. Lay and Enron. And reporters began asking: what d= id the president know, and when did he know it?=20 ''Even if no more damaging information comes out,'' Ms. Palmieri said, ''th= is is a major problem for this administration. It is going to damage the pr= esident's credibility and it is going to hurt their ability to get their me= ssage out.''=20 Mr. Gergen said, ''Washington journalists believe there is blood in the wat= er,'' but he said most of the public views Enron as a failed corporation wh= ose employees watched helplessly as their retirement savings evaporated. Th= e blame does not touch the White House.=20 To ensure the budding scandal does not ''have legs,'' Mrs. Garment said the= White House should immediately investigate whether anyone else in the admi= nistration had any contact with Enron. ''I assume the White House is making= a complete sweep of the upper levels of government for any information on = contacts between members of the administration and Enron,'' she said. ''And= if they find anything that they think is relevant, they should say what it= is immediately. Surely, they have learned from the past. Right?'' Photo: The Enron headquarters in downtown Houston. (Associated Press)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Bush, Enron chief rose out of the same circles of achievement By DEB RIECHMANN Associated Press Writer 01/12/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. WASHINGTON (AP) - President Bush bestowed the nickname "Kenny Boy" on embat= tled Enron executive Kenneth Lay back when the two were up-and-comers in Te= xas.=20 That doesn't mean they are best buddies; Bush dispenses nicknames freely an= d not just on intimates. Yet as their careers soared, their interests becam= e more intertwined, whether in business, politics or baseball. Bush's largest financial benefactor, Lay found him to be a friend of the en= ergy industry when Bush was Texas governor. And Bush made a special trip to= Houston during his presidential campaign to attend the Astros' first game = at Enron Field, as Lay threw out the first pitch.=20 They've enjoyed "quality time," Lay has said.=20 How close their friendship grew has come under scrutiny since Enron, the Ho= uston-based energy giant, filed the largest bankruptcy in U.S. history last= month.=20 It has since been disclosed that Lay contacted officials in the Bush admini= stration, which has at least 15 high-ranking members who owned stock in the= company last year. Several Cabinet members acknowledged contacts from Enro= n but said they did not tell Bush or take any action.=20 The president calls Lay a "supporter," in recognition of the money poured i= nto his campaigns over the years by Lay, his company and its employees.=20 But he denies speaking with Lay about the company's financial problems and = says his administration will aggressively investigate the failure of the co= mpany. Enron's fall cost thousands of jobs and vaporized the retirement sav= ings of many employees.=20 "My sense is that Bush cares about him," said Bill Miller, a political cons= ultant in Austin, Texas, who witnessed Lay's ascent in the corporate world = and Bush's rise to governor, then president.=20 "It was a friendship-friendship, not just a business friendship."=20 White House and Enron officials insist the two were never all that close. A= ny idea that Lay is a "close intimate" of Bush is ludicrous, said Bush advi= ser Karl Rove=20 "It would be a stretch to call them personal friends," said Enron spokesman= Mark Palmer, adding he recalled hearing Lay say that Bush had called him "= Kenny Boy" once or twice.=20 Parsing his words carefully, Bush said last week that it was when he became= governor after the 1994 election that "I first got to know Ken." But their= relationship apparently goes farther back.=20 Lay, as chairman of the University of Houston board of regents in the late = 1980s, tried to bring the senior Bush's presidential library to his school.= George W. Bush was involved in setting up the library, which eventually we= nt to College Station, Texas, instead.=20 Lay says he spent "a little more quality time with George W." during that t= ime.=20 Criminal, civil and congressional investigations are looming into whether E= nron defrauded investors, including 401(k) plan investors, by concealing in= formation about its financial problems.=20 Bush, sitting on high approval ratings, is hoping his connections to Lay wo= n't become a political liability.=20 Bush has received more than $550,000 from Enron, its employees and their re= latives during his political career - the most from any source. Altogether,= more than 250 members of Congress from both parties have received Enron co= ntributions.=20 Lay's relationship with the Bush family dates back to when the president's = father was the only Bush in national politics.=20 Lay was co-chairman of former President Bush's 1990 economic summit for ind= ustrialized nations, which was held in Houston.=20 Lay and his wife, Linda, dined on hickory grilled veal medallions and Texas= peaches and cream with summit attendees who included British Prime Ministe= r Margaret Thatcher and French President Francois Mitterrand.=20 Lay also was co-chairman of the host committee for the Republican National = Convention when it was held in Houston in 1992. George W. Bush played an ac= tive role in his father's unsuccessful campaign for a second term that year= .=20 The businessman had Democratic connections as well, serving Democratic Gov.= Ann Richards as leader of her business council. He gave money to her campa= ign and Bush's in 1994, and when Bush defeated her that year, the new gover= nor kept Lay on the business council.=20 As Lay was donating money to Bush's 1994 and 1998 governor's campaigns, he = also was lobbying legislators to deregulate the electric industry, an area = into which Enron was expanding.=20 Bush signed a deregulation law in 1999 clearing Enron's path into new marke= ts.=20 "Bush has always delivered on Kenneth Lay's political pitches," said Craig = McDonald, director of Texans for Public Justice, a campaign-finance advocac= y group.=20 Even if Bush's dad hadn't been in the White House, the two men would have b= een on similar trajectories.=20 "They're both from the energy business; they both like baseball," said W.J.= "Jack" Bowen, a retired gas executive who hired Lay twice, at a Florida en= ergy company and then at Transco Energy Co. in Houston.=20 They have similar personal traits, said Miller, who has watched Texas polit= ics for years. Both are bright and down-to-earth. Each tends to delegate au= thority.=20 "Neither one of them pretends to be an intellectual," Miller said. "Lay is = reserved, but not shy. Bush has got more ham bone in him." AP Graphic ENRON BUSH LAY, AP Photo WX101=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 National Desk; Section 1 ENRON'S COLLAPSE Complex Web of Relationships in Boom and Bust By JOHN SCHWARTZ 01/13/2002 The New York Times Page 26, Column 2 c. 2002 New York Times Company The cast of characters in the Enron drama is lengthy, and their relationshi= ps are complex.=20 THE EXECUTIVES=20 Kenneth L. Lay gained national fame as the chairman and chief executive of = Enron, a company that reshaped the nation's energy markets -- and notoriety= as the company flamed out spectacularly. A man with a doctorate in economics and an evangelical belief in free marke= ts, Mr. Lay turned an old-fashioned gas pipeline operator into the world's = biggest energy trader. But when Enron faltered, he could not explain the co= mpany's finances to the satisfaction of Wall Street or of Dynegy Inc., a ri= val that offered to rescue Enron but ultimately walked away from a proposed= merger.=20 Mr. Lay's longtime No. 2, Jeffrey K. Skilling, fostered a culture at Enron = described as creative and cutthroat. He led the company into new markets, s= etting up trading desks for paper, chemicals, water rights and high-speed I= nternet service.=20 Mr. Skilling was chief executive for six months, resigning last August. He = said last month that he was stunned by the company's rapid decline.=20 Enron replaced its chief financial officer, Andrew S. Fastow, in October, s= eeking to placate investors and regulators who had begun questioning a set = of unusual partnerships he arranged to shift debt off the company's books. = Two weeks later, the company revised its accounting for the partnerships, w= iping away about $600 million in profits it had reported over the previous = five years. Mr. Fastow earned $30 million from his investments in the deals= .=20 THE BOARD=20 Enron recruited prominent people to its board of directors, but given the c= ompany's collapse, analysts give them low marks. The directors include Wend= y L. Gramm, the former chairwoman of the Commodities Futures Trading Commis= sion and the wife of Senator Phil Gramm, Republican of Texas.=20 Ms. Gramm serves on the board's audit committee, which is responsible for t= he company's accounting and financial reporting. Until 1998, she owned Enro= n shares; when the Gramms decided that the stock presented conflict of inte= rest issues, she sold her shares for $300,000. Since then, the company has = placed her board pay in a ''deferred account'' that can be tapped later.=20 Also on the board is Dr. John Mendelsohn, president of the M. D. Anderson C= ancer Center, one of Houston's most prestigious institutions. Enron has don= ated more than $600,000 to the center in the last five years. Another audit= committee member, Lord John Wakeham, was in Margaret Thatcher's inner circ= le when she was Britain's prime minister.=20 THE LAWYERS=20 No corporate crisis would be complete without celebrity lawyers, and the En= ron debacle has enlisted some of the biggest. David Boies, who took on Micr= osoft in the federal antitrust suit, is representing Mr. Fastow. Robert S. = Bennett, who represented President Bill Clinton in the Paula Jones scandal,= is representing Enron in Washington.=20 THE POLITICIANS=20 Mr. Lay -- ''Kenny Boy'' to his friend George W. Bush -- is a major contrib= utor to both political parties. Mr. Lay and other Enron executives have giv= en more than $550,000 to Mr. Bush in his political career.=20 Enron's executives met with Vice President Dick Cheney four times last year= to discuss energy matters. When Mr. Cheney was chief executive of Hallibur= ton, a unit of the company built Houston's new baseball stadium, Enron Fiel= d. Before he became the president's top economic counselor, Lawrence B. Lin= dsey was a paid adviser to Enron. Karl Rove, Mr. Bush's chief political str= ategist, and I. Lewis Libby, Mr. Cheney's chief of staff, were investors in= the company.=20 The ties reach far beyond the White House. The Republican national chairman= , Marc Racicot, the former governor of Montana, was a lobbyist for the comp= any until last week. In Texas, Mr. Bush's successor, Rick Perry, has been c= riticized for appointing a top Enron executive to the state's Public Utilit= y Commission.=20 THE ACCOUNTANTS=20 Joseph F. Berardino, chief executive of the accounting firm Arthur Andersen= , Enron's longtime auditor, is caught in the Enron net. In December, he tol= d Congress that Enron might have illegally hidden information from its audi= tors. Last week, Andersen disclosed that its employees had destroyed docume= nts related to its auditing of Enron -- even after the government began inv= estigating Enron's fall.=20 If the story seems to take on the breadth of a Cecil B. DeMille epic, that = may only be appropriate. For there is a cast of thousands: the company's in= vestors, including Enron employees who saw their retirement savings disappe= ar virtually overnight. Their loss -- and their anger -- guarantee that the= investigations of Enron are only beginning. Photos: Dr. John Mendelsohn, cancer center chief.; Andrew S. Fastow, Enron = former officer.; Lord John Wakeham of Britain.; Dick Cheney, the vice presi= dent; Rick Perry, the Texas governor.=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Business/Financial Desk; Section 1 ENRON'S COLLAPSE Before Debacle, Enron Insiders Cashed In $1.1 Billion in Shares By LESLIE WAYNE 01/13/2002 The New York Times Page 1, Column 1 c. 2002 New York Times Company While investigators are focusing on how much money investors and employees = lost in the Enron Corporation's collapse, some shareholders and lawmakers a= re now setting their sights on another target: the millions that Enron insi= ders received by selling their shares while the price was still high.=20 As Enron stock climbed and Wall Street was still promoting it, a group of 2= 9 Enron executives and directors began to sell their shares. These insiders= received $1.1 billion by selling 17.3 million shares from 1999 through mid= -2001, according to court filings based on public records. They continued s= elling just before Enron's stock started to tumble early last year and the = company began its slide into bankruptcy protection. One of the biggest sellers was Kenneth L. Lay, who became prominent as the = company's chairman and a leading contributor to President Bush. He was amon= g more than a dozen Enron executives who received $30 million or more, incl= uding one who sold shares valued at $353.7 million.=20 Lawyers and spokesmen for the executives, board members and the company sai= d that the sales were proper, and that the insiders had no special informat= ion or advantages over other investors.=20 ''This issue is being investigated,'' said Robert S. Bennett, a lawyer for = Enron. ''But at this point in time, I am unaware of any evidence that suppo= rts the allegation there was improper selling by members of the board or se= nior management.''=20 Many of these Enron executives retain large holdings in the company, sellin= g shares regularly, as executives at other companies do. ''In many instance= s, the sale of the stock was preplanned according to a strict timetable,'' = Mr. Bennett said.=20 Mr. Lay himself sold Enron stock 350 times, trading almost daily, receiving= $101.3 million. In all, Mr. Lay sold 1.8 million Enron shares between earl= y 1999 and July 2001, five months before Enron filed for bankruptcy. As of = last February, he still owned more than 7.7 million shares.=20 Mr. Lay sold his stock for $31 to $86 a share; this week, Enron was selling= for under 70 cents a share. Often, Mr. Lay sold in amounts as small as 500= shares, while at other times he sold as many as 100,000 shares.=20 It has not been determined how much Mr. Lay or the others paid for their sh= ares, or how much they gained. Much of Mr. Lay's holdings, and those of oth= er executives, were in the form of stock options, which allowed them to buy= shares at a discount.=20 Other top sellers were Lou L. Pai, the former chairman of an Enron subsidia= ry, who received $353.7 million for his 5 million shares; Rebecca P. Mark-J= usbasche, a director and former Enron executive who received $79.5 million = for 1.4 million shares; and Ken L. Harrison, a director who sold 1 million = shares for $75.2 million.=20 Jeffrey K. Skilling, the company's former chief executive, received $66.9 m= illion for 1.1 million shares. Beginning in December 2000, Mr. Skilling beg= an to sell his holdings at a pace of 10,000 shares about every seven days. = He still owns about 600,000 shares and options, according to public filings= .=20 Andrew S. Fastow, the company's ousted chief financial officer, who set up = many of the financial partnerships that have been criticized for concealing= Enron's large debts, received $30 million for his holdings.=20 A detailed accounting of these trades is contained in a lawsuit brought by = Amalgamated Bank, of New York, which invested the pension money of union me= mbers in Enron shares. Representing the bank in this case, which is now in = the Federal District Court in Houston, is the same law firm that brought sh= areholder suits against Charles H. Keating Jr. in the savings and loan scan= dal and against Michael R. Milken, the junk bond financier, for securities = fraud.=20 While the suit has received little attention so far, it highlights one of t= he main points in the political debate now taking place in Washington -- wh= ether small shareholders were left out of a flow of information about Enron= 's deteriorating financial condition.=20 The differences in the trading strategies of the two groups -- those outsid= e the company who were buying Enron's shares and those inside the company w= ho were selling them -- reflect the different information that each group h= ad, according to the suit.=20 ''The defendants employed devices, schemes and artifices to defraud,'' the = lawsuit states. It accuses the 29 defendants of ''unlawful insider trading'= ' and says the group ''materially misled the investing public'' by issuing = false statements.=20 Senator Joseph I. Lieberman, Democrat of Connecticut and chairman of the Se= nate government affairs committee, has already announced hearings that will= , in part, look at how Enron shareholders might have been deceived by the c= ompany's financial statements. Senator Barbara Boxer, Democrat of Californi= a, has also expressed concern for Enron's small shareholders, especially em= ployees who put its shares in their 401(k) retirement plans only to lose th= eir savings.=20 Representative Henry A. Waxman of California, the ranking Democrat on the H= ouse Commerce Committee, released a letter yesterday asking Mr. Lay to answ= er questions about optimistic statements Mr. Waxman said that Mr. Lay had m= ade in e-mail messages to employees last August. In the e-mail, gathered by= staff investigators, Mr. Lay said that Enron remained strong.=20 At Enron, more than half of the employees' 401(k) assets, or about $1.2 bil= lion, was invested in company stock, which is now nearly worthless. Billion= s more were lost by other investors, from individuals to large institutions= that bought Enron shares for the pension plans of unions and corporations.= =20 The lawsuit claims the insiders withheld information, allowing Enron's shar= es to remain at an artificially high level while they were selling their sh= ares. ''This is the most massive insider bailout that we've ever seen and w= e've been prosecuting these cases for 30 years,'' said William S. Lerach, o= ne of the bank's lead attorneys. ''The overall size of this case is unprece= dented.''=20 Spokesmen for some of the defendants say that this group had done nothing w= rong. An Enron spokesman, Mark Palmer, dismissed the suit as ''completely w= ithout merit'' and a ''weak argument.''=20 Gordon G. Andrew, a spokesman for Mr. Fastow, the former chief financial of= ficer, declined to comment, but said that Mr. Fastow still had about 50 per= cent of his original holdings. Mr. Andrew said that Mr. Fastow's last stock= sale took place in November 2000 and that Mr. Fastow had purchased shares = in early 2001.=20 A spokeswoman for Mr. Skilling, the former chief executive, said that ''the= re is absolutely no basis to the allegation that Mr. Skilling did anything = improper with regard to the sale of Enron stock.'' The defendants have not = yet filed answers to the complaint. Arthur Andersen & Company, also named, = declined to comment.=20 At the top end of the selling was Mr. Pai, who headed an Enron subsidiary c= alled NewPower Holdings, an online retailer of electricity and natural gas.= Before leaving Enron last spring, Mr. Pai sold five million shares of Enro= n between January 1999 and July 2001 for $353.7 million.=20 In January 2000, just 60 days after the formation of NewPower, Mr. Pai rece= ived more than two million Enron shares. He began to sell them almost immed= iately, mostly while they were trading above $70.=20 Enron directors, also named in the case, sold stock too. All Enron director= s receive stock options as part of their $380,619 annual fees. Of that, 15 = percent was paid in cash, the remainder in stock.=20 One director, Wendy L. Gramm, the wife of Senator Phil Gramm, Republican of= Texas, sold all her 10,256 shares for $276,912. She sold the stock on one = day -- Nov. 3, 1998 -- for $27 a share. Ms. Gramm said earlier that she and= her husband decided to sell their Enron shares to avoid the appearance of = a conflict. She was then paid in cash.=20 The Securities and Exchange Commission and the Justice Department are both = investigating Enron. A Senate committee issued 51 subpoenas Friday as part = of an investigation into the insiders' stock sales.=20 The investigations should aid the case against the insiders, said Michael H= ennigan, a Los Angeles lawyer in the Orange County, Calif., bankruptcy laws= uit. ''I assume that the government is going after the exact same things th= at Lerach is after,'' he said, referring to the lawyer for the bank suing E= nron.=20 Last week, a federal judge declined to immediately freeze the assets of the= defendants, asking for further information before reconsidering the reques= t. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 News; Domestic Enron Auditing Firm Destroyed Documents Carol Lin, John King, Greg Clarkin 01/13/2002 CNN Sunday (c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House,= Inc.). All Rights Reserved. "TIME" magazine says just days before energy trader Enron made its financia= l meltdown public, employees of its auditing firm were told to destroy most= of their Enron documents. "TIME" says that directive came in a memo to Art= hur Andersen employees.=20 CAROL LIN, CNN ANCHOR: "TIME" magazine says just days before energy trader = Enron made its financial meltdown public, employees of its auditing firm we= re told to destroy most of their Enron documents. "TIME" says that directiv= e came in a memo to Arthur Andersen employees. Today Joe Lieberman said if that memo is what it appears, quote, "the folks= at Arthur Andersen could be on the other end of an indictment before this = is over."=20 Financial troubles for the energy company have been brewing for some time, = but the political fallout could just be beginning. In Washington today Whit= e House officials began defending their exchanges with Enron CEO Kenneth La= y.=20 CNN senior White House correspondent John King has more.=20 (BEGIN VIDEOTAPE)=20 JOHN KING, CNN SENOR WHITE HOUSE CORRESPONDENT (voice-over): Top Bush deput= ies disclose new details of their contacts with Enron officials, but say th= e bottom line is unchanged: A major political supporter of the president as= ked for help, and the answer was no.=20 DON EVANS, COMMERCE SECRETARY: I'm going to do everything I can to protect = the integrity and the trust of that office. And my judgment was to protect = the integrity of that office, not to step in.=20 KING: Key Democrats say it is not time for pointing fingers.=20 SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: I have not seen any evidence up to = this time that officials of the Bush administration acted improperly with r= egard to Enron.=20 KING: Still, Democrats in Congress want every detail of Enron's dealings wi= th the administration.=20 Enron chairman and CEO Ken Lay spoke to Commerce Secretary Evans on October= 15 of last year, the day before the company disclosed major losses. But Ev= ans says the only topic discussed in that call was Enron operations in Indi= a. The Enron chief called Evans again on October 29. And Evans says in that= conversation Lay asked for help with bond agencies.=20 Lay also called Treasury Secretary Paul O'Neill twice: in late October at h= ome, and again at the office in early November.=20 PAUL O'NEILL, TREASURY SECRETARY: Ken Lay didn't ask me to do anything and = we -- you know, we did nothing.=20 KING: The White House says the president learned of the phone calls just la= st Thursday, more than two months after the fact. And the president's spoke= smen said late last week he did not believe anyone at the White House was t= old at the time.=20 But Evans says he told the White House chief of staff a few weeks after the= call because Enron's troubles were making headlines.=20 EVANS: I thought the White House ought to know. I was over there one day, a= nd I stepped into Andy Card's office and told him I received this call. He = simply listened to me and said thank you very much.=20 KING: Thousands of Enron shareholders and employees lost millions when the = company filed for bankruptcy. And some Democrats say Secretaries O'Neill an= d Evans should have warned the public the company was in trouble.=20 (on camera): But Secretaries Evans and O'Neill say they were not told anyth= ing about the company's finances that was not already public knowledge. And= they say any investigation in the end will show Enron's generous support o= f the president, and its connections within the administration, bought it n= o special treatment.=20 John King, CNN, the White House.=20 (END VIDEOTAPE)=20 LIN: Though news of Enron's troubles is only just beginning to grab attenti= on in Washington, Wall Street has been tracking the company's fall from gra= ce for some time. Enron's stock chart tells that story.=20 Take a look at this: During the past year, issues of Enron topped out at $8= 3 a share. But as of the market's close on Friday, those same shares were t= rading at 67 cents a piece.=20 And as CNNFN's Greg Clarkin reports, many critics are wondering if the Wall= Street banking community kept the brewing scandal under wraps.=20 (BEGIN VIDEOTAPE)=20 GREG CLARKIN, CNNFN CORRESPONDENT (voice-over): It's already engulfed Houst= on and Washington, and now the Enron collapse threatens to pull in Wall Str= eet.=20 A number of Enron critics are asking if Wall Street's bankers played a role= in keeping information away from the public as the one-time energy giant c= ollapsed.=20 WILLIAM LERACH, SECURITIES LITIGATION ATTORNEY: A fraud of this scope and s= ize simply cannot be perpetrated without the assistance of sophisticated pr= ofessionals. This case is going to continue to evolve and expand. There are= other professionals, lawyers, investment bankers and the like, who appear = to be deeply implicated.=20 CLARKIN: The former head of the Securities and Exchange Commission agreed, = saying Wall Street bears some of the blame.=20 ARTHUR LEVITT, FMR. SEC. CHAIRMAN: It's not just he auditors, it's the secu= rity analysts; it's the rating agencies that dropped the ball; it's the inv= estment bankers who cooked up the scheme to hide matters from the general p= ublic.=20 CLARKIN: As for the auditors, Arthur Andersen, Enron's accounting firm, has= admitted to destroying documents relating to the company. "TIME" magazine = reports Andersen employees were direct to destroy all but the most basic, q= uote, "work papers," end quote.=20 One member of Congress said, if true, it may lead to criminal charges.=20 LIEBERMAN: If this memo was what it looks like, I'm afraid that the folks a= t Arthur Andersen could be on the other end of an indictment before this is= over.=20 CLARKIN: Senator Lieberman also said the Enron disaster could bring down An= dersen as well.=20 LIEBERMAN: Arthur Andersen is a great company with a great name. That name = is being sullied; and ultimately this Enron episode may end this company's = history.=20 CLARKIN: Andersen's role has many demanding new oversight of those charged = with checking the books of corporate America.=20 Former SEC Chairman Levitt points out what happened at Enron could happen t= o other corporate heavyweights.=20 Greg Clarkin, CNN Financial News, New York.=20 (END VIDEOTAPE)=20 TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SE= CURE ONLINE ORDER FORM LOCATED AT www.fdch.com=20 THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY B= E UPDATED.=20 Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS = RESERVED. Prepared by eMediaMillWorks, Inc. (f/k/a Federal Document Clearin= g House, Inc.) No license is granted to the user of this material other tha= n for research. User may not reproduce or redistribute the material except = for user's personal or internal use and, in such case, only one copy may be= printed, nor shall user use any material for commercial purposes or in any= fashion that may infringe upon Cable News Network, Inc.'s copyright or oth= er proprietary rights or interests in the material; provided, however, that= members of the news media may redistribute limited portions (less than 250= words) of this material without a specific license from CNN so long as the= y provide conspicuous attribution to CNN as the originator and copyright ho= lder of such material. This is not a legal transcript for purposes of litig= ation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 USA: US senator - Enron accountant could face charges. 01/13/2002 Reuters English News Service (C) Reuters Limited 2002. WASHINGTON, Jan 13 (Reuters) - If Arthur Andersen ordered workers to destro= y audit material related to Enron Corp., the Big Five accounting firm could= face criminal indictment, a leading Democratic senator said on Sunday.=20 Sen. Joseph Lieberman, a Connecticut Democrat, was referring to a report by= Time magazine that Arthur Andersen, Enron's auditor, ordered employees in = an Oct. 12 memo to destroy all audit material on Enron Corp. except the mos= t basic "work papers." The magazine reported on Sunday that just four days before Enron disclosed = a stunning $618 million loss for the third quarter - its first public discl= osure of its financial woes - the workers who audited the company's books w= ere ordered to destroy the records, and reminded to do so in the weeks lead= ing up to the first Security and Exchange Commission subpoenas issued on No= v. 8.=20 "We know that Arthur Andersen, the supposedly independent auditor, covered = up facts very relevant to the condition of Enron," Lieberman told CBS's "Fa= ce the Nation."=20 "It may well be" criminal, he said. "Arthur Andersen is a great company wit= h a great name. That name is being sullied and ultimately this Enron episod= e may end this company's history."=20 "From what I've seen of the Time magazine story, the memo about destroying = the documents of Enron was not just a routine 'clear your files' memo. It w= as specifically about Enron and it came at a time when people inside, inclu= ding the executives of Arthur Andersen and Enron, knew that Enron was in re= al trouble and that the roof was about to collapse on them," said Lieberman= , chairman of the Senate Governmental Affairs Committee.=20 Lieberman's panel has begun an investigation.=20 "This kind of memo to destroy documents raises very serious questions about= whether obstruction of justice occurred here. That's not for me to make a = judgment on now. Obviously I don't know enough about it," he added. "But yo= u've got lawsuits being filed ... you've got criminal investigations going = on.=20 "If this memo was what it looks like, I'm afraid that the folks at Arthur A= ndersen could be on the other end of an indictment before this is over."=20 Arthur Andersen admitted last Thursday its employees had deleted documents = related to its review of the bankrupt energy trader's finances, and congres= sional sources said thousands were destroyed.=20 A spokesman told Time it would be inappropriate to discuss the situation un= til the company completes its own review.=20 The Senate Permanent Subcommittee on Investigations also has issued 51 docu= ment subpoenas to Andersen, Enron and 49 unnamed Enron executives, employee= s and directors.=20 Sen. John McCain told CBS the accounting firm was receiving $50 million dol= lars a year for "consulting" as well as $50 million for auditing.=20 "That's hard to understand how you can audit objectively while you are gett= ing huge sums of money for consulting to an energy firm," McCain said.=20 Arthur Andersen did accounting for the global energy trading giant before i= t declared bankruptcy on Dec. 2, wiping out the jobs and pensions savings o= f thousands of workers and inflicting losses of millions of individual inve= stors. In addition to the regulatory and congressional investigations, the = Justice Department has opened a criminal probe. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 NEWS Enron Gave $21,933 to Schumer / Donations largest to any Senate Democrat Ellen Yan. WASHINGTON BUREAU 01/13/2002 Newsday NASSAU A41 (Copyright Newsday Inc., 2002) Washington - Sen. Charles Schumer, who sits on two committees planning hear= ings on the Enron bankruptcy, received more donations than any other Senate= Democrat from the failed energy trading giant.=20 The $21,933 the senator received came during his 1998 race and was the four= th largest in the Senate, even topping donations to some House lawmakers fr= om Enron's home state of Texas, according to a study by the Center for Resp= onsive Politics, which monitors campaign donations. The money came from com= pany employees, including chairman Kenneth Lay, and its political action co= mmittee. Although Enron overwhelmingly favored Republicans, Schumer collected more f= rom the company than any non-Texan, except for Sen. Conrad Burns (R-Mont.),= who got $23,200 and sits on the powerful Appropriations Committee, which d= oles out the nation's spending money. Enron's top recipient in Congress was= Sen. Kay Bailey Hutchinson (R-Texas), an appropriations member who got $99= ,500 from 1989 to November of last year.=20 Schumer is on the Energy and Natural Resources Committee and the Banking, H= ousing and Urban Affairs Committee. Both panels expect to investigate how a= nd why Enron imploded, sinking employees' pension funds, and to learn how m= uch the Bush administration knew of the company's troubles before the publi= c fall. Other committee members also received contributions from Enron.=20 Schumer received the donations during his battle with incumbent Alfonse D'A= mato, one of the most watched and expensive races in the nation. In a posit= ion favored by Enron, Schumer made power deregulation one of the keystone c= ampaign issues upstate because the high energy prices there were damaging t= he economy. Since he got into the Senate, there have not been many key ener= gy votes.=20 Schumer spokesman Bradley Tusk said nothing untoward happened: "Did Enron g= ive us contributions? Yes. Have they asked us to do anything? No."=20 Once Schumer arrived in the Senate, Tusk said, he led and won the fight aga= inst the company's main priority in 1999 when it came to reauthorizing the = Commodities Exchange Act. "The bill would have allowed electronic trading c= ompanies like Enron to be exempt from federal oversight," Tusk said. "We th= ought it would put consumers at risk."=20 The money may be explained by a common denominator between Enron and Schume= r. One was a prolific giver, the other a prolific fund- raiser.=20 Schumer is "going to get a lot of money from a lot of donors . . . and his = fund-raisers don't stop at the border" of New York, said Steven Weiss, a sp= okesman for the Center for Responsive Politics.=20 The company's employees and PAC also contributed to several other New Yorke= rs, according to campaign records. Sen. Hillary Rodham Clinton got $950 dur= ing her race, and former Sen. Daniel Patrick Moynihan $1,000 in 1992. In th= e House from 1989 to 2001, Reps. Gary Ackerman (D-Jamaica Estates) and Char= les Rangel (D-Manhattan) each got $3,500; Vito Fossella (R-Staten Island) $= 3,000; Edolphus Towns (D- Brooklyn) $500; Anthony Weiner (D-Brooklyn) $500;= and Peter King (R- Seaford) $300. Former New York City Mayor Rudolph Giuli= ani got $3,000; D'Amato $13,000 from 1996 to 1998; and Rick Lazio $9,400, m= ostly during his failed Senate bid in 2000.=20 On the state level, Enron employees gave $1,000 to Gov. George Pataki last = year and the same this year to Democratic gubernatorial candidate Andrew Cu= omo. They spent $60,000 to $70,000 in lobbying at the state capital each ye= ar from 1998 to 2000, but substantially less in 2001.=20 Staff writer John Riley contributed to this story. Caption: Newsday File Photo / Dick Kraus - A common denominator between Enr= on and Charles Schumer: One was a prolific giver, the other a prolific fund= -raiser.=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Commentary Enron echoes past scandals Clarence Page Clarence Page is a member of the Tribune's editorial board 01/13/2002 Chicago Tribune Chicagoland Final ; C 19 (Copyright 2002 by the Chicago Tribune) Here's a modest proposal to major news media: Accompany every news story ab= out Enron Corp. with a profile of an Enron victim so we don't forget who th= is scandal is really about.=20 It's easy to forget the little people as we sort through the big people who= let the little people down in what is growing into Washington's latest big= scandal. Chandra Levy's ex-boyfriend, Rep. Gary Condit, is not the only Washington s= candal target to be relieved of pesky press attention by the war on terrori= sm. Were it not for the Sept. 11 terror attacks, it would not have taken un= til last week, when the Justice Department opened an investigation, to put = this story on the front burner of media attention.=20 Houston-based Enron has been Bush's most generous corporate contributor thr= oughout his political career. Thousands of investors and Enron employees wh= o presumably worked hard and played by the rules suddenly lost their saving= s and pensions, because there was less to Enron's finances than they had be= en led to believe.=20 While their stock crashed, top Enron executives may have been able to bail = out quickly without telling the public or Enron's employees, who were not a= llowed at that point to move their pension funds from Enron stock to an inv= estment that was making money.=20 Investors like to think they can trust the information they receive about a= company's stability and finances, especially when it is a company for whic= h they work. If Americans cannot look to Washington to help them to protect= their hard-earned life savings from rip-offs like the Enron bankruptcy, yo= u have to wonder what Washington is for.=20 Yet when you look at Enron's cozy Washington connections, particularly with= the Bush administration, you begin to wonder, as they say out in the rural= areas, whether the fox was guarding the henhouse.=20 It is premature to put this developing blowup in the same league with major= White House scandals of the past, but there are numerous unfortunate echoe= s:=20 Bush's declaration that his good pal Enron Chairman Kenneth Lay never hinte= d at the company's precarious financial position echoes Bush's father decla= ring that he was "out of the loop" of the Iran- Contra affair in the 1980s.= =20 Disclosures that Enron's Chicago-based auditor, Arthur Anderson LLP, destro= yed thousands of Enron files sounded like the 18 1/2 minute gap in Presiden= t Nixon's White House tapes.=20 We even have--Hello, again!--a familiar face: savvy attorney Robert Bennett= , who defended Clinton against Paula Jones' accusations of sexual harassmen= t. Now Bennett is defending and spinning for Enron to reporters.=20 That's Washington. The same faces keep coming back. So do a lot of the same= questions, to which the White House has its damage-control machinery worki= ng. The strategy includes:=20 (1.) Look proactive. Get Atty. Gen. John Ashcroft, who received a now-embar= rassing $25,000 contribution from Enron for his Senate campaign, to recuse = himself.=20 (2.) Have President Bush announce the criminal investigation, express sympa= thy for investors who got the shaft in "this awful bankruptcy" and announce= new pension disclosure rules to protect workers in other companies.=20 Among Enron's ripped-off workers, that reform is called, "closing the barn = door after your horses, your mule and all of your dairy cattle have walked = away."=20 (3.) Deny, deny, deny. "I have never discussed the financial problems of th= e company," Bush told reporters at a photo-op. "The last time I saw Mr. Lay= was at my mother's fundraising event for literacy. That was in Houston las= t spring . . ."=20 Jocular George usually refers to his pals by first names or nicknames. But = Enron's chief, one of his biggest benefactors, suddenly was just "Mr. Lay."= =20 No, this scandal probably is not going away soon. Bush will have to learn t= o live with his losses, just like Enron's investors, although Bush's losses= probably won't cost him as much.=20 ----------=20 E-mail: cptime@aol.com PHOTO; Caption: PHOTO: An unidentified woman carries a box of her belonging= s from Enron's Houston-based headquarters. AP photo by Pat Sullivan.=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Editorial Learning From Enron 01/13/2002 The Washington Post FINAL B06 Copyright 2002, The Washington Post Co. All Rights Reserved LAST WEEK the scandal around Enron deepened. The Justice Department announc= ed a criminal investigation into the firm's collapse, and the Bush administ= ration belatedly came clean about a number of high-level contacts it had wi= th Enron and its creditors as the firm headed toward bankruptcy. More may y= et come out. But for the moment there is no evidence that the Bush team was= improperly embroiled in the firm's deceptive schemes. Enron appears to hav= e sought help from the administration in securing fresh credit from its ban= kers and in staving off a downgrade by a credit-rating firm. But no help se= ems to have been given.=20 The real scandal about Enron is different. It is that a public company, wit= h a legal obligation to report accurately on its finances, concealed the tr= ue state of those finances from its owners. Those owners included many smal= l investors who either held Enron stock directly or through their retiremen= t funds, and who have been cheated. Many Enron employees, who were encourag= ed by the company to fill their retirement plans with company stock, have b= een left with little or nothing. Meanwhile Enron's senior managers, who eit= her perpetrated the fraud or at a minimum failed to prevent it, have extrac= ted millions in pay and bonuses from the company. The task now is to identify those responsible for this disaster and to devi= se regulations that might prevent its recurrence. As well as senior officia= ls within Enron, the spotlight must fall on Arthur Andersen, the auditing f= irm that was supposed to certify the accuracy of Enron's accounts. Auditors= often defend themselves in such cases by blaming the firm, claiming that m= anagers gave them false numbers to work with. But in Enron's case, Andersen= has already admitted that it spotted accounting mistakes and suggested tha= t they be put right, but then certified the accounts as accurate without an= y corrections. What's more, Andersen now confesses to have destroyed docume= nts related to Enron, not the usual behavior of an innocent party.=20 Three kinds of reform might make corporate accounts more accurate in future= . The first is to make corporate board members take their responsibilities = more seriously. Boards are supposed to ensure that managers act in sharehol= ders' interests, and a key part of their job is to appoint tough auditors t= o verify financial statements. But board members often do managers' bidding= , either because they are drawn from management ranks or because their inde= pendence is compromised by consulting contracts with the company. Enron boa= rd members received thousands of dollars from the managers they oversaw. Th= is practice should be strictly limited.=20 Second, and most important, the rules by which auditors work should be made= tougher. At present, the Financial Accounting Standards Board is reluctant= to take a hard line on accounting tricks used to deceive shareholders, in = part because the board depends on auditing firms and public companies for i= ts budget. As a result, Enron's practice of concealing its risky financial = instruments in partner firms may actually have been legal under the board's= standards, even though it rendered its published accounts meaningless. Thi= s is scandalous; no investor, no matter how sophisticated, could have known= the full extent of Enron's obligations (which sank the firm). Until firms = are required to disclose completely their obligations, how can stockholders= know which firms are burdened by debts that don't appear on their balance = sheets? And if stockholders can't reliably know the extent of corporate obl= igations, how can it be safe to buy stocks?=20 Finally, auditors' independence should be ensured. At present, auditors pro= vide consulting services to the firms they oversee, harming their independe= nce in the same way that board members compromise themselves. Setting a cap= on such services, or requiring more detailed disclosure of them, is worth = considering.=20 None of these changes will be easy, to be sure. But Enron threatens "a mass= ive loss of public confidence in the numbers that are the bedrock of Americ= an markets," in the words of Arthur Levitt, the former head of the Securiti= es and Exchange Commission. He is right, and it is time to do something abo= ut it. http://www.washingtonpost.com=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 National Desk THE NATION NEWS ANALYSIS White House's Failure to Sound Alarm Faulted That = no warnings were issued as Enron collapsed raises the specter of special tr= eatment, critics charge. JAMES FLANIGAN; AARON ZITNER TIMES STAFF WRITERS 01/13/2002 Los Angeles Times Home Edition A-1 Copyright 2002 / The Times Mirror Company Even though they mounted no formal effort to bail out Enron Corp., Bush adm= inistration officials are coming under fire for not publicly disclosing the= extent of the company's troubles when they became aware of them.=20 Some legal experts contend the administration was in a position to sound a = warning to the public or the Securities and Exchange Commission after a ser= ies of phone calls from Enron executives to Treasury Department officials l= ast fall. The fact that they didn't, while Enron's financial situation grew= darker and its stock price declined steadily, raises the specter of specia= l treatment for a powerful corporation, congressional critics say. But the Bush administration, despite close ties to Enron, did not help the = firm stave off bankruptcy as the federal government had done for failing en= terprises such as Long-Term Capital Management, Chrysler Corp. and Lockheed= Corp.=20 Enron was different. Many experts on government-business relations say the = company's relationship with the Bush administration made aiding it a potent= ial political embarrassment. But others say the administration decided not = to help the company because its failure did not threaten widespread damage = to financial or energy markets and the economy as a whole.=20 Yet the fact that Enron's failing condition went on without public disclosu= re for so long--even as high government officials were apprised of it--puzz= led legal experts.=20 "I'd be surprised if they [Treasury officials] didn't call the SEC," said a= ttorney John Hanson, a specialist in bankruptcy cases for the law firm Noss= aman Guthner Knox Elliot LLP, which has offices in four California cities, = including Irvine and Los Angeles, and in Washington.=20 In October and early November, Enron President Lawrence "Greg" Whalley made= a series of six to eight calls in which he asked Peter Fisher, Treasury un= dersecretary for domestic finance, to help secure loans from the company's = bankers. Fisher refused, and on Nov. 8 Enron Chairman and Chief Executive K= enneth L. Lay telephoned Treasury Secretary Paul H. O'Neill to tell him of = Enron's dire financial situation.=20 That same day, Enron filed documents with the SEC revising its financial st= atements back to 1997, evaporating $600 million in nonexistent profits and = accelerating its stock plunge.=20 Although the administration's accounts of what happened are incomplete, it = appears that neither Fisher nor O'Neill asked the SEC to demand that Lay te= ll stakeholders and investors about the firm's deteriorating condition, obs= ervers note. "I cannot comprehend why they did not inform [SEC Chairman Har= vey] Pitt," said a onetime lawyer for the federal government who asked for = anonymity because he still does business with the government.=20 "My counsel would have been to call Lay back and request him to do full dis= closure," said Lynn Turner, a former chief accountant at the SEC.=20 In the 1998 case of Long-Term Capital Management, a foundering investment f= irm kept out of bankruptcy by a government-assisted infusion of capital, Fe= deral Reserve Chairman Alan Greenspan communicated constantly with then-SEC= Chairman Arthur Levitt and with the Treasury Department and the Commodity = Futures Trading Commission, Turner said.=20 Rep. Henry A. Waxman (D-Los Angeles) charged last week that Bush administra= tion officials had "done nothing to mitigate the harm of the Enron bankrupt= cy to thousands of its employees and shareholders." In response, White Hous= e Press Secretary Ari Fleischer said Enron officials had not provided the T= reasury officials with any information that was not already in the general = news.=20 Stock Rose After Earnings Revision Filed=20 But the record of SEC filings and public statements by Enron officials show= s that Lay and other company officials maintained publicly that the company= 's energy trading business was strong and that it had the financial wherewi= thal to survive the crisis even as some of the firm's difficulties became e= vident in October and November.=20 The company reported a $618-million loss and a reduction in its shareholder= s' equity Oct. 16, and Nov. 8 it revised its earnings for the previous four= years, although without public reference to its overwhelming debts or the = financial peril it was telling Treasury officials about. In fact, Enron sto= ck rose almost 20% in the four days after the Nov. 8 disclosures as investm= ent analysts anticipated its proposed merger with Dynegy Inc.--later cancel= ed--and said most of Enron's troubles were behind it.=20 Because the precise dates of Whalley's phone calls to Fisher were not relea= sed, it cannot be determined how much shareholder value was lost between th= e time Fisher was first contacted and Enron stock plummeted (it dropped fro= m $33.84 a share on Oct. 16 to $8.41 on Nov. 8). But company shareholders a= nd employees lost more than $18 billion of market value in that decline.=20 From that point, Enron stock fluctuated until the end of November, when its= bonds were reduced to junk status, and the firm filed Dec. 2 for protectio= n from creditors under Chapter 11 bankruptcy. Enron stock closed Friday at = 67.5 cents a share.=20 Legal experts are not certain whether officials have a responsibility to di= sclose information received in communications from private industry. "It's = a tough question," said Turner, the former SEC accountant. "Officials can h= ave confidential communications."=20 In the case of Enron "the courts will decide" whether government officials = should have pushed for public disclosure, said William Bagley, a lawyer in = private practice who in 1974 served as the first commissioner of the Commod= ity Futures Trading Commission.=20 Matters of disclosure are only one part of the mounting debate concerning E= nron's collapse. Some say the Enron-Treasury discussions alone raise seriou= s questions.=20 "It's a terrible precedent for the rest of the economy if major companies f= eel like they have access to the highest levels of government and feel comf= ortable asking the government to intervene in their private negotiations," = said Austan Goolsbee, an economics professor at the University of Chicago G= raduate School of Business. Goolsbee termed the Enron phone calls "borderli= ne unethical."=20 But Alice Rivlin, a former vice chairwoman of the Federal Reserve and a Cli= nton administration budget director, saw a responsibility for officials to = communicate.=20 "When a really big company is in really big trouble, having the CEO call to= say 'You ought to know what's going on' is a good thing," Rivlin said. "If= they had gone down and not said anything, that wouldn't have been responsi= ble. I think the reaction of the Treasury secretary, if that had happened, = would have been, 'Why didn't somebody tell me?' "=20 Some See Secrecy as Part of Problem=20 Others see Enron's secrecy in all things as part of the firm's difficulties= . "There's a front door in government and a back door, and most of these co= ntacts were through the back door, hidden from public scrutiny," said Paul = C. Light, director of government studies at the Brookings Institution, a no= npartisan Washington think tank.=20 More appropriate, Light said, would have been public appeals by Enron for b= ailout legislation, filings with the Securities and Exchange Commission "or= other above-board, in-the-sunshine approaches for help."=20 But many experts see Enron's political influence as a reason for its failur= e to get a bailout. Politically, the Bush administration already had been o= n the defensive for taking massive contributions from Enron, which in Calif= ornia had been pilloried for allegedly trying to gouge the public during th= e energy crisis.=20 But Edward Muller, an investor in energy projects and former president of E= dison Mission Energy, said Bush administration energy officials did not rel= y on political considerations in their decisions to withhold help. "They si= mply decided that a bankruptcy of Enron would not disrupt energy or financi= al markets or the economy," said Muller, who was in touch with officials la= st fall in connection with his own business interests.=20 Enron, despite generating massive revenues, did not employ hundreds of thou= sands of workers, as did Chrysler in the 1980s or Lockheed in the 1970s. An= d unlike Long-Term Capital Management in the 1990s, its collapse did not th= reaten banks across the country and the world.=20 Indeed, Enron's bankruptcy did not greatly affect prices for electricity an= d natural gas, nor did it disrupt markets that trade in those commodities. = One effect of Enron's bankruptcy, energy analysts said, has been to make ba= nkers and financial institutions more cautious about lending and investing = in power companies. But such caution typically follows any publicized bankr= uptcy.=20 In any case, lawyer Bagley explained, federal bailouts are not easy to do. = "There is no institutional structure, so it takes extraordinary action by C= ongress--as in Chrysler or Lockheed." (In 1971, Congress narrowly voted spe= cial financing to save the aerospace firm from bankruptcy after an unwise i= nvestment in building a commercial airliner.)=20 Long-Term Capital was saved by emergency bank financing, but that was organ= ized by the Federal Reserve. Enron could have been "rescued" by a similar i= nfusion of capital, Bagley noted. "But where would the capital come from? T= he Bush administration would have had to seek congressional action for Enro= n." And given Enron's closeness to the White House, such an effort may well= have raised political difficulties too great to surmount.=20 *=20 Times staff writers Jube Shiver, Peter Gosselin and Warren Vieth in Washing= ton and Nancy Cleeland in Los Angeles contributed to this report. PHOTO: (to photos) Kenneth L. Lay, left, telephoned Treasury Secretary Paul= H. O'Neill on Nov. 8 to tell him of Enron's dire situation. SEC documents = filed that day revised Enron's financial statements back to 1997.; ; ; PHOT= OGRAPHER: Reuters=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 News; Domestic Interview With John Dingell, Tom Davis Tony Snow, Brit Hume 01/13/2002 Fox News: Fox News Sunday (c) Copyright Federal Document Clearing House. All Rights Reserved. SNOW: Continuing our discussion of the Enron collapse, we welcome two key p= layers from the House of Representatives: Democrat John Dingell, ranking me= mber of the House Energy and Commerce Committee; and Republican Tom Davis, = chairman of his party's National Congressional Committee.=20 Also here with questions, Brit Hume, Washington managing editor of Fox News= . Representative Dingell, based on what you've seen so far, is there any case= for political hanky panky so far in Enron?=20 REP. JOHN DINGELL (D), MICHIGAN: I think it's too early to say. I think wha= t we have to do is have a thorough investigation, get all the facts, and th= en make the necessary judgment.=20 Certainly Enron's behavior, Andersen's behavior, have raised questions. And= certainly the fact that the administration would not reveal the matters th= at went on with regard to the vice president's panel on energy and Enron's = part in it raises some questions.=20 BRIT HUME, FOX NEWS: Well, let me just ask a follow up on that if I can, Co= ngressman. What link do you see between the discussions the administration = had on energy policy and the financial collapse of this company? Is there a= ny connection?=20 DINGELL: Well, there's no connection there, but there is a connection which= is even more important, and that is what energy policy was put.=20 Remember, Enron was pushing very, very hard to have total deregulation of e= nergy, particularly electrical utility energy sales that had a particular e= ffect upon California and which caused huge disasters to the people of Cali= fornia with regard to energy. Plus...=20 HUME: Well, how many investigations are you talking about here, Congressman= ? Are you talking about one about the financial collapse of Enron, or are y= ou talking about two, including a separate investigation of energy policy, = California's predicament, Enron's discussion with the vice president on tha= t matter?=20 DINGELL: All this ties together.=20 HUME: How?=20 DINGELL: Enron was busy doing many things including stripping its employees= of their 401(k) benefits, including possible insider trading, including fi= ling false reports with the SEC, the 10-Ks, the 10-Qs and annual reports, a= nd they were also tied up in a peculiar relationship with Andersen, their a= uditor.=20 SNOW: OK, Representative Davis, what do you think? I want to get your respo= nse to what Representative Dingell said.=20 REP. TOM DAVIS (R), VIRGINIA: First of all, I think a lot of what Represent= ative Dingell says goes to what the Post says this morning.=20 SNOW: That's The Washington Post.=20 DAVIS: The Washington Post, it's: "Poll finds bad news for Democrats lookin= g for a traditional mid-term election edge."=20 Of course we ought to investigate the collapse of Enron and what happened t= o the employees and how some of the largest owners of this and the CEO were= able to cash out while forbidding their own employees to do that. We ought= to take a look at the financial accounting standards on this. We ought to = see if new rules and regulations ought to come forward.=20 But taking a look at these overall policies, just this politics, there's ab= solutely no evidence to date that the administration did anything improperl= y. And we know that Enron gave a lot of money to a lot of players in Washin= gton on both sides.=20 SNOW: Carl Levin, who is going to be running an investigation on the Senate= side, has said on another broadcast that he thinks that Ken Lay, in fact, = was asking over the phone for inappropriate favors from the administration.= Do you see any evidence of that?=20 DAVIS: Well, we know he was on the phone. We know that they had Bob Rubin, = who was President Clinton's Cabinet secretary, call up on their behalf. And= we don't know all those answers yet.=20 What we do know so far is we found no indication that the administration, i= n any way, did anything improper or answered any calls that might have come= forward.=20 HUME: But you are, as the head of the National Republican Congressional Com= mittee, in the process of returning campaign contributions.=20 DAVIS: Absolutely.=20 HUME: Well, if there's nothing improper here, why return the money?=20 DAVIS: Well, I'll tell you why, because they gave $100,000 in corporate dol= lars, it could go back and help those employees, help fund their pension pl= ans. And, frankly, I think that is a better use of $100,000 at this point.= =20 SNOW: Representative Dingell, you also got some money over the years from E= nron. Did anybody at Enron try to contact you?=20 DINGELL: Well, Enron talks to everybody. And I've told them no at almost ev= erything they've said...=20 (LAUGHTER)=20 ... and that includes deregulation of electrical utility sales and things o= f that kind.=20 SNOW: But during this period when Enron officials were contacting the treas= ury secretary, the commerce secretary and the undersecretary of treasury, d= id anybody call you and say, we want you to take a look into rating service= s or we want you to give us some help?=20 DINGELL: No, they did not, and I would not have done so.=20 And by the way, Tony, they gave me $10,500, and we're going to give that mo= ney -- I've already instructed my campaign treasurer -- to the funds that h= ave been set up to help the employees, and I urge everybody to do the same = thing.=20 HUME: Well, just to follow that up for a second, Tony's questions, when did= they contact you, how often and about what?=20 DINGELL: Well, they were usually contacting me about deregulating electrica= l utility sales, and we always told them no.=20 HUME: When was the last time? When did that happen last?=20 DINGELL: Oh, over a period of some time, and we told them no.=20 HUME: What? Last year, last six months, last month, when?=20 DINGELL: Oh, over a long period of time. They contacted us about that. We t= old them no. I opposed the proposal. I think it was the right thing to do.= =20 HUME: Sounds like the $10,500 was a bad investment.=20 DINGELL: Well, if they regard it as an investment, they lost their shirt. B= ut what we're going to do with that money is give that to the employees' fu= nds to try and help make whole from the fact that so many of their employee= s lost everything in the process of the collapse because Enron would not le= t them cash out their 401(k)s.=20 HUME: Congressman Dingell, when the hearings get under way, will you be wan= ting to have Bob Rubin among those testify about attempts to gain influence= or bailout for Enron?=20 DINGELL: If you watched me when I ran investigations, and I ran a lot of th= em, and they were very, very effective, we had everybody in. And we saw to = it that we got all the facts.=20 HUME: That would be a yes?=20 DINGELL: And that's what I want of these investigations in the Senate and t= he House.=20 HUME: Would that be a yes then?=20 DINGELL: That means absolutely yes.=20 SNOW: Representative Davis, I've heard you talk about returning contributio= ns, Representative Dingell talk about returning contributions. If you retur= ned everybody's contributions, you probably would be able to save one or tw= o of the people who worked. You've got thousands at Enron.=20 This is token help.=20 Now, is there going to be some move on Capitol Hill to make these people wh= ole? And if so, shouldn't other people who have been the victim of bad busi= ness practices and had their portfolios hampered, shouldn't they also expec= t help from Capitol Hill?=20 DAVIS: Well, I don't know that they can expect a government bailout at this= point.=20 But, look, I agree with Congressman Dingell. We need to get to the bottom o= f this matter. We have a criminal probe going on from the Justice Departmen= t. I think that's appropriate.=20 But I think on Capitol Hill, we need to look at why the seventh- largest co= rporation in America fell so quickly, why their corporate executives were c= ashing out and their ordinary employees that had grown the company were not= able to do that and lost their pension funds.=20 SNOW: Is it your suspicion that corporate executives deliberately misled em= ployees and told them everything was going to be fine, meanwhile, they cash= ed out while the employees were left holding the bag?=20 DAVIS: That's the appearance is. I think we need to nail that down, but tha= t is the appearance.=20 And the question then is, were they acting illegally, improperly, and do we= need to put in new rules and regulations to stop this in the future?=20 SNOW: Representative Dingell, getting back to the investigations, Attorney = General John Ashcroft, who received money just last year from Enron in a fa= iled Senate bid in Missouri, said he's going to recuse himself from the cas= e.=20 Do you think anybody who's received money from Enron over the years should = recuse themselves from the investigations? And that would include you.=20 DINGELL: I think there's a judgment that should be made.=20 Well, Tony, I'm just going to tell you, I've opposed Enron at every turn. A= nd I intend to -- with regard to deregulation and questions that they regar= d important and contacted me on, and I intend to continue that practice.=20 No, I'll give Enron an honest investigation. We'll look and see what kind o= f rascality went on.=20 Remember, there's plenty here to look into. There's the fact that Enron, ap= parently, made false representations in connection with their annual report= s, their 10-Ks and their 10-Qs. They, either alone or together with their a= ccountant, misrepresented facts. Their accountant also destroyed large volu= mes of papers.=20 I don't think you can find anybody in the country who doesn't want to get t= o the bottom of this. That includes me and every other member of Congress.= =20 SNOW: Representative Davis, do you think either political party is going to= be able to gain political advantage out of this Enron scandal?=20 DAVIS: Well, right now there is absolutely no evidence that anyone in elect= ed office or in the administration acted improperly. So at this point, I do= n't see any advantage. I see people -- they're jockeying for it, when you l= ook at the polls and how these have been used in the past. But I can assure= you, we'll have a fair hearing on the House side.=20 SNOW: All right, Representative Dingell, very quickly, either side getting = an advantage? We'll get 10 seconds.=20 DINGELL: Well, Tony, I want to see a fair, thorough and complete investigat= ion.=20 SNOW: All right.=20 DINGELL: I don't think we ought to make a partisan issue out of this. I thi= nk we ought to get to the facts.=20 SNOW: All right. Representative Dingell, Representative Davis, thank you bo= th.=20 Now for some viewers on the West Coast, Fox Sports and the NFL playoffs are= coming up. For everyone else, our panel is next. Either way, stay tuned to= Fox.=20 (COMMERCIAL BREAK)=20 THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY B= E UPDATED.=20 Content and Programming Copyright 2002 Fox News Network, Inc. ALL RIGHTS RE= SERVED. Transcription Copyright 2002 eMediaMillWorks, Inc. (f/k/a Federal D= ocument Clearing House, Inc.), which takes sole responsibility for the accu= racy of the transcription. ALL RIGHTS RESERVED. No license is granted to th= e user of this material except for the user's personal or internal use and,= in such case, only one copy may be printed, nor shall user use any materia= l for commercial purposes or in any fashion that may infringe upon Fox News= Network, Inc.'s and eMediaMillWorks, Inc.'s copyrights or other proprietar= y rights or interests in the material. This is not a legal transcript for p= urposes of litigation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 News; Domestic Interview With Paul O'Neill Tony Snow 01/13/2002 Fox News: Fox News Sunday (c) Copyright Federal Document Clearing House. All Rights Reserved. TONY SNOW, HOST: In one year Enron went from the toast of Houston to just p= lain toast. Executives walked off with millions of dollars, employees lost = their life savings, and accountants shredded critical papers.=20 (BEGIN VIDEO CLIP) GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: The administration is deepl= y concerned about its effects on the economy. We're also deeply concerned a= bout its effects on the lives of our citizenry.=20 (END VIDEO CLIP)=20 SNOW: Did Enron executives break the law, bend the law or fall victim to ba= d luck? Will any politicians take a fall? We'll ask Treasury Secretary Paul= O'Neill and two key congressional investigators, Representatives John Ding= ell and Tom Davis.=20 Plus, the latest on the hunt for bin Laden and a round-up on the war agains= t terror. And our quadra-pundit panel: Brit Hume, Mara Liasson, Fred Barnes= and Juan Williams.=20 This is the January 13 edition of FOX NEWS SUNDAY.=20 Good morning. We'll talk with our guests after an update on America at war.= =20 (NEWSBREAK)=20 SNOW: The top domestic story this morning: the collapse of Enron. Not long = ago the company was the world's largest energy trader, worth $70 billion. B= ut last fall the company acknowledged several hundred million dollars' wort= h of previously unreported liabilities, and its stock, already hit by a wea= kening economy, went into free-fall from a high of more than $80 a share to= less than 50 cents today.=20 A company that once boasted of never having had a bad quarter now has filed= for the biggest bankruptcy in our nation's history. In the process, thousa= nds of employees have seen their retirement savings vanish, while some comp= any executives managed to sell stock then worth millions.=20 Adding to the intrigue, Arthur Andersen, the firm auditing Enron's books, c= laimed it didn't get some important records from the company and destroyed = thousands of other pages of documents. The administration and at least four= congressional committees have launched investigations, but the complex cas= e may take years to resolve.=20 So is this a corporate scandal, a political scandal, both, neither? For ans= wers we turn to the treasury secretary, Paul O'Neill.=20 Good morning.=20 PAUL O'NEILL, SECRETARY OF TREASURY: Good morning.=20 SNOW: Now, in October you received the first of three phone calls from Ken = Lay, the chairman of Enron. In his first phone call to you, what did he say= ?=20 O'NEILL: He called to tell me that he thought it would be useful for our te= chnical people to talk with his technical people to understand the complex = derivative contracts they had, to assure ourselves that their problems were= not going to get translated into larger problems for the U.S. and the worl= d capital markets.=20 SNOW: So he did not seek direct help? He didn't ask for, at least at that j= uncture, any intervention with rating services or anything?=20 O'NEILL: Absolutely not. No, he just called me to alert me that he thought = we ought to pay attention to the technical details.=20 SNOW: All right. And when you got that request from him, did any alarm bell= s go off? Did you say, this is an unusual request?=20 O'NEILL: No, I didn't think it was unusual at all. I get dozens of calls fr= om people every day, and his call wasn't unusual.=20 SNOW: So you mean corporate executives will often call and ask for your adv= ice about technical details of their derivatives trades?=20 O'NEILL: Well, they -- well, you know, this is a very unusual case in the s= ense that Enron's the biggest energy -- or was the biggest energy trader in= the world. And so, in that sense, I didn't think it was unusual.=20 You know, I think one thing that's been missing through a lot of the conver= sation about this is a lack of understanding of what goes on in the world.= =20 As the treasury secretary at the time that I had this call, I was working o= n the economic stimulus bill with the leadership of Congress. I was trying = to get the Congress to pay attention to and pass a terrorist risk insurance= proposal, which, unfortunately, they failed to do. I was working on pursui= ng terrorist financing all over the world.=20 So, you know, this is three, four-minute conversation in the midst of a sea= of things going on in the world, and I didn't think it was unusual at all.= =20 SNOW: So it wasn't a big deal. The following day he calls. What did he ask = for then?=20 O'NEILL: You know, I guess I don't remember two conversations back to back.= You're telling me something new.=20 I think what our records show is that I had two conversations with Ken, and= I think the dates are the 28th of October and another one on the 8th or 9t= h of November.=20 And, you know, the second call that I had from Ken was to tell me that they= were being looked at by the rating agencies. It was just a heads-up, and t= hat was it.=20 SNOW: So, at this point, one of the questions a lot of people want to know = is, why didn't you tell the president, why didn't anybody tell the presiden= t at this point?=20 O'NEILL: Well, again, you know, if you put this in the context of what's go= ing on, the president's prosecuting the war against the terrorists -- you k= now, I have been involved in big-league events for, I don't know, most of t= he last 40 years. I didn't think this was worthy of me running across the s= treet and telling the president. I don't go across the street and tell the = president every time somebody calls me.=20 SNOW: This is the seventh-largest corporation in America. When you got thos= e phone calls, did it occur to you that Enron might very soon be bankrupt?= =20 O'NEILL: I had no idea. You know, I had -- I frankly think what Ken told me= over the phone was not new news. You all had been reporting for weeks that= Enron had problems, that they were in trouble and the rest of that. And, y= ou know, it's part of the reason I didn't think there was any reason for me= to talk to anybody else, because I thought what Ken said to me was public = property. It was not new news.=20 SNOW: So were you surprised by the collapse of Enron's stock value?=20 O'NEILL: Well, not really. I guess, you know, I've watched lots of corporat= ions come and go. It's an interesting fact that there are very few companie= s that have been around for 40 or 50 years or 100 years.=20 So, you know, in the broader scheme of things, not really. Companies come a= nd go. It's -- part of the genius of capitalism is, people get to make good= decisions or bad decisions, and they get to pay the consequence or to enjo= y the fruits of their decisions. That's the way the system works.=20 SNOW: Now, a few years ago, a company called Long-Term Capital got a bailou= t from the federal government as it was facing bankruptcy. At least one --= =20 O'NEILL: I don't think that's...=20 SNOW: I'm sorry. Go ahead.=20 O'NEILL: I don't think that's a correct characterization. My recollection i= s that Long-Term Capital had a problem, and the New York Fed, I think it's = true, played a role in convening the banks that were at risk, but I don't t= hink the federal government provided anything at all, Tony.=20 SNOW: OK. In that case...=20 O'NEILL: There was no bailout. There was no bailout.=20 SNOW: OK. Well -- and there was no requested bailout here. There was a requ= est for perhaps some aid in intervening with Moody's, which was doing corpo= rate ratings.=20 O'NEILL: Not to me.=20 SNOW: OK. But to people under your jurisdiction, correct?=20 O'NEILL: According to accounts that I've read in the newspapers, that's rig= ht.=20 You know, this thing has become a subject of lots of conversation. We have = taken what I think are prudent steps, so that I've not spent any time talki= ng to the undersecretary about the conversations he had with other people, = to make sure that we do this correctly.=20 You know, I think we have done the right thing. We're going to continue to = do the right thing.=20 The president has asked me to lead a couple of different groups, to see if = there are lessons that we should learn, and possibly change law, rules or r= egulations to better protect individuals who have a stake in a 401(k) plan = or a pension plan, to make sure that the people that are involved out there= in companies are not disadvantaged by decisions that their leaders make.= =20 SNOW: Now, is the philosophy of this administration that, when a company ge= ts into a bind like this, it's on its own?=20 O'NEILL: Absolutely. You know, unless there's an issue related to the compa= ny that reaches to public responsibility, you know, in the American capital= ist system, companies are responsible for their actions.=20 And there is a broad scheme of laws and rules and regulations that instruct= and tell companies what they're supposed to do. And so, of course, you kno= w, we don't have an interest in individual companies, and that's it.=20 SNOW: So you're not talking to Peter Fisher, who's your undersecretary work= ing on this. There seems to be almost a see-no- evil, speak-no-evil kind of= atmosphere. You're not talking to a guy who's working for you. You and Don= Evans don't talk to the president until a meeting just very recently.=20 Surely there had to be some sense in your mind that these calls were inappr= opriate, or that there was something about them that you did not want to pa= ss along to the president. Is that correct?=20 O'NEILL: No, it's not. I didn't think there was anything inappropriate abou= t someone calling me to give me a heads-up that there were some technical t= hings that we ought to pay attention to. I don't find that inappropriate. I= t seems to me it's exactly the right discharge of my duties to make sure th= at the public's not going to be hurt by some individual company action.=20 SNOW: Now, Henry Waxman is saying that this administration -- well, let me = read a quote from Congressman Waxman. He's going to be conducting an invest= igation; a lot of people are. He's making allegation about the way the Whit= e House has handled this. We're going to get it up on the screen here prese= ntly.=20 He said, "It is now clear that the White House had knowledge that Enron was= likely to collapse but did nothing to protect innocent employees and share= holders who ultimately lost their life savings. I'm deeply troubled that th= e White House stood by and let this happen to thousands of families."=20 Your reaction?=20 O'NEILL: My reaction is, you know, it's just amazing to me to have this kin= d of comment. What we knew, what I knew, I think what those of us in the ad= ministration knew was public property. Everyone knew from Enron's disclosur= es that they were struggling. We didn't know more than that.=20 The company had a duty to inform its shareholders and its employees about t= hings that were going on inside the company. That's not a federal governmen= t responsibility.=20 And again, we didn't have any knowledge that wasn't general public property= . You all in the television world and in print media were reporting on kind= of a day-to-day basis what was going on in Enron. I didn't know anything m= ore than you did.=20 SNOW: So when Ken Lay e-mailed employees in August saying he thinks the bes= t times are ahead, do you think he was being straight with his employees?= =20 O'NEILL: Well, I don't know. You know, that's something you need to ask Ken= Lay. I don't know. I didn't have inside knowledge of what the company's pr= ospects were. You know, having been a CEO, I often -- I always communicated= with my people what I thought was going on. And you need to ask Ken Lay wh= at he had in his mind when he sent that e-mail.=20 SNOW: Do you think the federal government or Congress ought to do anything = to try to make whole some of the shareholders, especially people who worked= for Enron who've lost their life savings, or is that just the breaks?=20 O'NEILL: Well, again the second group the president asked me to lead is to = look and see whether the laws and rules and regulations about disclosure ar= e appropriate and whether something's been missing in the requirements for = disclosure, especially in these areas that are so complicated.=20 I don't know whether you've ever spent any time trying to understand the de= rivatives business. I did, because when I was at Alcoa we ran a billion-dol= lar, multi-billion-dollar derivatives process in the 36 countries we were i= nvolved in around the world. And it's an enormously complicated subject.=20 The president's asked me to look at the rules and regulations and see wheth= er we need to modify them in some way to assure that shareholders and emplo= yees are not disadvantaged because the disclosure rules are not strong enou= gh.=20 SNOW: Mr. Secretary, final question. I'm going to read a Fox News Opinion D= ynamics Poll question. We asked people about their optimism about the econo= my, whether they think things are going to get better or worse in the next = year. And 74 percent said better; only 14 percent said worse.=20 Are they realistic or guilty of irrational exuberance?=20 O'NEILL: No, I think they're on the right track. I think -- you know, I thi= nk the information we have so far in the data on economic performance is a = mix but I think it's mixed toward the positive side, and I'm optimistic we'= re going to return to a good rates of real growth.=20 SNOW: With or without a stimulus package?=20 O'NEILL: Well, the stimulus package, I still believe, would hasten the move= ment out of a slow economic period. It would help people who were directly = affected by the events of September 11.=20 The president said over and over again, every person who has a prospect of = losing their job or who has lost their job, we should care about them and t= herefore, yes, we should do the stimulus package.=20 I'm hoping the Congress will come back informed by their constituents that = they, the constituents, want a stimulus package and that we'll finally get = a vote in the Senate. We already passed two bills in the House. Hopefully t= he Senate's going to be responsive, and we're going to do something in the = next few weeks.=20 SNOW: All right. Secretary O'Neill, thanks for joining us.=20 O'NEILL: My pleasure.=20 SNOW: Up next, Congress takes a look at the Enron mess.=20 (BEGIN VIDEO CLIP)=20 BUSH: This administration will fully investigate issues such as the Enron b= ankruptcy to make sure that workers are protected.=20 (BEGIN VIDEO CLIP)=20 (COMMERCIAL BREAK)=20 THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY B= E UPDATED.=20 Content and Programming Copyright 2002 Fox News Network, Inc. ALL RIGHTS RE= SERVED. Transcription Copyright 2002 eMediaMillWorks, Inc. (f/k/a Federal D= ocument Clearing House, Inc.), which takes sole responsibility for the accu= racy of the transcription. ALL RIGHTS RESERVED. No license is granted to th= e user of this material except for the user's personal or internal use and,= in such case, only one copy may be printed, nor shall user use any materia= l for commercial purposes or in any fashion that may infringe upon Fox News= Network, Inc.'s and eMediaMillWorks, Inc.'s copyrights or other proprietar= y rights or interests in the material. This is not a legal transcript for p= urposes of litigation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 News; Domestic White House Says it Offered Enron No Assistance Kyra Phillips, John King 01/13/2002 CNN: Sunday Morning (c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House,= Inc.). All Rights Reserved. The Enron investigation is dominating Sunday's news talk shows. The big que= stion is: What is the likely political fallout from the Enron bankruptcy?= =20 KYRA PHILLIPS, CNN ANCHOR: The Enron investigation is dominating today's Su= nday's news talk shows, along with the war in Afghanistan. The big question= , though, what is likely economic -- what is the likely economic and politi= cal fallout from the Enron bankruptcy. Well CNN's John King has more now fr= om the White House. A lot of people are asking that question John. JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: A lot of people asking Kyr= a, and the political side of these investigations will go hand in hand with= the exploration, not only by the Justice Department and other government a= gencies, but by the Congress as well, is into just how Enron filed for bank= ruptcy and did it mislead its shareholders and its employees. That is the b= usiness side of it, if you will.=20 On the political side, members of Congress want to know about contacts betw= een senior Enron officials and senior Bush administration officials. There = are political connections, the company is a prolific donor for political ca= mpaigns, not only the Republicans, the Democrats as well. Also some persona= l relationships between the president and the CEO of Enron, and as well as = other senior Bush administration officials who have long-standing relations= hips with the company and its senior officials.=20 Two Cabinet secretaries, Don Evans at Commerce, Paul O'Neill at Treasury, o= ut making the round of the talk shows again today. They did receive a phone= call from the Enron CEO, Ken Lay, late last year before the company filed = for bankruptcy, in which at least in the Evans conversation, Secretary Evan= s says Ken Lay asked for help. Now two ways to get into trouble in a contro= versy like this -- one is to do something hard and the Bush administration = officials insist when Enron asked for help, the answer was no, and they say= any investigation will show that, that they did not help them at all.=20 But another way you can get in trouble and at least extend the political co= ntroversy is if the answers don't match up. Here at the White House on Thur= sday, the White House Press Secretary Ari Fleischer was asked if Secretary = Evans or Secretary O'Neill passed on word to anyone here at the White House= -- the president or any other senior officials that Ken Lay had called the= m and asked for help. Ari Fleischer said not that he was aware of, that it = was not passed on to the best of his knowledge. Today discussing this on "M= eet The Press", Secretary Evans said he did indeed pass word on to the Whit= e House.=20 (BEGIN VIDEO CLIP)=20 DON EVANS, COMMERCE SECRETARY: I was in the White House, a lot more started= to happen with respect to Enron. They announced the Dynegy merger. Shortly= after that, there was some question whether or not the Dynegy merger would= make or not. And so with all the ongoing and continuing activity at Enron = and Dynegy, I thought the White House ought to know. I was over there one d= ay, and I stepped into Andy Card's office and told him I received his call,= he simply listened to me and said thank you very much.=20 (END VIDEO CLIP)=20 KING: Evans said that Andy Card told him he did not pass that information o= nto President Bush. Again, though, members of Congress, especially the Demo= crats want more details of any and all contacts between the administration = and Enron. Any regulatory decisions or other decisions made by the administ= ration that might have benefited Enron and so you have not a conflicting an= swer, but certainly new information today from Secretary Evans that he did = pass some information onto the White House.=20 You can be sure that will be another request as Democrats in Congress as th= e investigations of the political side of all of this go hand in hand with = the criminal investigations and other regulatory investigations into just w= hat happened at Enron -- Kyra.=20 PHILLIPS: John King, live at the White House. Thanks so much.=20 TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SE= CURE ONLINE ORDER FORM LOCATED AT www.fdch.com=20 THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY B= E UPDATED.=20 Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS = RESERVED. Prepared by eMediaMillWorks, Inc. (f/k/a Federal Document Clearin= g House, Inc.) No license is granted to the user of this material other tha= n for research. User may not reproduce or redistribute the material except = for user's personal or internal use and, in such case, only one copy may be= printed, nor shall user use any material for commercial purposes or in any= fashion that may infringe upon Cable News Network, Inc.'s copyright or oth= er proprietary rights or interests in the material; provided, however, that= members of the news media may redistribute limited portions (less than 250= words) of this material without a specific license from CNN so long as the= y provide conspicuous attribution to CNN as the originator and copyright ho= lder of such material. This is not a legal transcript for purposes of litig= ation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 News; Domestic Enron-White House Relationship Continues Causing Controversy Kyra Phillips, John King 01/13/2002 CNN: Sunday Morning (c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House,= Inc.). All Rights Reserved. More questions and few answers this morning as the investigation of fallen = energy giant, Enron, shifts into high gear. A high-ranking Democrat has ask= ed some tough questions from Enron CEO.=20 KYRA PHILLIPS, CNN ANCHOR: More questions and few answers this morning as t= he investigation of fallen energy giant, Enron, shifts into high gear. A hi= gh-ranking Democrat has asked some tough questions from Enron CEO. Congressman Henry Waxman has asked Kenneth Lay to explain two upbeat e-mail= s sent to employees that talked up the company's future, even though it was= sliding toward bankruptcy. Waxman also wants to know why Enron barred work= ers from selling their Enron stock after the company acknowledged its finan= cial problems. Enron also had some links to the Bush administration.=20 And CNN's John King is at the White House with more on this. John, how worr= ied is the Bush administration about this investigation?=20 JOHN KING, CNN WHITE HOUSE CORRESPONDENT: Well, Kyra, Bush administration o= fficials say they have absolutely nothing to hide, but they also acknowledg= e that this is likely to become a political question -- some would say cont= roversy -- for weeks, if not months.=20 The administration initially reacted a bit defensively to all these questio= ns about contacts between senior Enron officials and senior Bush administra= tion officials. Ken Lay, the CEO, is a long-time Bush family friend, not on= ly of the president, but also of his father. He's close to the vice preside= nt. Many officials in the administration actually have worked as consultant= s for Enron. So there are a great deal of questions about contacts.=20 But you will see today, the Sunday news shows, you'll see the Commerce secr= etary, the secretary of the Treasury out talking publicly. They've been on = CNN over the weekend, and as early as Friday and Thursday as well. The admi= nistration saying that the bottom line will be at the end of all these inve= stigations, that a major political contributor of the president called and = asked for help and the answer was no.=20 That won't satisfy people in Congress initially. You mentioned Henry Waxman= , a key Democrat on the House Government Reform Committee. He wants to know= everything about the administration's contacts with Enron. He wants to kno= w if in any way once they became aware in the administration of Enron's fin= ancial difficulties, did they do anything to try to help.=20 There's a provision in what the president wanted in a stimulus package that= you could say would have helped Enron. It would have helped a lot of compa= nies, but would have helped Enron specifically as well. So Congress will as= k a lot of questions about this, but the Bush administration says in the en= d though the answer will be, and they insist the answer will be, that a fri= end of the president asked for help and the answer was no.=20 PHILLIPS: So the focus will be on whether the company deliberately lied abo= ut its financial position?=20 KING: That is one of the questions, and then there's a subplot to that. One= of the things Congressman Waxman wants to know is, if the secretary of the= Treasury and if the secretary of Commerce knew that Enron was in trouble a= nd that Enron was saying different things in public, did they have a respon= sibility to put other government agencies on alert. Did they have a respons= ibility to pressure the company to be more candid and honest.=20 Bush administration officials say when those conversations took place betwe= en cabinet members and senior Enron officials, that there was public knowle= dge of the company's troubles, perhaps not detailed public knowledge, but t= hat Enron was already on record.=20 But one of the things you mentioned in the lead-in, Henry Waxman wants to k= now, why was Ken Lay writing optimistic e-mails to company employees at aro= und the time he was calling Bush administration officials, there's a month = or so difference, around the time he was calling them and saying the compan= y was in trouble.=20 In one of those e-mails he said he wants to know if --- Henry Waxman says t= o Ken Lay, if you sent those e-mails, then "they create the appearance that= you misled Enron employees about the value of their investments." And of c= ourse, it was critical because many Enron employees were putting their savi= ngs into the company's 401(k) plan and buying Enron stock in doing so.=20 PHILLIPS: Well, John, since we've been talking about the subject matter, I = continue to get bombarded with e-mail. I just want to sneak one in here, if= you don't mind.=20 KING: Not at all.=20 PHILLIPS: This one comes from John. He says, "if these same set of circumst= ances had occurred during the Clinton Administration, the outcry from the R= epublicans and the various news media would have been so deafening that imp= eachment proceedings would be the talk of D.C. by now. Why is the reaction = to George W. Bush administration indiscretion so muted, compared with Clint= on-era political scandals?"=20 KING: Well, I'd have to say I would, I guess disagree somewhat with the pre= mise of the question. The inquiries are just beginning in the past few days= . The Bush administration has launched investigations of its own. Congress = will launch its investigations.=20 There are many committees looking into this in Congress, and as Congressman= Waxman is asking questions, he serves on the same committee as Congressman= Dan Burton, who is the chairman of that committee, who is the Republican t= hat many Clinton Administration officials came to, I'll use the word dislik= e. They might use a stronger term. There will be some to and fro here. Ther= e's a great deal of media inquiry into this, media inquiry into the contact= s between Bush administration officials.=20 As of this moment, Sunday morning here in Washington, there is no evidence = that anyone in the Bush administration did anything to help this company, b= ut there are a lot of questions. We're asking them at CNN. Others are askin= g them in the news media. Congress is asking them as well.=20 And you can be sure in the weeks and months ahead, Congress will be asking = for any and all documentation of contacts between the company and the admin= istration.=20 And if any evidence surfaces that the administration did help the company, = did reach out to help the company or in any way help hide information that = should have been put in the public domain, then you can be certain those in= vestigations will intensify.=20 PHILLIPS: John King, great to see you on this Sunday. Thanks so much.=20 TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SE= CURE ONLINE ORDER FORM LOCATED AT www.fdch.com=20 THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY B= E UPDATED.=20 Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS = RESERVED. Prepared by eMediaMillWorks, Inc. (f/k/a Federal Document Clearin= g House, Inc.) No license is granted to the user of this material other tha= n for research. User may not reproduce or redistribute the material except = for user's personal or internal use and, in such case, only one copy may be= printed, nor shall user use any material for commercial purposes or in any= fashion that may infringe upon Cable News Network, Inc.'s copyright or oth= er proprietary rights or interests in the material; provided, however, that= members of the news media may redistribute limited portions (less than 250= words) of this material without a specific license from CNN so long as the= y provide conspicuous attribution to CNN as the originator and copyright ho= lder of such material. This is not a legal transcript for purposes of litig= ation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Interview: Bennett Roth and David Ivanovich discuss the Enron debacle and h= ow it might affect the Bush administration 01/13/2002 NPR: Weekend Edition - Sunday Copyright 2002 National Public Radio, Inc. All Rights Reserved. LIANE HANSEN, host: From NPR News in Washington, this is WEEKEND EDITION. I= 'm Liane Hansen.=20 Executives and directors of the Enron Corporation sold more than $1 billion= worth of the company's stock just before the energy trading company fell i= nto bankruptcy last year, according to a report in today's editions of The = New York Times. The Times reports that company chairman Ken Lay sold 1.8 mi= llion shares of Enron stock between early 1999 and July 2001. But last Augu= st in two e-mail messages to Enron employees, Lay boasted that Enron's perf= ormance was robust and called the company the, quote, "finest organization = in American business today." In our studio this morning are two Washington-based reporters for the Houst= on Chronicle who have been covering the Enron story. David Ivanovich report= s on business and Bennett Roth covers the White House.=20 Good morning and welcome to you both. Thanks for coming in.=20 Mr. BENNETT ROTH (Houston Chronicle): Good morning.=20 HANSEN: David, let's start with you and these reports of possible insider t= rading and potentially misleading e-mails from Ken Lay to Enron employees. = What do you make of these reports?=20 Mr. DAVID IVANOVICH (Houston Chronicle): Well, it's certainly interesting t= o see the extent of the insider trades in light of the company's collapse. = I'm not surprised that the executives would have been talking up the compan= y. Executives tend to do that. But what's so controversial about this, of c= ourse, is that so many of the rank-and-file employees at Enron had Enron sh= ares locked in their 401(k) plan, and were unable to sell their shares at t= he crucial point when the stock was nose-diving.=20 HANSEN: So the executives were able to get--sell their stocks and the emplo= yees were unable to get into their retirement accounts. What about the acco= unting firm of Arthur Andersen? It disclosed this past week that it had des= troyed documents relating to Enron's finances. Is that going to have an eff= ect--what effect would it have on any investigation?=20 Mr. IVANOVICH: Oh, sure, I think that it really puts the limelight on Ander= sen. On Friday, the House Energy and Commerce Committee, which has been inv= estigating the Enron debacle vigorously, told the accounting firm that they= want to see the personal files of six partners who were looking in the Enr= on case, and they want those documents by Monday.=20 HANSEN: Bennett Roth, Enron, and particularly Ken Lay, have long connection= s, close connections with President Bush and members of his administration.= The president seemed to be distancing himself from Enron's troubles this p= ast week. How close can you tell us are those ties?=20 Mr. ROTH: Well, they certainly go way back to Bush's father, who appointed = Ken Lay to help run the economic summit in 1990 and the Republican conventi= on in 1992 in Houston. Ken Lay and Enron have been Bush's most generous ben= efactor over the year, giving him somewhat over a $1/2 million. And, you kn= ow, when Bush was governor, there's this correspondence between the two men= in which Governor Bush wished Ken Lay happy 55th birthday, and Ken Lay wro= te a letter, you know, talking about Bush's knee surgery. So I mean, there = certainly has been a long relationship between them.=20 But certainly, Bush has done his best this week to distance himself, someho= w suggesting that he inherited Ken Lay from Ann Richards, the former govern= or, who appointed Bush to a business board. However, it appears to be a lit= tle bit of a stretch there. Yes, indeed, Richards did appoint him to the bo= ard, but Lay has said himself that he supported Bush in the 1994 gubernator= ial race against Richards, and Enron and Bush actually gave Bush more money= than Richards.=20 HANSEN: Hmm. But Enron executives put out some feelers to the Bush administ= ration. They wanted to help get some loans to forestall the bankruptcy, but= there's no indication the administration actually followed through. So wha= t do you think we're seeing here? Is it just a potentially embarrassing foo= tnote, or is a bigger problem looming for the administration?=20 Mr. ROTH: Well, we really don't know yet. I mean, this information has been= dribbling out. A month ago, it appeared that--I mean, from the Bush admini= stration, there'd been no contacts, and all of a sudden this week we find t= here's all these contacts, and much of it really depends on the congression= al investigations, the Justice Department investigation, and this could go = on. Now right now it's a distraction, and Bush would like to talk about the= economy, the war and other things, and this week ended up talking about En= ron, and that's certainly a political minus. But it really remains to be se= en. But there's certainly a lot more questions out there.=20 HANSEN: David, a lot more questions out there, I'm sure.=20 Mr. IVANOVICH: There certainly are. We have questions that--the congression= al panels are all looking into this. We have so many members of Congress th= at are now calling for investigations, it's hard to keep track of how many = hearings and how many subpoenas have been sent out.=20 HANSEN: But there have also been members of the Bush administration that ha= ve had to recuse themselves from involvement in this investigation, and Enr= on has also made contributions to Democrats over the years. So how might th= is affect the congressional investigation?=20 Mr. IVANOVICH: Well, you have so many members who don't know what to say ab= out Enron right now. They--some want to speak up; some are afraid to. Most = of the Enron money did go to Republicans, but there are a large number of D= emocrats on the Hill that received money, as well.=20 HANSEN: Do you really think it's just going to be a distraction for the Bus= h administration?=20 Mr. IVANOVICH: Oh, I don't know. I think that they're panicking right now. = It's interesting to see their reaction. I don't think that they're reacting= in a calm manner about this at this time.=20 HANSEN: And, briefly, Bennett, what do you think, just a distraction or som= ething more?=20 Mr. ROTH: Oh, I--it could be more than that. And I agree with David. The wa= y they're reacting makes you somehow think that maybe there's more there. I= mean, why would they be so eager to distance themselves from Enron and so = eager to point to the Democrats right now. I mean, they certainly are worri= ed about this.=20 HANSEN: Houston Chronicle correspondents Bennett Roth and David Ivanovich. = Thank you both for coming in this morning.=20 Mr. ROTH: Thank you. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 News; Domestic Interview With Michael Weisskozpf Kyra Phillips 01/13/2002 CNN: Sunday Morning (c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House,= Inc.). All Rights Reserved. Michael Weisskozpf of "TIME" magazine discusses the Enron collapse.=20 KYRA PHILLIPS, CNN ANCHOR: Right now four Congressional committees are look= ing into what went on at Enron before the company filed for the largest ban= kruptcy in history. And, too, we wanted to point out that more than 250 law= makers on Capitol Hill received campaign contributions from Enron. "TIME" magazine's Senior Correspondent Michael Weisskozpf joins us now from= Washington to further discuss the political fallout from this bankruptcy a= nd the investigations.=20 Good to see you, Michael.=20 MICHAEL WEISSKOZPF, "TIME" MAGAZINE: Good to be here.=20 PHILLIPS: Well, we received a number of e-mails from viewers on this subjec= t matter. Remember yesterday, actually, we did a reporter's notebook talkin= g about the subject matter. And if you don't mind, can I just read some of = these e-mails to you and have you respond to them?=20 WEISSKOZPF: Please.=20 PHILLIPS: OK. This one comes from Jean. It's one of the first ones -- we go= t a couple hundred of these actually. "I'm a stock investor that still owns= my Enron shares. What will happen to the stockholder's shares in the Enron= debacle?"=20 WEISSKOZPF: There are shareholder suits ongoing now, and most of their argu= ments is directed against the insider trading by 29 top Enron executives wh= o unloaded about $1 billion worth of shares before they dropped.=20 PHILLIPS: Now, a lot of people have been talking about this situation as th= e next -- next White Water. Do you think that's going a little too far?=20 WEISSKOZPF: Well, certainly, the administration has a perception problem al= ready because of its long-standing political connections with Enron and Ken= Lay, its Chairman. However, any scandal needs more than that. And unless w= e find any type of official action in this administration which favored Enr= on, I would guess that this would have short life.=20 PHILLIPS: This question comes from Dale -- this e-mail -- the question is, = "What kind of tax advantages did Enron reap as a result of its political ca= mpaign contributions?"=20 WEISSKOZPF: None. Taxes are -- campaign contributions are not tax deductibl= e.=20 PHILLIPS: Now, Enron executives gave hundreds of thousands of dollars in po= litical contributions. From your perspective, as a correspondent covering t= his story, does it appear that this was a company that gave money to get wh= at they wanted from the government? Do you think there was a favor exchange= here?=20 WEISSKOZPF: Corporations are not charitable when it comes to political care= ers. They all have some motivation. However, even the wiliest of corporate = executives realize those contributions only take you so far. It probably on= ly gets you an audience, which is a great deal more than the ordinary Ameri= can gets. But an opportunity to put your argument to decision-makers, that'= s what they got.=20 PHILLIPS: Michael, another e-mail. This one comes from Kevin. "As a laymen = to the inner workings of the legal system, I don't quite understand the del= ay in bringing Enron executives to justice. They clearly violated the law a= nd misrepresented the company's financial standings to their workers and th= e world. What kind of outcome can the American people expect in this case, = and when?"=20 WEISSKOZPF: That's really the job of these investigating committees in Cong= ress; also, the Justice Department and the SEC. It must be proven that comp= any executives were aware of misleading the public while they were hiding l= osses. You need to show more than action, you have to show a kind of conspi= racy behind it.=20 PHILLIPS: Michael Weisskozpf, "TIME" magazine. I enjoy your articles. We'll= definitely be following these hearings. No doubt, this is not going to go = away for a while. Michael, thanks for being with us early on this Sunday.= =20 WEISSKOZPF: A pleasure.=20 TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SE= CURE ONLINE ORDER FORM LOCATED AT www.fdch.com=20 THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY B= E UPDATED.=20 Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS = RESERVED. Prepared by eMediaMillWorks, Inc. (f/k/a Federal Document Clearin= g House, Inc.) No license is granted to the user of this material other tha= n for research. User may not reproduce or redistribute the material except = for user's personal or internal use and, in such case, only one copy may be= printed, nor shall user use any material for commercial purposes or in any= fashion that may infringe upon Cable News Network, Inc.'s copyright or oth= er proprietary rights or interests in the material; provided, however, that= members of the news media may redistribute limited portions (less than 250= words) of this material without a specific license from CNN so long as the= y provide conspicuous attribution to CNN as the originator and copyright ho= lder of such material. This is not a legal transcript for purposes of litig= ation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 News; Domestic Enron Collapse Brings Bush Administration Under Scrutiny Carol Lin, John King 01/13/2002 CNN Sunday (c) Copyright eMediaMillWorks, Inc. (f/k/a Federal Document Clearing House,= Inc.). All Rights Reserved. The Enron collapse continues to reverberate in Washington. Top Bush adminis= tration officials today appeared on Sunday news programs to shed more light= on their contacts with the energy giant.=20 CAROL LIN, CNN ANCHOR: The Enron collapse continues to reverberate in Washi= ngton. Top Bush administration officials today appeared on Sunday news prog= rams to shed more light on their contacts with the energy giant. CNN senior White House correspondent John King joins us now with more -- Jo= hn.=20 JOHN KING, CNN SENIOR WHITE HOUSE CORRESPONDENT: Good evening to you Carol.= =20 We learned more about those contact today. We also saw a shift, if you will= , in the Democratic focus in its criticism of the Bush administration for i= ts dealing with Enron before Enron filed for bankruptcy.=20 One Democratic criticism is two secretaries in the Bush Cabinet -- Don Evan= s in Commerce, Paul O'Neill at Treasury -- had phone calls from the top off= icial at Enron, the CEO and the Chairman Ken Lay in the weeks prior to Enro= n's filing bankruptcy. Many Democrats say Secretary Evans and O'Neill had a= responsibility to give a public warning so that shareholders and employees= at the company who were continuing to buy the stock had some indication th= e company's finances were headed south.=20 Secretaries O'Neill and Evans dismissing that today, saying they were told = nothing by Ken Lay that wasn't available in the public domain. Treasury Sec= retary Paul O'Neill says yes, he had two conversation with Ken Lay, but he = considered them routine; and he says there was no reason at all to tell the= president.=20 (BEGIN VIDEO CLIP)=20 PAUL O'NEILL, TREASURY SECRETARY: Well again, you know, if you put this in = the context of what's going on -- the president's prosecuting a war against= the terrorists. You know, I have been involved in big league events for, I= don't know, most of the last 40 years. I didn't think this was worthy of m= e running across the street and telling the president. I don't go across th= e street and tell the president every time somebody calls me.=20 (END VIDEO CLIP)=20 KING: Secretary Evans said today that Ken Lay did ask for his help, but tha= t he refused and decline to intervene. Secretary Evans also disclosed that = several weeks after that phone call he did tell the White House Chief of St= aff Andy Card. He says Andy Card did not tell the president; that, in fact,= that the president learned about all these phone calls from Ken Lay to the= members of his Cabinet just last Thursday, a full two months after the fac= t.=20 As all this plays out, four committees in Congress looking into it. Senator= Joseph Lieberman of Connecticut, the Democratic vice presidential candidat= e in the last election, is the chairman of one. He says Democrats have many= questions of the administration, but that so far he sees no evidence of an= y wrongdoing.=20 (BEGIN VIDEO CLIP)=20 SEN. JOSEPH LIEBERMAN (D), CONNECTICUT: I have not seen any evidence up to = this time that officials of the Bush administration acted improperly with r= egard to Enron. In fact, based on the stories that are being told, I'd say = that the Cabinet members in the Bush administration who were called by Enro= n executives for help as the company was about to go into bankruptcy acted = properly by not giving any help.=20 (END VIDEO CLIP)=20 KING: Still, other Democrats say they want men many more details of any and= all administration dealings with Enron -- not just in the weeks before its= bankruptcy. Democrats want to know if the administration made any regulato= ry or other policy decisions that could have benefited the company once its= top officials here in the administration found out that Enron was in troub= le.=20 Bush officials saying they will cooperate with those congressional investig= ations and, indeed, are investigating the company from the administration's= standpoint. They say in the end it will be proven the administration did n= othing wrong.=20 But again Carol, Democrats have questions. The political side of this inqui= ry could go on for weeks, if not months.=20 LIN: All unfolding as we speak. Thank you very much. John King reporting li= ve from the White House tonight.=20 TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SE= CURE ONLINE ORDER FORM LOCATED AT www.fdch.com=20 THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY B= E UPDATED.=20 Content and programming copyright 2002 Cable News Network, Inc. ALL RIGHTS = RESERVED. Prepared by eMediaMillWorks, Inc. (f/k/a Federal Document Clearin= g House, Inc.) No license is granted to the user of this material other tha= n for research. User may not reproduce or redistribute the material except = for user's personal or internal use and, in such case, only one copy may be= printed, nor shall user use any material for commercial purposes or in any= fashion that may infringe upon Cable News Network, Inc.'s copyright or oth= er proprietary rights or interests in the material; provided, however, that= members of the news media may redistribute limited portions (less than 250= words) of this material without a specific license from CNN so long as the= y provide conspicuous attribution to CNN as the originator and copyright ho= lder of such material. This is not a legal transcript for purposes of litig= ation. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Cabinet members say they didn't inform Bush about Enron calls for help By H. JOSEF HEBERT Associated Press Writer 01/13/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. WASHINGTON (AP) - Two Bush cabinet members said Sunday they never considere= d intervening in Enron's spiral toward bankruptcy, nor informed President B= ush of requests for help from the fallen energy giant.=20 "Companies come and go. It's ... part of the genius of capitalism," said Tr= easury Secretary Paul O'Neill, when asked if he was surprised at the sudden= collapse of Enron. The company's failure has left the one-time energy trad= ing behemoth's stock virtually worthless and thousands of workers' pension = funds in disarray. Last fall, a month before Enron declared bankruptcy, O'Neill received two t= elephone calls from Enron's chief executive, Kenneth Lay. Lay also called C= ommerce Secretary Don Evans at the time, reaching out for help to harness t= he energy company's financial slide.=20 O'Neill's view of Enron's collapse was characterized as "cold-blooded" and = reflective of "the 18th century, but not the 21st century" by Sen. Joseph L= ieberman, D-Conn., whose Committee on Governmental Affairs is leading Senat= e investigations into the Enron debacle.=20 Separately, Lieberman said that an internal Arthur Andersen LLP memo on Oct= . 12 directing that all but basic Enron working papers be destroyed "raises= very serious questions about whether obstruction of justice occurred."=20 Andersen this past week revealed that Enron documents had been destroyed. B= ut Lieberman said most troubling was that the memo, disclosed in a report i= n Time magazine, "was specifically about Enron" and not a general directive= to clean out files. Congressional investigators want to find out why Ander= sen did not raise flags about Enron's business practices.=20 Andersen, in a statement Sunday, acknowledged "there were internal communic= ations that raise questions" about the handling of Enron documents and that= the company "is committed to getting the facts and taking appropriate acti= ons in the Enron matter." The statement said it would be inappropriate to c= omment further on the Time magazine report.=20 Lieberman and Sen. John McCain, R-Ariz., said on CBS' "Face the Nation" the= administration may have been right in not intervening to try to save Enron= . But they said the government's response - as well as earlier federal moni= toring of its business practices - may have been hampered by the energy com= pany's freewheeling flow of campaign contributions.=20 "We're all tainted by the millions and millions of dollars that were contri= buted by Enron executives, which ... creates the appearance of impropriety,= " said McCain, a longtime voice for campaign finance reform. McCain acknowl= edged getting $9,500 in Enron contributions in two Senate campaigns.=20 Lieberman, who said he received $1,000 from Enron in his 1994 Senate campai= gn, said one focus of his committee's investigation will be "whether any of= the influence" from Enron money affected the administration's handling of = the Enron collapse, or oversight by federal agencies.=20 "I don't feel at all compromised," added Lieberman, referring to his commit= tee's investigation.=20 Since 1990, Enron and its employees contributed $5.77 million to political = campaigns, about three-fourths of it to GOP candidates. About half of the m= oney was spent in the 2000 election, with President Bush a major beneficiar= y.=20 O'Neill and Evans said Sunday that while they received calls from Lay in la= te October and early November, they dismissed any suggestion of intervening= to help the company.=20 Evans said that Lay was looking "for all the possible ways that he could st= abilize his company" and asked that Evans consider contacting credit rating= agencies. "I considered it and said, 'Thank you for the call,"' Evans said= on NBC's "Meet the Press."=20 O'Neill said that Lay, in a call of three or four minutes, "asked me for no= thing." But O'Neill acknowledged that during one conversation Lay said Enro= n's ability to sustain its credit rating "was a critical aspect" of keeping= a merger with rival Dynegy on track. The merger later fell apart.=20 The Treasury Department has acknowledged that, around the same time in late= October and early November, another Enron executive repeatedly contacted P= eter Fisher, a Treasury undersecretary, trying to get the government to enc= ourage banks to extend credit to the struggling company.=20 Sen. Carl Levin, D-Mich., whose Senate Governmental Affairs subcommittee ha= s issued 51 subpoenas in connection with its Enron investigation, said Sund= ay on ABC, "I have no doubt that they were asking for the government to tak= e action."=20 But an Enron spokesman, Mark Palmer, said the calls "were informational" an= d "not about trying to improve our credit rating."=20 Neither O'Neill nor Evans said they informed President Bush of the telephon= e calls. But Evans said he frequently discussed Enron's situation during ge= neral meetings with the president in November and December.=20 The tone of those conversations was "how sad it was to see what was happeni= ng to that once great company," Evans said on NBC.=20 Enron filed for bankruptcy on Dec. 2.=20 O'Neill said his concerns involving Enron were over the possible impact on = U.S. and global capital markets, but he was assured by Fisher that there we= ren't going to be problems in that area. O'Neill said that at the time of t= he calls he was deeply involved in pushing the president's stimulus package= in Congress, pursuing the financial trail of terrorists and dealing with o= ther issues of greater concern.=20 "I didn't think this was worthy of me running across the street (to the Whi= te House) and telling the president," O'Neill said on "Fox News Sunday." "I= don't ... tell the president every time somebody calls me."=20 As to the sudden collapse of Enron and the nosedive of the company's stock,= O'Neill said he was not surprised.=20 "I've watched lots of corporations come and go. ... There are very few comp= anies that have been around for 40 or 50 years. ... Companies come and go. = It's part of the genius of capitalism.=20 "People get to make good decisions or bad decisions, and they get to pay th= e consequences or to enjoy the fruits of their decisions. That's the way th= e system works." AP Photos WX105-106, 108=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 O'Neill - I did not discuss Enron case with subordinates. 01/13/2002 EFE News Service (c) 2002 Distributed via COMTEX News Washington, Jan 13, 2002 (EFE via COMTEX) - U.S. Treasury Secretary Paul O'= Neill said Sunday he never spoke to his subordinates about the Enron case a= nd did not consider his conversations with executives of the now-bankrupt e= nergy trader to be unusual.=20 During an appearance on the "Fox News Sunday" television program, O'Neill s= aid he did not mention telephone calls from Enron president and executive d= irector Kenneth Lay to his subordinates in the Treasury Department to ensur= e that he acted appropriately. Likewise, O'Neill said he did not consider it unusual that Lay called him o= n a couple of occasions before Enron declared bankruptcy.=20 O'Neill said Lay did not ask for help and that the conversations on Oct. 28= and Nov. 8 or 9 "didn't last more than three or four minutes."=20 "I didn't think this was worthy of me running across the street and telling= the president ... I frankly think what Ken told me over the phone was not = new news. You all had been reporting for weeks that Enron had problems, tha= t they were in trouble," O'Neill said.=20 The Justice Department and four congressional committees are investigating = the bankruptcy of Houston-based Enron, a company whose executives were larg= e contributors to Republican candidates and President Bush, as well as many= Democratic candidates.=20 O'Neill said Lay told him that, at that time, Enron was worth $70 billion a= nd he wanted to talk to "a technical person" in the department to explain t= he company's problems and assure them it would have no consequences for the= economy or for the stock market.=20 Enron filed for bankruptcy in December, causing thousands of employees to l= ose their jobs and the value of its stock to plummet from $80 per share to = less than a dollar.=20 This situation meant that most of its workers not only lost their job but a= lso their retirement funds, but some Enron top executives maneuvered to sel= l their shares, which were worth billions of dollars, in advance of the pri= ce crash.=20 emm/mc/bp=20 http://www.efe.es=20 Copyright (c) 2002. Agencia EFE S.A.=20 KEYWORD: Washington=20 SUBJECT CODE: POL=20 US=20 ENRON. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 US regulators probe Enron share-sell sell-off by executives - report 01/13/2002 AFX News (c) 2002 by AFP-Extel News Ltd NEW YORK (AFX) - A number of Enron Corp executives who sold their shares in= the company before its stock plummeted are being investigated by federal r= egulators, the New York Times reported, citing court filings.=20 As Enron stock climbed and Wall Street was still promoting it, the 29 Enron= insiders began to sell their shares, netting 1.1 bln usd by selling 17.3 m= ln shares from 1999 through mid-2001, the newspaper reported. One individual sold shares valued at 353.7 mln usd, it said.=20 The group continued selling just before Enron's stock started to tumble ear= ly last year and the company began its slide into bankruptcy protection.=20 "This issue is being investigated," Robert Bennett, a lawyer for Enron told= to the newspaper.=20 "But at this point in time, I am unaware of any evidence that supports the = allegation there was improper selling by members of the board or senior man= agement," he was quoted as saying.=20 sg/pch/lam Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Report: Enron gave more than $200K to Florida politicians 01/13/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. TALLAHASSEE, Fla. (AP) - Florida's pension fund investment in Enron Corp. h= as cost the state more than $300 million, but many top politicians received= money from the Texas-based energy giant.=20 Enron officials doled out more than $200,000 in campaign contributions, inc= luding the maximum allowable $500, to scores of the state's elected officia= ls in Washington and Tallahassee. Since 1990, Enron and its employees contributed $5.77 million to political = campaigns nationally, about three-fourths of it to GOP candidates. About ha= lf of the money was spent in the 2000 election, with President Bush a major= beneficiary.=20 Gov. Jeb Bush received $6,500 for his 1998 campaign, the Palm Beach Post re= ported in Sunday's editions.=20 Enron is under a nationwide criminal investigation by the Justice Departmen= t for possibly defrauding investors and other questionable financial dealin= gs. Early last year, the company had a market value of more than $40 billio= n.=20 By December, the company was broke, employees saw their retirement plans di= sappear and Florida's $94 billion state pension fund lost more than $300 mi= llion after being forced to dump 7.5 million Enron shares.=20 Last month, the state Board of Administration, which Gov. Bush heads, fired= Alliance Capital Management Corp., saying it was troubled by the New York = financial adviser's decision to continue buying Enron stock after company o= fficials admitted they'd lied about its finances.=20 Florida officials are asking federal courts handling the various Enron case= s to make the state a lead plaintiff because of the state's losses.=20 Altogether, Florida's 25-member delegation has received $42,300. Four of th= e Florida lawmakers - Graham and Reps. Michael Bilirakis, R-Tarpon Springs,= Cliff Stearns, R-Ocala, and Peter Deutsch, D-Lauderhill - serve on congres= sional energy committees. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron Gave To Florida Politicians;Pension Fund Lost $300M 01/13/2002 Dow Jones International News (Copyright (c) 2002, Dow Jones & Company, Inc.) TALLAHASSEE, Fla. (AP)--Florida's pension fund investment in Enron Corp. (E= NE) has cost the state more than $300 million but many top politicians rece= ived political contributions before the Texas-based oil giant went bust.=20 Enron officials doled out more than $200,000 in campaign contributions, inc= luding the maximum allowable $500, to scores of the state's elected officia= ls in Washington and Tallahassee. Gov. Jeb Bush received $6,500 for his 1998 campaign, the Palm Beach Post re= ported in Sunday's editions.=20 Enron, which is one of the biggest contributors to President George W. Bush= , is under a nationwide criminal investigation by the Justice Department fo= r possibly defrauding investors and other questionable financial dealings. = Early last year, the company had a market value of more than $40 billion.= =20 By December, the company was broke, employees saw their retirement plans di= sappear and Florida's $94 billion state pension fund lost more than $300 mi= llion after being forced to dump 7.5 million Enron shares.=20 Last month, the state Board of Administration, which Gov. Bush heads, fired= Alliance Capital Management Corp. (AC), saying it was troubled by the New = York financial adviser's decision to continue buying Enron stock after comp= any officials admitted they'd lied about its finances.=20 Florida officials are asking federal courts handling the various Enron case= s to make the state a lead plaintiff because of the state's losses.=20 U.S. Sen. Bob Graham, the state's top elected Democrat, received $8,000 fro= m the company.=20 "As a member of the Energy Committee, Sen. Graham received campaign support= from a wide variety of energy interests, as well as environmentalists and = others," said Paul Anderson, Graham's press secretary. "At the time he rece= ived these contributions, no one could have known what was going to happen = to Enron late last year."=20 Sen. Bill Nelson, D-Fla., received $1,000 contributed in December 2000, a f= ew weeks after his election. Nelson spokesman Dan McLaughlin said Nelson ha= d a fund raiser in Washington to help retire his campaign debt, and one of = the contributors at that event had ties to Enron.=20 In all, from 1995 to 2000, Enron gave $166,500 to state Republicans and $42= ,000 to Democrats, reflecting the GOP's increasing control of Florida polit= ics and government.=20 Enron also contributed to Florida's congressional delegation.=20 U.S. Rep. E. Clay Shaw, R-Fort Lauderdale, has gotten $7,000. U.S. Rep. Mar= k Foley, R-West Palm Beach, has received $3,500. U.S. Rep. Robert Wexler, D= -Delray Beach, got $500.=20 Altogether, Florida's 25-member delegation has received $42,300. Four of th= e Florida lawmakers - Graham and Reps. Michael Bilirakis, R-Tarpon Springs,= Cliff Stearns, R-Ocala, and Peter Deutsch, D-Lauderhill - serve on congres= sional energy committees.=20 The state Democratic Party got $20,000, most of which was used to help the = campaign of then-Lt. Gov. Buddy MacKay. That year, Enron also contributed $= 500 to Secretary of State Katherine Harris as well as 13 Democratic and 60 = Republican legislative candidates, nearly all of them incumbents. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 A SECTION ENRON INSIDERS' SALES DRAW IRE ; STOCK SHARES SOLD BY EXECUTIVES FROM 1999 = THROUGH MID-2001 WERE WORTH $1.1 BILLION. Leslie Wayne, New York Times 01/13/2002 Orlando Sentinel METRO A6 (Copyright 2002 by The Orlando Sentinel) While investigators are focusing on how much money investors and employees = lost in Enron Corp.'s collapse, some lawmakers and shareholders have set th= eir sights on another target: the millions that Enron insiders got by selli= ng shares near the top of the market.=20 As Enron stock climbed and Wall Street was still touting it, 29 Enron execu= tives and directors began to sell their shares. These insiders received $1.= 1 billion by selling 17.3 million shares from 1999 through mid-2001, accord= ing to court filings based on public records. They continued selling as Enr= on's stock started to tumble early last year and the company began its slid= e into bankruptcy. Kenneth Lay, who became prominent as the company's chairman and a leading c= ontributor to President Bush, was among more than a dozen Enron executives = who received $30 million or more. One sold shares valued at $353.7 million.= Lawyers and spokesmen for the executives, board members and the company sa= y they had no insider information or other advantages over other investors.= =20 "This issue is being investigated," said Robert S. Bennett, a lawyer for En= ron. "But at this point in time, I am unaware of any evidence that supports= the allegation there was improper selling by members of the board or senio= r management."=20 Since Enron's fall, Congress, the Justice Department and regulators have be= gun looking at whether the company illegally concealed the extent of its fi= nancial problems from investors and accountants.=20 Some Enron execs retained large holdings of Enron stock and sold regularly,= much as executives at other companies do.=20 Lay himself sold Enron stock 350 times, almost daily, receiving $101.3 mill= ion. In all, Lay sold 1.8 million Enron shares from early 1999 to July 2001= , five months before Enron filed for bankruptcy.=20 Some of Lay's shares were sold for as much as $86. Last week, Enron was sel= ling for less than 70 cents a share. Sometimes Lay sold amounts as small as= 500 shares; other times he sold as many as 100,000 shares at a time. Lay a= nd other executives had much of their holdings in stock options, which let = them buy shares at a discount on the market price.=20 Other top sellers were Lou L. Pai, former chairman of an Enron subsidiary, = who received $353.7 million for his 5 million shares; Rebecca P. Mark-Jusba= sche, a director who received $79.5 million for 1.4 million shares, and Ken= L. Harrison, a director who sold 1 million shares for $75.2 million.=20 Jeffrey Skilling, the company's former chief executive, received $66.9 mill= ion for 1.1 million shares. Beginning in December 2000, Skilling began to s= ell his holdings at a pace of 10,000 shares about every seven days. Andrew = Fastow, the company's ousted chief financial officer who set up many of the= financial partnerships that have been criticized for concealing Enron's la= rge debts, got $30 million for his holdings. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Insiders at Enron made millions By Leslie Wayne=20 New York Times News Service 01/13/2002 Deseret News A10 Copyright (c) 2002 Deseret News Publishing Co. NEW YORK -- While investigators are focusing on how much money investors an= d employees lost in Enron Corp.'s collapse, some shareholders and lawmakers= are now setting their sights on another target: the millions that Enron in= siders received by selling their shares near the top of the market.=20 As Enron stock climbed and Wall Street was still touting it, a group of 29 = Enron executives and directors began to sell their shares. These insiders r= eceived $1.1 billion by selling 17.3 million shares from 1999 through mid-2= 001, according to court filings based on public records. They continued sel= ling as Enron's stock started to tumble early last year and the company beg= an its slide into bankruptcy. Kenneth L. Lay, who became prominent as the company's chairman and a leadin= g contributor to President Bush, was among more than a dozen Enron executiv= es who received $30 million or more. One sold shares valued at $353.7 milli= on. Lawyers and spokesmen for the executives, board members and the company= say they had no insider information or other advantages over other investo= rs.=20 "This issue is being investigated," said Robert S. Bennett, a lawyer for En= ron. "But at this point in time, I am unaware of any evidence that supports= the allegation there was improper selling by members of the board or senio= r management."=20 Some of them retained large holdings of Enron stock and sold regularly, muc= h as executives at other companies do.=20 Lay himself sold Enron stock 350 times, almost daily, receiving $101.3 mill= ion. In all, Lay sold 1.8 million Enron shares between early 1999 and July = 2001, five months before Enron filed for bankruptcy.=20 Some of Lay's shares were sold for as much as $86. Last week, Enron was sel= ling for under 70 cents a share. Sometimes Lay sold in amounts as small as = 500 shares, other times he sold as many as 100,000 shares at a time. Lay an= d other executives had much of their holdings in the form of stock options,= which allowed them to buy shares at a discount on the market price.=20 Other top sellers were Lou L. Pai, the former chairman of an Enron subsidia= ry, who received $353.7 million for his 5 million shares; Rebecca P. Mark-J= usbasche, a director who received $79.5 million for 1.4 million shares, and= Ken L. Harrison, a director who sold 1 million shares for $75.2 million.= =20 Jeffrey K. Skilling, the company's former chief executive, received $66.9 m= illion for 1.1 million shares. Beginning in December 2000, Skilling began t= o sell his holdings at a pace of 10,000 shares about every seven days. Andr= ew S. Fastow, the company's ousted chief financial officer who set up many = of the financial partnerships that have been criticized for concealing Enro= n's large debts, received $30 million.=20 A detailed accounting of these trades is contained in a lawsuit brought by = Amalgamated Bank, of New York, which invested the pension money of union me= mbers in Enron shares. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Enron `gift' to Democrats for Dabhol project? By Sridhar Krishnaswami. 01/13/2002 The Hindu (c) 2002 Katsuri & Sons Ltd WASHINGTON, JAN. 12. Enron Corporation, which is becoming a major embarrass= ment for and liability to the Republican Party and the administration in an= election year, is said to have given $100,000 to the Democratic Party when= the $3-billion deal with India was being clinched.=20 According to a media report, the Enron Corporation had discussed the power = plant proposal with the then President, Bill Clinton's Chief of Staff, Thom= as "Mack" McLarty in 1995 and 1996; and the White House continually monitor= ed the India Dabhol Project through the American Embassy. And in 1996, four= days before New Delhi approved the project, the Houston Firm contributed $= 100,000 to the Democratic Party. However, Enron, according to the report, h= as denied that its "gift" to the party was any kind of repayment for the Cl= inton administration's attention to the project. The controversy over the failed corporation has come to embarrass the Bush = administration with many saying that it is now becoming the Republican vers= ion of the Whitewater scandal that dogged the Clinton Presidency from almos= t start to finish. The U.S. President, George W. Bush, and his senior aides= are maintaining that nothing improper has taken place.=20 The Houston-based firm is now the focus of a Justice Department enquiry, go= ing into whether top Enron executives improperly shielded investors from lo= sses and prevented the employees from selling billions of dollars of stocks= which were plummeting. Many Republican and Democratic law-makers also want= to know if Enron, with ties to the Grand old Party, sought any favours fro= m the Bush administration. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 The Statesman (India) - Dabhol jobless take crime route. 01/13/2002 The Statesman Financial Times Information Ltd - Asia Africa Intelligence Wire, The States= man c 2002 : All Rights Reserved. United News of India GUHAGAR (Maharashtra). Jan. 13. - As the Centre and th= e state continue to fight over political nuances and trivialities, with utt= er disregard for the need to find ways to re-open the Dabhol Power Company,= a sizeable section of the people rendered jobless by the closure of the 2,= 184-MW Dabhol power plant has taken to crime.=20 Villagers in this coastal region of Ratnagiri district resplendent with sce= nic beauty are in real dire straits. In a rare consensus, all villagers des= ire the re-opening of the plant at the earliest. The villagers categorically state: both the Centre and the state government= should keep off their political differences to find ways to restart the DP= C. "Poor farmers have lost their farms and many others their jobs," pointed= out a village elder, Mr Mankeshwar Gurav.=20 Significantly, with a major shift in the people's attitude, more and more v= illagers are now joining the pro-Enron bandwagon, advocating resumption of = the power plant.=20 According to a pro-Enron activist and former sarpanch of Anjanwel taluka, M= r Iqbal Mastan, many villagers left their jobs in Mumbai and settled down h= ere accepting work for lower wages. Over 3,000 people from surrounding vill= ages were also employed in the project work and the plant. "They are now jo= bless and it's a matter of grave concern that crime rate in the villages is= picking up," he observed. The 68 year-old man claimed he hadn't seen not a= single case of crime in Anjanwel. But the closure of the plant made youths= engage in pilfering and stealing. Recently, eight youths of a village were= arrested for stealing copper rods from the DPC premises.=20 Financial Times Information Ltd - Asia Africa Intelligence Wire=20 All Material Subject to Copyright=20 The Statesman (India) Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 AUSTRALIA: Enron Australia book wind-up moves slowly. 01/13/2002 Reuters English News Service (C) Reuters Limited 2002. MELBOURNE, Jan 14 (Reuters) - Enron Australia administrators said on Monday= that a wind-up up the group's electricity and weather derivatives book wou= ld be a slow process following the rejection of bids for its sale.=20 "It is going to take quite some time for the book to be worked out just in = terms of how all the counterparties are terminated and securing valuations = on the books as well," administrator consultant Alan Topp told Reuters. The Australian unit of Enron Corp appointed voluntary administrators Sims L= ockwood in early December after its U.S. parent filed for Chapter 11 bankru= ptcy.=20 The electricity book at the start of the sales process was estimated to be = worth about A$5 million based on the mid-point between bids and offers on t= he forward price curve, although valuations on outstanding contracts are st= ill to be agreed.=20 The administrators last month provided data room access for nine potential = bidders in the electricity and weather derivatives book, but the sale did n= ot go ahead.=20 "The offers we received were in a form that could not be accepted, and seco= ndly we had not received a number of confirmations from counterparties that= they would agree to the assignment of their book in any event," Topp said.= =20 Topp said a creditors meeting was likely to be held on January 29.=20 "There are still a number of counterparties which haven't closed out," he s= aid.=20 Enron has been a major provider of Australian power market liquidity, holdi= ng a 15-20 percent share of the over-the-counter market which allows genera= tors and retailers to hedge their exposure to the volatile spot market.=20 The company was once the world's biggest trader of gas and electricity and = other commodities. The operations, dormant since early December 2, generate= d most of Enron's US$101 billion in revenue in 2000.=20 Topp said the sale in the U.S. of Enron Corp's trading operation to Swiss b= ank UBS AG , announced on Friday, was not likely to affect the Australian p= rocess. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Former Enron employees deeply angered by their treatment as company went do= wn By MARK BABINECK Associated Press Writer 01/13/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. HOUSTON (AP) - Losing his retirement investment in Enron Corp. was one thin= g. What really hurt, said Charles Prestwood, was realizing that his unwaver= ing corporate loyalty ran only one direction.=20 "We had great trust, great loyalty," said Prestwood, 63, who retired as a p= lant operator in 2000. "We were trained loyalty above everything. And we we= re loyal. When you have that type of indoctrination for many years, it's go= ing to get in the way of your life eventually." More than a month after Enron shed more than 5,000 worldwide jobs and its s= tock bottomed out, retirees and laid-off workers from all walks of life are= still facing up to the ways the enormous debacle has stung them.=20 Enron employees whose 401(k) accounts were filled with company stock watche= d helplessly as ceaseless bad news obliterated their value last fall, while= a bookkeeping mechanism barred them from cashing out.=20 "I'll never trust my employer quite the same again," said Tim Dalton, a cor= porate security specialist who was among the 4,500 Houston workers laid off= in December.=20 Enron chairman Kenneth Lay "was like the Pied Piper. We followed him like l= emmings into the sea," said Deborah DeFforge, who might have to leave Houst= on for the West Coast to find work.=20 Congressional committees as well as the Justice and Labor departments want = to know why many senior Enron executives and board members sold their stock= when it was still valuable, while workers were barred from selling stock i= n their 401(k) funds.=20 Enron says its stock price, which stood at about $80 a year ago, already wa= s down to $13.88 when a coincidental 10-day freeze on 401(k) transactions w= as implemented because the plan changed administrators. By the time transac= tions could resume, the price was $9.98. When trading on the New York Stock= Exchange concluded Friday, the company's shares were selling for 67 cents = a piece.=20 The peak value of Prestwood's retirement account, about $1.3 million, might= sound lavish. But he had intended to live simply off the dividends, plus S= ocial Security and a small pension, withdrawing money only for things like = "replacing the lawn mower or refrigerator if they break."=20 "What so hurts about the whole deal is that something you devote your whole= life to, you see it destroyed right in front of your eyes," he said from h= is home on a quiet wooded country lot 40 miles north of Houston.=20 Prestwood is one of a number of former Enron workers who have filed lawsuit= s over their 401(k)s.=20 Dalton has funneled some of his energies into a Web site, http://www.thecro= okede.com, where he sells Enron-bashing T-shirts. Some of the proceeds go t= o a fund he's established to help fellow Enron exes.=20 "We told someone we hope to sell some T-shirts for four to five months unti= l it dies down," Dalton said. "`Die down?' they said, `You'll be selling T-= shirts all year as all the dishonesty and crookedness is exposed."'=20 The anger also hasn't diminished for DeFforge, who is a plaintiff in "every= suit I can get my hands on" and doesn't want to rest "until they're behind= bars."=20 "To take that many people and dupe them for that length of time, yeah, we'r= e pretty much all on a crusade," said DeFforge, a specialist in energy serv= ices until she was given 30 minutes to clean out her desk on Dec. 3.=20 While outsiders may scratch their heads as to why so many workers put so mu= ch of their retirement savings into company stock, Mike Black, a 54-year-ol= d systems programmer, cites corporate messages last summer in which executi= ves were saying shares "ought to be selling at $50 or $60" apiece.=20 Syed Ishaq said top executives assured workers the company would survive a = few speed bumps, while never mentioning the curious off-balance sheet finan= cing and crippling debt that were Enron's downfall.=20 "I even bought stock of the company when it was at $5 based on what I was t= old at an all-employee meeting!" Ishaq said in an e-mail. "Then I get laid = off, I only get $4,500, which barely pays for one month of expenses, I imme= diately file for benefits and start looking for a job."=20 "We had no idea the books were messed up," Prestwood said. "When you're loc= ked in and sit there crying and watching it melt down, something you've dev= oted your whole life to building, it's sad."=20 ---=20 On the Net:=20 Enron: http://www.enron.com AP Photo NY110=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Former Enron employees coping with firm's collapse By MARK BABINECK Associated Press Writer 01/13/2002 Associated Press Newswires Copyright 2002. The Associated Press. All Rights Reserved. HOUSTON (AP) - Losing his retirement investment in Enron Corp. was one thin= g. What really hurt, said Charles Prestwood, was realizing that his unwaver= ing corporate loyalty ran only one direction.=20 "We had great trust, great loyalty," said Prestwood, 63, who retired as a p= lant operator in 2000. "We were trained loyalty above everything. And we we= re loyal. When you have that type of indoctrination for many years, it's go= ing to get in the way of your life eventually." More than a month after Enron shed more than 5,000 worldwide jobs and its s= tock bottomed out, retirees and laid-off workers from all walks of life are= still facing up to the ways the enormous debacle has stung them.=20 Enron employees whose 401(k) accounts were filled with company stock watche= d helplessly as ceaseless bad news obliterated their value last fall, while= a bookkeeping mechanism barred them from cashing out.=20 "I'll never trust my employer quite the same again," said Tim Dalton, a cor= porate security specialist who was among the 4,500 Houston workers laid off= in December.=20 Enron chairman Kenneth Lay "was like the Pied Piper. We followed him like l= emmings into the sea," said Deborah DeFforge, who might have to leave Houst= on for the West Coast to find work.=20 Congressional committees as well as the Justice and Labor departments want = to know why many senior Enron executives and board members sold their stock= when it was still valuable, while workers were barred from selling stock i= n their 401(k) funds.=20 Enron says its stock price, which stood at about $80 a year ago, already wa= s down to $13.88 when a coincidental 10-day freeze on 401(k) transactions w= as implemented because the plan changed administrators. By the time transac= tions could resume, the price was $9.98. When trading on the New York Stock= Exchange concluded Friday, the company's shares were selling for 67 cents = a piece.=20 The peak value of Prestwood's retirement account, about $1.3 million, might= sound lavish. But he had intended to live simply off the dividends, plus S= ocial Security and a small pension, withdrawing money only for things like = "replacing the lawn mower or refrigerator if they break."=20 "What so hurts about the whole deal is that something you devote your whole= life to, you see it destroyed right in front of your eyes," he said from h= is home on a quiet wooded country lot 40 miles north of Houston.=20 Prestwood is one of a number of former Enron workers who have filed lawsuit= s over their 401(k)s.=20 Dalton has funneled some of his energies into a Web site, http://www.thecro= okede.com, where he sells Enron-bashing T-shirts. Some of the proceeds go t= o a fund he's established to help fellow Enron exes.=20 "We told someone we hope to sell some T-shirts for four to five months unti= l it dies down," Dalton said. "`Die down?' they said, `You'll be selling T-= shirts all year as all the dishonesty and crookedness is exposed."'=20 The anger also hasn't diminished for DeFforge, who is a plaintiff in "every= suit I can get my hands on" and doesn't want to rest "until they're behind= bars."=20 "To take that many people and dupe them for that length of time, yeah, we'r= e pretty much all on a crusade," said DeFforge, a specialist in energy serv= ices until she was given 30 minutes to clean out her desk on Dec. 3.=20 While outsiders may scratch their heads as to why so many workers put so mu= ch of their retirement savings into company stock, Mike Black, a 54-year-ol= d systems programmer, cites corporate messages last summer in which executi= ves were saying shares "ought to be selling at $50 or $60" apiece.=20 Syed Ishaq said top executives assured workers the company would survive a = few speed bumps, while never mentioning the curious off-balance sheet finan= cing and crippling debt that were Enron's downfall.=20 "I even bought stock of the company when it was at $5 based on what I was t= old at an all-employee meeting!" Ishaq said in an e-mail. "Then I get laid = off, I only get $4,500, which barely pays for one month of expenses, I imme= diately file for benefits and start looking for a job."=20 "We had no idea the books were messed up," Prestwood said. "When you're loc= ked in and sit there crying and watching it melt down, something you've dev= oted your whole life to building, it's sad."=20 ---=20 On the Net:=20 Enron: http://www.enron.com AP Photo NY110=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 SEC, UK accountancy watchdog ICA in Enron crisis talks - report 01/13/2002 AFX News (c) 2002 by AFP-Extel News Ltd LONDON (AFX) - A crisis meeting of Britain and America's top accountancy wa= tchdogs has been called in the wake of the collapse of American energy grou= p, Enron Corp and this could lead to crackdown on the industry, according t= o the Sunday Times.=20 America's Securities and Exchange Commission (SEC) and the Institute of Cha= rtered Accountants (ICA), Britain's largest accountancy body, will meet in = New York next month, the paper said. Rule changes to be considered at the meeting could cost the big players bil= lions of dollars in fees, it suggested.=20 Andersen audited Enron's books and was also paid millions of dollars in con= sulting fees by the company and last week admitted many Enron documents hel= d by Andersen had been destroyed.=20 The SEC is now investigating.=20 Top of the agenda at the New York summit will be whether the SEC should rev= isit clean up plans laid out by Arthur Levitt, its former chairman.=20 Levitt wanted firms to sell their consultancy businesses, claiming there wa= s a clear conflict of interest if a company was acting as an independent au= ditor while picking up huge fees for consultancy work - as was the case for= Andersen and Enron.=20 Consultancy generates half of the revenue for the 'big five' accountants --= Andersen, Deloitte & Touche, Ernst Young, KPMG and PriceWaterhouseCoopers = -- and, according to SEC figures, for every dollar that accountants got for= audits, they received an average of 2.69 usd for non-audit work, the paper= reported.=20 dlh/lam Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Opinion; Editorial Pages Desk Resist Revenge 01/13/2002 Los Angeles Times Home Edition M-4 Copyright 2002 / The Times Mirror Company The Bush administration faces the possibility of a full-scale scandal in th= e Enron bankruptcy. It can be dealt with quickly or drawn out painfully. Wh= at will decide this is how fast and how thoroughly the administration comes= clean on all of its ties to Enron, and whether Democrats can avoid the tem= ptation to pay back the Republicans for their long campaign against Bill Cl= inton. White House forthrightness and Democratic restraint are the winning = combination here.=20 It is now clear that Bush administration contacts with Enron were not confi= ned to Vice President Dick Cheney's task force; they went deep into the Cab= inet. White House Press Secretary Ari Fleischer and other officials are try= ing to spin their way out by dismissing all questions as partisan politics,= but the only way for the administration to clear itself is to open up its = records, starting with the secretive energy task force. That means minutes of meetings, phone logs, notes, e-mails, everything. Oth= erwise, the White House will feed the perception that it is trying to cover= up involvement in a scandal that led to the collapse of one of the biggest= corporate donors to the Bush campaign--the largest corporate bankruptcy in= the nation's history.=20 Atty. Gen. John Ashcroft, who received $25,000 from Enron CEO Kenneth L. La= y a week before being defeated in the 2000 U.S. Senate race in Missouri, ha= s acted appropriately in recusing himself from the Justice Department's cri= minal investigation. But contacts between Enron and Treasury Secretary Paul= H. O'Neill and Commerce Secretary Don Evans also need to be explored fully= .=20 The Treasury Department added Friday that Enron President Lawrence "Greg" W= halley asked Undersecretary Peter R. Fisher for help in getting banks to ex= tend more credit and that the two men spoke six or eight times in October. = If the administration did have extensive contacts with Enron and knew that = the company was about to collapse, why did it do nothing to protect the emp= loyees who eventually lost their retirement savings, locked up in Enron sto= ck? Exactly how many officials met with or had e-mail communications with E= nron employees? Was the president aware of what his officials were doing?= =20 Until recently, Rep. Henry A. Waxman (D-Los Angeles) was almost alone in de= manding that the administration produce records of its contacts with Enron.= He shrewdly avoided stepping from demands for information to allegations o= f wrongdoing. Now that five congressional committees have issued subpoenas = concerning Enron, other Democrats should find strength to resist the innuen= do and partisanship that marked Republican investigations of the Clinton Wh= ite House.=20 Rumblings are also starting, though not yet on the record, among congressio= nal Republicans who seem as alarmed as Democrats about Enron's ties to the = White House. When Congress reconvenes, perhaps supporters of campaign finan= ce reform will whisper "Enron" in the ears of members who refuse to petitio= n for a vote on the languishing reform bill.=20 Sen. Joseph I. Lieberman (D-Conn.), who heads the Senate Governmental Affai= rs Committee, will need to walk a line between tough questioning and needle= ssly heated rhetoric when he chairs the first hearing Jan. 24. The administ= ration will do itself a favor by cooperating fully. It may well turn out th= at there is nothing to hide. But first the administration has to open its b= ooks on its dealings with Enron. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 BUSINESS Change the system that gave us Enron By Jeff Brown 01/13/2002 The Philadelphia Inquirer CITY-D D01 (c) Copyright 2002, The Philadelphia Inquirer. All Rights Reserved. As one congressional aide put it last week, the Enron debacle is the "perfe= ct storm" - a catastrophic mix of all the worst in business, government and= politics.=20 After the biggest bankruptcy in history, the revelations kept coming last w= eek: The company's auditor, Arthur Andersen, confessed to destroying Enron docum= ents during the very period last fall when it was becoming clear they'd be = needed to explain why Andersen had not raised the alarm over the huge energ= y-trading firm's high-risk practices.=20 The White House acknowledged that Enron Corp.'s chairman, one of President = Bush's biggest political contributors, had contacted two cabinet officials = as the company was collapsing. Enron denied it was seeking favors, but one = of those contacted, Commerce Secretary Donald Evans, said Enron chairman Ke= nneth Lay had indicated he could use government help shoring up the company= 's bond ratings. Ratings reductions are what pushed the firm into its final= downward spiral. Administration officials said they had given no help.=20 The Justice Department launched a criminal investigation while Attorney Gen= eral John Ashcroft said he would not take part because he, too, had receive= d generous Enron contributions during his Senate campaign in Missouri in 20= 00.=20 A string of congressional committees prepared for hearings, while Democrats= positioned themselves to exploit the Enron catastrophe in next fall's camp= aigns.=20 It's far too soon to know all the implications of the Enron story. But what= is known so far is enough to point clearly to the need for change in the w= ay business and politics are conducted in this country.=20 If it wasn't obvious before, the Enron case underscores the need for campai= gn finance reform. President Bush may spend months trying to convince Ameri= cans that Enron hadn't bought access and influence in his administration. T= hat's going to be difficult, given the contacts disclosed last week and ear= lier disclosures that Enron executives had met six times with Vice Presiden= t Cheney during energy policy discussions last year. Enron has long been kn= own as one of the most aggressive lobbyists in Washington.=20 Even without evidence of a quid pro quo between contributor and recipient, = common sense tells you many contributors must believe they will get special= treatment, else they wouldn't spend the money. People who think they've bo= ught protection are more likely to fudge the rules. Hence, the perceived co= rruption in politics encourages corruption in business.=20 While much is still to be learned about the relationship between Enron and = Arthur Andersen, it's already clear the case demonstrates the need for acco= unting reform. Accountants are supposed to be watchdogs for shareholders an= d the public. Too many have become lawyerlike advocates for the corporate e= xecutives who hire them.=20 Part of the problem is the conflict of interest that has developed as accou= nting firms have moved more heavily into corporate consulting. Many are sim= ply afraid to jeopardize lucrative consulting deals by issuing critical aud= its. Washington should tackle this conflict of interest by forcing these fi= rms to divest their consulting operations.=20 Accounting rules also need to be strengthened so that reports to shareholde= rs and regulators accurately portray earnings and risks. For years, Enron w= as able to inflate its profits by concealing debts in a string of "off-bala= nce-sheet" transactions. While some of this may have been done improperly, = current rules do allow companies to hide debts and other obligations. Even = Wall Street analysts were unable to figure out Enron's statements.=20 No one knows how many Enron-type time bombs are ticking at other companies.= But if the accounting rules permit deception, it's sure to take place. And= if the public concludes that corporate financial statements are not to be = trusted, confidence in the stock and bond markets is sure to be undermined.= That's not what we need as we try to recover from a two-year stock market = slump.=20 Finally, it's already clear that 401(k) retirement plans need major reform.= Thousands of Enron employees' retirement accounts were devastated when the= company's share price fell from $90 to less than $1. Company rules had pre= vented most employees from selling Enron shares held in 401(k)s, even thoug= h Enron executives were locking in fortunes by unloading shares as the comp= any's troubles mounted.=20 Bills recently introduced in Congress would limit employees' risk by placin= g a cap on the amount of the employer's stock that could be held in 401(k)s= , or by giving employees the right to sell those shares.=20 While that would be an improvement, it wouldn't resolve the broader problem= - that investment choices in most 401(k) plans are just too limited. Parti= cipants are left with too many eggs in too few baskets, an especially serio= us problem if the boss offers poor investment choices.=20 There's a simple solution: 401(k)s should be changed to work like individua= l retirement accounts, allowing participants unlimited investment choices.= =20 Because Enron was so big - the seventh-largest U.S. corporation at its heig= ht - it's tempting to see this mess as unique. In fact, political influence= peddling, accounting shenanigans, and abuse of employees and shareholders = are widespread. Perhaps the Enron case is big enough to produce some sorely= needed systemic change. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 National/Foreign POLITICS EMERGE IN ENRON FALLOUT Glen Johnson, Globe Staff 01/13/2002 The Boston Globe THIRD A.1 (Copyright 2002) WASHINGTON - It was a curious bit of scheduling in the midst of a president= ial campaign, but George W. Bush broke away from a trip to California on Ap= ril 7, 2000, because of a pressing bit of business back home.=20 The Texas governor had to get to Houston to attend the opening of Enron Fie= ld, a baseball park named after the energy-trading firm headed by his frien= d and biggest individual donor, Kenneth Lay. The $248 million stadium had been built by Halliburton Co., the Dallas oil-= services and construction company that was run by Dick Cheney, whom Bush la= ter picked as his vice presidential running mate.=20 Such connections between Bush and the Houston energy company that last mont= h became the largest US company to file for bankruptcy protection - devasta= ting many of its retirees' pension plans in the process - have given Democr= ats the first whiff of scandal from an administration that has pledged to r= estore honor and integrity to the White House.=20 To date there have been no allegations that anyone in the White House acted= illegally, or that Lay was able to exploit friendships within the administ= ration.=20 But the investigation into how Enron handled its financial problems, and ho= w the administration responded upon learning about them, could provide the = Democrats with grist for the campaign trail as the party seeks to regain co= ntrol of the House and to tighten its tenuous grip on the Senate in the 200= 2 elections.=20 Republicans are especially vulnerable because Enron and Lay gave a majority= of their campaign donations to the GOP, raising the specter of influence p= eddling.=20 "This is the largest alleged stock fraud in American history," said Paul Be= gala, a Democratic political consultant who had been a longtime adviser to = Bill Clinton. "This is not about anybody's personal life, not about anybody= 's private failings. It's about allegations of insider access in a corporat= e rip-off."=20 However, the company also donated to Democrats, prompting some Republicans = to argue that they are inoculated from across-the-aisle criticism. The Demo= cratic connections were highlighted on Friday, when the Treasury Department= disclosed that Robert E. Rubin, the Treasury secretary in the Clinton admi= nistration and now chairman of the executive committee of Citigroup, called= a top Treasury Department official last November to discuss help for Enron= .=20 Moreover, Democrats risk a backlash if their investigation is perceived as = payback for the GOP's Whitewater inquiry during the Clinton administration.= =20 Bush has been riding a popularity crest following his response to the Sept.= 11 attacks.=20 "I think there's a great danger for Democrats if they seem opportunistic ab= out trying to create a political scandal out of a business scandal," said S= tuart Stevens, a Republican media consultant who was one of Bush's top advi= sers, and who has worked on campaigns with William F. Weld, the former Mass= achusetts governor.=20 "I don't think, just because Chuck Schumer received contributions from Enro= n, he did anything wrong," Stevens said of the Democratic senator from New = York. "And this is a case where there's every reason to believe the Bush ad= ministration has handled itself exactly the way the public would want an ad= ministration to act."=20 The comment hinted at the balancing act both parties face as Enron moves fr= om the name of an energy company to a synonym for corporate failure - and p= erhaps much more.=20 At least eight government investigations are under way.=20 What is not in dispute is that Lay and Enron were deep-pocketed political d= onors. In the 2000 election cycle, the company gave money to 71 current sen= ators and 188 current members of the House. It donated $1.77 million to Rep= ublicans and $681,000 to Democrats, according to the Center for Responsive = Politics, a campaign-finance watchdog group. Through his political career, = Bush has received about $650,000 from Lay.=20 What is also not in dispute is that Enron suffered a spectacular decline. W= hen Bush was inaugurated as president last year, Enron's stock was trading = at around $80 per share. When he marks his first anniversary a week from to= day, the share price will be less than $1.=20 In between, the company announced on Oct. 16 that it was posting a third-qu= arter loss of $618 million. As the stock price began to spiral downward, En= ron blocked its employees from selling Enron shares from their 401(k) accou= nts, ostensibly because the company was changing administrators for the pen= sion plan. In the meantime, however, 29 senior executives cashed in more th= an $1 billion of stock. On Dec. 2, the company filed for bankruptcy protect= ion, as thousands of employees said they had lost their life's savings.=20 Prosecutors are believed to be looking at how Enron used complex partnershi= ps to keep about $500 million in debt off its books. The administration and= Congress agree that it is proper to investigate whether any laws were brok= en during the collapse. Bush himself has called for an inquiry into the rul= es restricting employee stock sales. He has also established a committee to= determine how to protect pension plans from similar corporate failures.=20 The fuel for a political debate centers on contacts between Lay and Bush ad= ministration officials, as Enron's worth plummeted.=20 Lay was one of 474 people to serve on Bush's presidential transition team l= ast year. He also was a member of a panel advising the administration on it= s energy policy.=20 Vice President Dick Cheney, who headed the panel, has refused to give names= of committee members, or dates of their meetings. But last week, the admin= istration said that Lay and Enron officials met with Cheney and his staff s= ix times last year; the most recent meeting was six days before the third-q= uarter loss was reported.=20 On Thursday, the White House said that three times shortly before the bankr= uptcy filing Lay phoned Treasury Secretary Paul H. O'Neill and Commerce Sec= retary Don Evans. In those calls, Lay warned the officials of his company's= financial problems.=20 Evans says he was asked if there was anything he could do as Enron faced a = downgrading of its debt. In the conversation with O'Neill, Lay suggested th= e possibility of a federally arranged bailout with private money, the White= House said.=20 Then, on Friday, the administration said that a top Treasury Department off= icial was contacted separately by Enron's president and Rubin, the former s= ecretary, and that they discussed the possibility of a credit extension for= Enron.=20 In all these instances, the administration officials said they did not take= action. Evans and O'Neill have said they determined that the fallout from = Enron's problems was not wide enough to warrant special help from the gover= nment.=20 O'Neill also said that as overseer of the capital markets, he hears from ma= jor companies every day. "I was not surprised at all that I would get a cal= l saying, `Hey, we've got a problem over here and you should know about it,= ' " O'Neill said Thursday on CNN.=20 But it is the lack of action that bothers one Democrat.=20 "It is now clear the White House had knowledge that Enron was likely to col= lapse, but did nothing to try to protect innocent employees and shareholder= s who ultimately lost their life savings," said Representative Henry A. Wax= man of California, the top Democrat on the House Government Reform Committe= e.=20 A Republican National Committee spokeswoman, Mindy Tucker, noted that Lay h= ad ties to the Clinton administration - he slept at the White House and pla= yed golf with the president once - and significant links to the Democrats w= ho are now trying to sit in judgment.=20 "If people are going to grouse about contributions, everybody is in trouble= . Joe Lieberman took contributions from them and he's holding hearings. Joh= n Ashcroft took donations and he's recusing himself," Tucker said of Lieber= man, the Connecticut senator, and Ashcroft, the attorney general.=20 Begala, who answered questions about a stream of political and sexual scand= als while advising former President Clinton, said the Bush administration w= ould be wise to release all information about its dealings with Lay and Enr= on, and to return the focus to the company's operations - and not its deali= ng with the White House.=20 "I have a Ph.D. in scandal management," Begala said. "These are hard and pa= inful lessons, but I would offer my friends - and many are my friends - the= tip to just put it out there and stop pretending this is a not a scandal."= =20 Glen Johnson can be reached by e-mail at johnson@globe.com=20 SIDEBAR: A PRECIPITOUS COLLAPSE PLEASE REFER TO MICROFILM FOR CHART DATA. Caption: Enron's corporate headquarters building in Houston. / AFP PHOTO=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 National/Foreign CEO'S LONG PATH FROM FARM TO RIG Robert Schlesinger, Globe Staff 01/13/2002 The Boston Globe THIRD A.14 (Copyright 2002) WASHINGTON - Kenneth Lay came from humble roots that, his friends and assoc= iates say, he never forgot. He became one of the premier community philanth= ropists and political donors in the country.=20 He also built and presided over a company whose failure, amid allegations o= f financial improprieties, has ruined the retirement prospects of thousands= of its employees. The portrait of Kenneth Lay, who will turn 60 this year, is disjointed: The= re is both a folksy man of the people and a tough corporate operator, a man= whose contradictions have been brought into view as his economic and polit= ical power has disintegrated into economic and political scandal.=20 "For a lot of us it's causing a conundrum that we're in, because it's kind = of hard to put all these pieces together," said Bob Eury, president of Cent= ral Houston Inc., a nonprofit civic group, and a friend of Lay's for 15 yea= rs. "At this point everybody's kind of like, it's very hard to understand a= ll this stuff."=20 Kenneth Lee Lay was a minister's son, born to Omer and Ruth E. Rees Lay, on= a Missouri farm. The family lived in tiny Rush Hill, a wisp of a community= outside Columbia, close enough that the three Lay children could live at h= ome when they attended the University of Missouri.=20 "I spent a lot of time on a tractor and had a lot of time to think," Lay to= ld the Houston Chronicle in 1991. "I must confess I was enamored with busin= ess and industry. It was so different from the world in which I was living.= "=20 Nevertheless, he thought his path might take him into the law, until he too= k his first economics class at the University of Missouri.=20 "It was something that clicked with me," Lay told the Portland Oregonian in= 1997. "I just found the power and effectiveness of the market system to be= incredible, which I pretty much believed anyway."=20 After finishing his undergraduate work in 1964, Lay moved among private-sec= tor, government and academic work, making stops at the Department of the In= terior (as deputy secretary for energy, from 1972 to 1974), the University = of Houston (as a doctoral candidate; degree awarded in 1970), and Humble Oi= l, later known as Exxon (from 1965 to 1968).=20 In 1985, Lay helped two struggling natural gas pipeline companies combine, = and quickly emerged as the chief of the new company: Enron.=20 Over the years, Lay moved to orient Enron away from the staid business of n= atural gas pipelines to the riskier - and more profitable - world of energy= markets. These were markets, through lobbying and crusading, that Lay help= ed to create.=20 Lay also quickly made himself, and Enron, central figures in the Houston co= mmunity. As the company grew, he pointed out that a company of its scope co= uld have picked headquarters anywhere, and that Houston was a conscious cho= ice.=20 "He was the go-to man for Houston, the individual in the corporate communit= y who would get it done, the corporation in the corporate community who wou= ld take the lead on those major issues," said Jim Kollaer, president and ch= ief executive officer of the Greater Houston Partnership.=20 Lay's friends pointed to Enron's philanthropy and the lead role Lay took in= the creation of Enron Field, the home of baseball's Houston Astros, as exa= mples of his leadership.=20 But Lay's generosity was not limited to community causes: He became one of = the state's and nation's most prolific donors and political activists. Whil= e a Republican by instinct, Lay and Enron gave money to both parties, not l= east because Texas was dominated by Democrats until the early 1990s.=20 Lay drew close to the Bush family, supporting the father's two presidential= runs and helping the son's gubernatorial and presidential campaigns.=20 Lay served as one of George W. Bush's "pioneers," a group of fund- raisers = who promised to each raise $100,000 for the presidential effort. Lay and En= ron were among the biggest donors to Bush's presidential campaign.=20 His connections were clear: When Governor Bush addressed Texas's antipollut= ion laws, Enron was one of a few energy-producing companies invited to help= redraft the law.=20 When Enron Field opened in 2000, Lay celebrated with Governor Bush and his = father, the former president, in the owner's box.=20 Lay's early years in Washington had given him an understanding of the impor= tance of establishment connections. He moved with relative ease between the= parties, whether staying overnight in the White House of former President = Bush or playing golf with President Bill Clinton in 1993.=20 But in the end, his connections failed him: As his company careened toward = bankruptcy, he reached out to some of those contacts, apparently to no avai= l.=20 Enron's collapse has triggered a curious round of Washington confessions as= various administration officials have stepped forward to disclose their co= ntacts with the corporation and the CEO.=20 At the same time, Karl Rove, Bush's top political operative, played down th= e relationship between the two.=20 "The president knows him. He is a friend. But the idea that he is a friend = in the sense that this is a guy who's a close intimate is just ridiculous,"= the Associated Press quoted Rove as saying on Friday.=20 Robert Schlesinger can be reached by e-mail at schlesinger@globe.com Caption: KENNETH LAY "Enamored with business"=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Top Bush official savaged over Enron capitalism-as-usual comment by Charles= Whelan [Corrected 01/13/02] 01/13/2002 Agence France-Presse (Copyright 2002) CORRECTION: ATTENTION - ADDS details WASHINGTON, Jan 13 (AFP) - US Treasury Secretary Paul O'Neill was savaged b= y leading members of Congress on Sunday for describing the biggest corporat= e collapse in US history as "part of the genius of capitalism."=20 O'Neill and Commerce Secretary Donald Evans, appearing on the Sunday talk s= hows, distanced the Bush administration from the collapse of the company, w= hich left thousands of workers holding worthless pension fund securities wh= ile top executives reportedly cashed out for hefty profits. O'Neill, speaking on "Fox News Sunday," said the president knew nothing of = appeals for help from the company prior to its collapse, which he described= as a textbook illustration of capitalism at work.=20 "Companies come and go," said O'Neill. "It's -- part of the genius of capit= alism is, people get to make good decisions or bad decisions, and they get = to pay the consequence or to enjoy the fruits of their decisions. That's th= e way the system works."=20 The Justice Department has launched a criminal investigation and members of= Congress have announced a series of probes into the affair.=20 Speaking on the CBS show "Face the Nation," Senator Joseph Lieberman, a for= mer Democratic vice-presidential candidate, described O'Neill's comments as= "outrageous."=20 "Those are statements that might have been made by the secretary of the tre= asury in the 18th century, but not in the 21st century."=20 "The death that Enron experienced was not a natural death. We know enough t= o know that now," he added. "This was not capitalism as we want it to be."= =20 While Enron sped toward a corporate train wreck and executives pulled some = one billion dollars out of the firm, chairman Kenneth Lay was telling worke= rs that prospects for the energy giant had never looked better, according t= o information released by congressional investigators to US media.=20 Republican Senator John McCain, also speaking on CBS, said the collapse of = Enron was "tainted" by the firm's massive contributions to politicians.=20 McCain and Lieberman said they agreed with a federal judge in Houston, Texa= s, who was considering freezing the assets of top company executives, so th= at ordinary shareholders could be compensated if the case went to the court= s.=20 O'Neill and Evans both said they had received phone calls from Lay, a big f= inancial supporter of Bush, prior to the company's collapse, but said that = no demand from the company for help had been passed on to Bush.=20 "I didn't think this was worthy of me running across the street (to the Whi= te House) to tell the president," he said.=20 For over a decade Enron has been a major contributor to US politicians both= Democrat and Republican, and among those benefitting most was Bush, who re= ceived 623,000 dollars from Enron since launching his political career in 1= 993, according to news reports in Washington.=20 But Evans, speaking on NBC's "Meet the Press" talk show, said there was no = payback.=20 He also rejected criticism from Henry Waxman, the senior Democrat of the Ho= use Committee on Government Reform, who said the White House could have int= ervened to prevent tens of thousands of ordinary people from losing their s= avings.=20 "If I had stepped in I think it would have been an egregious abuse of the o= ffice of secretary of commerce of the United States of America," he said.= =20 Enron hid its losses and overstated its profits prior to the collapse while= the firm's auditor, Arthur Andersen LLP, has admitted shredding documents = related to its audit of the firm.=20 Lieberman, who is leading one of the congressional investigations, said the= fallout from the scandal could destroy the internationally acclaimed accou= nting firm.=20 cw/mk Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 BUSINESS Firms offering severance, but only if workers agree not to file unemploymen= t / A matter of compensation L.M. SIXEL Staff 01/13/2002 Houston Chronicle 2 STAR 1 (Copyright 2002 Houston Chronicle) MOST of us figure that state unemployment insurance is a safety net. If we = get laid off, we can always rely on up to $319 a week we can collect in une= mployment benefits from the Texas Workforce Commission.=20 But you can't be so sure these days. If you're receiving severance payments from your old employer, take a close= look. You may have waived your rights to unemployment benefits without rea= lizing it.=20 Four former employees from Mitchell Energy & Development Corp. found out th= e hard way. They not only lost their unemployment benefits, but they also w= ere hit with a $41,479 judgment after Mitchell Energy successfully argued i= n federal court that they relinquished their rights when they accepted an e= arly retirement package.=20 In an attempt to reduce their state unemployment insurance tax, some employ= ers like Mitchell are forcing their employees to make a choice: Either take= a company-sponsored buyout package or state unemployment compensation - bu= t not both.=20 The lure is attractive to employers because companies pay unemployment taxe= s based on the number of ex-employees who receive benefits. The fewer filin= gs for unemployment benefits, the lower an employer's tax. The amount of we= ekly benefits received by former employees is based on salary levels.=20 While it's unclear how many companies have adopted this practice, several e= mployment law experts believe it will become far more common now that a fed= eral judge has ruled they can do it.=20 And it is a significant expense. Employers can pay as much as 6.54 percent = of the first $9,000 in wages per employee, or $588.60 each year, when they = have a lot of claims filed against them.=20 Employment taxes may be costly. But there's a problem when employers force = employees to waive their rights to unemployment benefits: Texas law prohibi= ts it. In fact, the penalty is a six- month jail term for an employer who e= ven accepts a waiver.=20 Mitchell Energy, however, argued that such waivers do not break the law bec= ause its early retirement plan is covered under the federal Employee Retire= ment Income and Security Act and therefore supercedes state law.=20 Under ERISA, companies that provide benefits such as health insurance and p= ensions have a wide berth in structuring their plans, giving them freedom t= o override related state regulations.=20 Until now, no one questioned whether ERISA would pre-empt state law concern= ing unemployment compensation.=20 In mid-November, U.S. District Judge David Hittner ruled that because Mitch= ell's early retirement plan doesn't allow employees to file claims against = the company, they're not entitled to unemployment benefits. Hittner's rulin= g, according to W. Fulton Broemer, the attorney representing the four Mitch= ell workers, is the first time a federal judge in the United States has rul= ed ERISA overrides a state law that carries criminal penalties.=20 It's like saying that if a severance plan that's covered under ERISA requir= es you to kill a mockingbird before you can get your money, you must kill t= he bird, even though it's against state law in Texas, Broemer said.=20 Hittner also ruled that the waiver the employees signed to receive their ea= rly retirement benefits - which said they wouldn't file any claims against = Mitchell Energy, but did not specifically mention unemployment benefits - w= as not vague and was fully enforceable.=20 A spokesman for Mitchell Energy said the company did not want to comment on= the case.=20 ...=20 Legislation planned=20 Concern over the Mitchell case has U.S. Rep. Gene Green, D- Houston, vowing= to introduce legislation that would prevent employers from using ERISA as = a shield against unemployment taxes.=20 Unemployment insurance was designed as a bridge, he said.=20 "It's not like someone is getting rich on it," said Green. "They're just tr= ying to keep their homes and insurance."=20 The Mitchell case has unnerved many ex-Enron employees who also agreed not = to apply for unemployment benefits in exchange for hefty severance checks. = Enron's severance agreement specifically states that if an ex-employee file= s for unemployment benefits, severance benefits will stop.=20 Johnnie Williams knew that when she agreed to forfeit unemployment benefits= in exchange for about $52,400 in severance when she lost her job in mid-No= vember. But that was before Enron filed for bankruptcy. Now Williams is sta= nding in line with thousands of other creditors questioning whether they'll= get paid.=20 And like those thousands of other ex-Enron employees, Williams has bills to= pay. Those unemployment checks would come in handy.=20 Enron spokeswoman Karen Denne said Enron officials decided they didn't want= employees to collect both unemployment insurance and severance.=20 It's not illegal to put that condition into the severance plan, she said.= =20 Denne said Enron's internal rule doesn't affect the employees who lost thei= r jobs after the bankruptcy filing and received $4,500 in severance pay, wh= ich isn't subject to ERISA rules. They can apply for unemployment benefits,= she said.=20 ...=20 Clash at Mitchell Energy=20 As for the Mitchell Energy case, it all started in December 1998 when emplo= yees were told they would lose their jobs if they didn't agree to take a vo= luntary early retirement package, according to court documents.=20 The employees, who worked for Mitchell in Mineral Wells, agreed to take the= package and were told by representatives of the Texas Workforce Commission= that they could file for unemployment insurance for the 90-day period befo= re their retirement benefits kicked in. The commission representatives had = been asked by Mitchell Energy to speak to the employees who worked in the t= own of 14,000 west of Fort Worth.=20 The employees filed for unemployment benefits and initially began receiving= checks. But when Mitchell Energy found out, company officials reminded the= employees that they had agreed not to file any claims against the company.= =20 All but four of the employees dropped their claims for unemployment benefit= s. Mitchell Energy sued the four for damages.=20 Initially, the Texas Workforce Commission sided with the employees, saying = that they were entitled to unemployment benefits. But after Mitchell appeal= ed, the commission reversed itself. In a 2- to-1 vote, commissioners sided = with Mitchell, agreeing the four employees left the company voluntarily.=20 ...=20 Dissenting voice=20 In his dissent, T.P. O'Mahoney, the commissioner appointed to represent wor= kers, said he believed the employees were clearly facing a layoff.=20 "The employer's refusal to tell the employees when the work was ending or m= ake it clear which particular positions were targeted for layoff appears to= have been nothing more than an attempt to leave the employees in the dark = and prevent the receipt of unemployment benefits," O'Mahoney wrote.=20 The four employees sued the Texas Workforce Commission over its decision in= state district court in Austin. That case is pending.=20 Meanwhile, Judge Hittner ruled that the four employees - Vada L. Fain, Lest= er G. Trollinger, John F. Wilkins and Greer H. Yoes - violated their agreem= ent not to file any claims against Mitchell and must pay $41,479 in attorne= y fees and other expenses to Mitchell to litigate the case.=20 But when an employee files for unemployment benefits, it's not a claim agai= nst a company, argued Rick McHugh, staff attorney with the New York City-ba= sed National Employment Law Project, a public policy group that examines wo= rkplace issues.=20 Unemployment benefits are a statutory benefit given by the Legislature, McH= ugh said.=20 "It's not a matter for employers to bargain about," said McHugh, who works = in Ann Arbor, Mich.=20 Using that logic, McHugh asked, would the Texas Workforce Commission pay un= employment benefits to striking employees if an employer agreed to those pa= yments in an ERISA severance plan? Under current law, strikers aren't eligi= ble for unemployment benefits.=20 While McHugh said he doubts the Texas Workforce Commission would adhere to = such an ERISA plan, it's hard to know for sure.=20 Texas Workforce Commission spokesman Larry Jones said his agency isn't awar= e of the Mitchell Energy case in federal court and can't comment. And since= the four employees have sued the commission, Jones said it isn't appropria= te to comment.=20 And there's another issue, McHugh said. How can ERISA supersede state unemp= loyment laws when state unemployment compensation was created by federal la= w in the first place? The federal unemployment system was created by the So= cial Security Act and the Federal Unemployment Tax Act.=20 ...=20 A precedent?=20 McHugh is worried about the precedent the Mitchell case may set for other s= tates that have laws similar to Texas prohibiting employee waivers.=20 If the Mitchell case gets upheld on appeal, McHugh worries there'd be nothi= ng to stop employers from doing the same thing with other benefit plans, su= ch as workers' compensation, said McHugh. An employer could easily offer ea= rly retirement or severance to an injured worker in exchange for dropping a= workers' compensation claim.=20 Broemer has appealed Hittner's ruling to the U.S. 5th Circuit Court of Appe= als in New Orleans. McHugh said his group would like to pitch in and help w= ith the appeal.=20 Joe Ahmad, a Houston employment lawyer with Ahmad, Zavitsanos & Anaipakos, = doesn't think the ERISA pre-emption argument will hold up.=20 The courts, including the U.S. Supreme Court and the 5th Circuit, have been= showing a bias against ERISA pre-emption in other issues. Instead, they've= been focusing more and more on states' rights.=20 But Tony Rosenstein, an employment lawyer at Baker & Botts, believes Hittne= r was right on target.=20 There was clearly an ERISA pre-emption, said Rosenstein. And the unemployme= nt statute isn't like embezzlement or bank robbery, which are part of state= criminal law.=20 Meanwhile, Rep. Green has directed his staff to look into the case, and if = the appeal of the four ex-Mitchell employees fails, he plans to introduce l= egislation to prohibit an ERISA pre-emption on unemployment benefits.=20 This kind of pre-emption was never intended by Congress, Green said, especi= ally since unemployment insurance was created by federal law.=20 ...=20 Push for action in Texas=20 The issue needs to come up in the next session of the Texas Legislature, sa= id Richard Shaw, secretary-treasurer of the AFL-CIO, who has vowed to lead = the fight.=20 It's an "atrocity" that the Texas Workforce Commission allows employers to = get out of paying benefits even though the Legislature said employees who l= ose their jobs are clearly entitled to them, Shaw said.=20 Texas already disqualifies many more employees than other states, so many o= ut-of-work Texans don't receive unemployment benefits, said Rick Levy, lega= l director for the Texas AFL-CIO.=20 Levy said that's because the Texas Workforce Commission has a broader defin= ition of misconduct than most states and it doesn't count the last quarter = of wages when computing eligibility.=20 Meanwhile, Williams decided to file for unemployment benefits while she wai= ts for the bankruptcy court to act. Photo: Johnnie Williams agreed to forgo state unemployment benefits in retu= rn for a $52,400 severance package from Enron Corp. But when the energy gia= nt declared bankruptcy, Williams was left with nothing and wonders if she w= ill ever get paid (color)=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 News Enron `players' worked D.C. ties Stephen J Hedges, Jeff Zeleny and Frank James, Washington Bureau 01/13/2002 Chicago Tribune Chicagoland Final ; C 1 (Copyright 2002 by the Chicago Tribune) When a newly minted President Bush strode into the White House nearly a yea= r ago, the influence and interests of Kenneth Lay, and his massive Enron en= ergy trading company, were only a few steps behind.=20 Lay, an old Bush family acquaintance and the chairman of Houston- based Enr= on, was already a member of the new president's transition team on energy i= ssues. Within a few months, he consulted with White House personnel directo= r Clay Johnson on possible presidential appointees to the Federal Energy Re= gulatory Commission, which oversees some of Enron's markets. Bush made an E= nron vice chairman secretary of the Army. Vice President Dick Cheney's ener= gy task force turned to Lay for his expertise six times. The repetitive presence of Lay and his energy monolith during the opening y= ear of Bush's presidency is extraordinary for its frequency and for its sor= ry conclusion.=20 When Enron's wobbly house of trading cards began to tumble in late October,= Lay and his assistants did not hesitate to make hot-line- style calls to B= ush's treasury and commerce secretaries to drop their bombshell about the c= ompany's precarious state and to hint at a government-led bailout, which ne= ver happened.=20 Bush, former governor of Texas, has said he never discussed the company's t= roubles with Lay, whom he has known for years. Other White House aides dism= issed any suggestion that the administration took steps to save Enron from = its impending collapse and the bankruptcy proceeding that followed.=20 But while Democrats were quick to point out the chummy Bush-Lay relationshi= p of days gone by, they have lately taken a more cautious tone.=20 "There's smoke here, but there's no proof of fire," said Sen. Joseph Lieber= man (D-Conn.), chairman of the Senate Governmental Affairs Committee, which= will examine Enron's collapse at a Jan. 24 hearing.=20 Another Democratic lawmaker, Rep. Henry Waxman of California, on Saturday r= eleased copies of two e-mail messages Lay sent employees in August. In one,= the Enron chairman said: "Our performance has never been stronger; our bus= iness model has never been more robust." In the other, he detailed an emplo= yee stock option program that spoke of "a significantly higher price" for E= nron stock in the future.=20 "It appears that you misled your employees into believing that Enron was pr= ospering," Waxman, the ranking Democrat on the House Government Reform Comm= ittee, said in a letter to Lay that the lawmaker also made public.=20 Mark Palmer, an Enron spokesman, said Saturday that "Ken Lay was telling th= e truth" in August. He added that only later did the company's financial pr= oblems become clear.=20 As for Bush-Lay chumminess, Lieberman's tone is as practical as it is diplo= matic. The fact is, Lay and Enron were working Washington long before Georg= e W. Bush came to town, and there was plenty of money and influence being s= pread around both political parties.=20 "One mistake is to think that this all started with the Bush administration= ," said Chuck Lewis, executive director of the Center for Public Integrity,= a Washington watchdog group. "They extracted favors from the Clinton admin= istration and from Congress prior to Bush arriving. These guys are players.= "=20 Clinton connection=20 Lay was no stranger to the Clinton White House, playing golf with the presi= dent and staying overnight in the Lincoln Bedroom. Enron hired away Linda R= obertson, a senior Treasury official in the Clinton administration, to head= the firm's Washington office.=20 Enron made a $100,000 contribution in 1997 to the Democratic National Commi= ttee just days before its representatives accompanied Commerce Secretary Mi= ckey Kantor on a trade mission to the former Yugoslavia, where Enron hoped = to win a large contract.=20 Lay contributed $11,000 to former President Bill Clinton during his two cam= paigns; Vice President Al Gore got $13,750 from Enron in the 2000 election.= During Clinton's eight years in office, the company and Lay contributed ab= out $900,000 to the Democratic Party.=20 That sort of generosity was well-known in fundraising circles in Washington= and across the country. In the past 10 years, Enron contributed $5.8 milli= on to political candidates of all stripes, from former New York Mayor Rudol= ph Giuliani to Clinton to House Speaker Dennis Hastert (R-Ill.).=20 "The name of the game for both Democrats and Republicans is raise as much d= amn money as possible with no holds barred," said Leon Panetta, Clinton's f= ormer chief of staff. "And so both sides are going after huge contributors = that will give largely soft money contributions that are unlimited.=20 "That just means it's an open invitation to companies that want to exert in= fluence to play that game. And until there are some limits that are placed = on soft money campaign contributions, what you see happening with Enron is = going to continue to happen in the future."=20 But no candidate benefited more from Enron than President Bush. First as a = candidate for governor of Texas and later as a presidential contender, Bush= has received $623,000 from Enron since launching his political career in 1= 993.=20 The Center for Responsive Politics, a non-partisan group that tracks money = and politics, said 73 percent of Enron's contributions in the last decade h= ave gone to Republicans and 27 percent to Democrats.=20 "It definitely buys access," said Larry Noble, executive director of the gr= oup and former counsel of the Federal Election Commission. "It gets their p= hone calls returned. When you make that many contributions and Kenneth Lay = is a friend of President Bush's, you have to ask very serious questions abo= ut what that access bought."=20 Enron officials contributed $10,500 to the Bush campaign for legal expenses= in the Florida recount. When Bush became president, they donated $300,000 = for the inaugural celebration.=20 Contributions to lawmakers=20 Though in far smaller amounts, political contributions were given to the ma= jority of congressional lawmakers.=20 Nearly half of the representatives in the House and three-fourths of the se= nators received money from Enron executives, according to campaign finance = reports filed in Washington. Texas lawmakers received the most, with Republ= ican Sen. Kay Bailey Hutchison topping the list with $99,000 in contributio= ns since 1989.=20 Atty. Gen. John Ashcroft received about $25,000 in Enron contributions duri= ng his unsuccessful Senate re-election campaign in Missouri. Ashcroft last = week recused himself from an Enron criminal investigation launched by a Jus= tice Department task force. The department later disclosed that Ashcroft, w= hile serving as attorney general, was invited by Lay to speak to a group of= chief executive officers about law-enforcement issues.=20 Sen. Charles Schumer (D-N.Y.) received $21,933 in contributions during the = same period. He sits on the Senate energy committee. Senate Majority Leader= Tom Daschle (D-S.D.) received $6,000.=20 The Enron governmental affairs office in Washington has nearly a dozen empl= oyees, in addition to contract lobbyists. Telephone calls to that office we= re not returned late last week.=20 But money was only part of the game. Lay and Enron are clearly more comfort= able with the Republicans who are now in office, and, until early December,= those officials appeared content with Enron.=20 Wendy Gramm, who headed the Commodity Futures Trading Commission under form= er President George Bush, is a good example. Not only did she once head the= agency that regulated some of Enron's trading activities, but she was marr= ied to Sen. Phil Gramm (R-Texas), a member of the Senate Banking Committee.= =20 While at the agency, Wendy Gramm shepherded a commission ruling that exempt= ed a significant amount of Enron's energy trading from federal oversight. S= everal weeks later, she left government and was elected to Enron's board.= =20 In December 2000, with his wife still on Enron's board, Sen. Gramm sponsore= d the Commodity Futures Modernization Act, which made the exemption law. A = Gramm spokesman said the senator did not work on that part of the legislati= on.=20 As an Enron board member, Wendy Gramm sold $277,000 worth of Enron stock in= 1998, according to the Center for Public Integrity.=20 Senior Bush adviser Karl Rove also held Enron stock worth $100,000 to $250,= 000, but he was required to sell it under government ethics rules.=20 In at least one high-profile instance, an Enron official joined the federal= government. Bush's secretary of the Army, Thomas White, had been vice chai= rman of Enron Energy Services. Bush's nomination of the former brigadier ge= neral had raised congressional concerns because White had headed Enron's ef= forts to win federal contracts to run the utilities on military bases.=20 Sen. John McCain (R-Ariz.), among others, asked White to recuse himself fro= m the contract-letting process, to which White agreed, though he still favo= rs the trend toward privatizing such services. White sold about $50 million= in Enron shares before the price of the company's stock plummeted.=20 Slew of investigations=20 Three congressional panels, the Justice Department, the General Accounting = Office, the Department of Labor, and the Securities and Exchange Commission= have opened inquiries into Enron's failure and the firm's activities befor= e its bankruptcy filing. Though the first Senate hearing is less than two w= eeks away, it will take months, if not several years, to sort through the w= eb of commodities trading schemes and off-the-books deals that regulators a= nd congressional leaders say brought on Enron's collapse.=20 A thorough investigation of Enron's market influence likely will reveal a g= ood bit of the dealmaking that occurred not on trading floors, but in Washi= ngton offices.=20 "There are so many tentacles to Enron, and so many different elements that = it could have impacted, that it may take some time to dig out and discover,= " said Lewis of the Center for Public Integrity. "When they go back and loo= k at . . . the actual influence over personalities and policies that played= out over the last two months, that's when we're going to see exactly what = Enron got, and what they didn't get." PHOTOS 6 GRAPHICS 2; Caption: PHOTO (color): (George W. Bush.) Reuters phot= o. PHOTO (color): George W. Bush. AP photo. PHOTO (color): Dick Cheney. PHO= TO (color): John Ashcroft. PHOTO (color): Don Evans. PHOTO (color): Paul O'= Neill. GRAPHIC (color): Enron's connections to the Bush administration Sour= ce: Associated Press. Chicago Tribune - See microfilm for complete graphic.= GRAPHIC (color): Enron's political contributions Sources: opensecrets.org,= Federal Election Commission. Chicago Tribune - See microfilm for complete = graphic.=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Editorial Enron's oily aftermath 01/13/2002 Chicago Tribune Chicagoland Final ; C 18 (Copyright 2002 by the Chicago Tribune) Enron's corpse is providing evidence of a major financial scandal that will= take years to unravel. It took only moments, though, for official Washingt= on to sniff out the potential for a political scandal.=20 The comparisons to Watergate and Whitewater already are flying: What did Pr= esident Bush know, and when did he know it? The answers from the administration are: nothing and never.=20 The White House has revealed that the chairman of Enron, Kenneth Lay, calle= d two Cabinet members late last year, apparently seeking government help wi= th the failing company's desperate situation. The administration says that = no offer of help was given, and that President Bush learned of the calls on= ly last Thursday.=20 If that's the case, it speaks well of the Bush administration. Lay has been= a major contributor to Bush's state and federal campaigns. To hear the adm= inistration tell it, the big-bucks donor got turned away at the door.=20 That, of course, won't stop the press and members of Congress from sniffing= around this, to see if there's more to the story. And well they should. Th= at's not a slap at Bush's integrity. It's a comment on the fact that in U.S= . politics, firm denials have a funny history of going soft when exposed to= scrutiny.=20 With the facts at hand this is, for now, a financial scandal, not a politic= al scandal. It involves the stunning collapse of the nation's 7th largest c= ompany, possible criminal fraud, destroyed documents, and executives cashin= g in company stock at big profits while the retirement portfolios of Enron = workers were wiped out.=20 The Justice Department is probing possible crimes leading up to Enron's Dec= . 2 bankruptcy filing. The Securities and Exchange Commission and Labor Dep= artment are investigating, as are numerous congressional committees. A floo= d of shareholder litigation has begun.=20 Last week's stunning revelations provided more fodder for the investigators= :=20 - Lay called Treasury Secretary Paul O'Neill and Commerce Secretary Donald = Evans last fall, as Enron was collapsing. Some reports indicate that Lay, a= nd Enron President Lawrence Whalley, in a series of phone calls to Treasury= officials, sought assistance to stave off bankruptcy. Lay also called Fede= ral Reserve Board Chairman Alan Greenspan to alert him the company was in a= free fall that could impact financial and energy markets.=20 - Atty. Gen. John Ashcroft, who also received campaign contributions from E= nron and Lay, has recused himself from any involvement in the investigation= . Ashcroft's chief of staff and the entire U.S. Attorney's staff in Houston= have also recused themselves because of potential conflicts.=20 - Arthur Andersen revealed that its employees had destroyed a "significant = but undetermined number" of Enron documents. Employees apparently began del= eting and shredding in September, before the full extent of Enron's trouble= s became known, and may have continued even after the SEC began investigati= ng.=20 - Vice President Dick Cheney or his aides met with Enron executives half a = dozen times last year when the administration was developing an energy poli= cy.=20 None of this indicates the administration improperly intervened as Enron he= aded for bankruptcy. But precisely because the ties that bind this company = to this administration are so strong, the Bush government must be honest an= d forthcoming. It is essential that these criminal and civil investigations= be thorough, conducted fairly and free from any political influence.=20 Scandals at accounting houses just don't have as much sizzle as scandals at= the White House. But that's where this one is focused, and it may well lea= d to welcome changes that have nothing to do with politics and everything t= o do with the integrity of the information that investors rely on when judg= ing a company's stock.=20 The true state of Enron's finances were hidden from its investors because t= he company and its auditors permitted a series of senior level partnerships= that kept hundreds of millions in debt off the books. When the extent of t= hat deception became clear, Enron's downfall was assured.=20 Did Enron criminally misrepresent its condition by hiding the full extent o= f these partnerships? Was Arthur Andersen compromised because it received n= early as much last year from Enron for consulting services ($23 million) as= it did in accounting fees ($25 million)?=20 The questions of politics will sort themselves out. The most pressing conce= rn is that thousands of people lost their retirement savings --and may have= been victims of a crime. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Foreign News Clinton link with Enron lowers the heat on Bush Rupert Cornwell in Washington 01/13/2002 The Independent - London FINAL 21 (Copyright 2002 Independent Newspapers (UK) Limited) The Democrats were dragged into the growing Enron scandal yesterday as it e= merged that Robert Rubin, Bill Clinton's Treasury Secretary, contacted a to= p official at his old department to find out if the Bush administration cou= ld step in to help the energy group.=20 Mr Rubin made his call last November to Peter Fisher, head of the Treasury'= s domestic finance section, in his current capacity as chairman of Citigrou= p, one of the main creditors of Enron. A month later the company went bankr= upt in the biggest financial collapse in modern US history. Mr Rubin was one of the most admired members of the Clinton team, and his i= nvolvement will dent Democratic efforts to turn the affair into a new White= water. "This could be a flu shot for Bush," one observer said. "This could = inoculate him from the worst of the scandal."=20 The debacle of what was once the seventh largest US corporation has caused = great embarrassment for the White House because of the close ties of Enron'= s chief, Kenneth Lay, with President George Bush.=20 Since 1994, the company donated almost $600,000 (pounds 430,000) to the pre= sident's various campaigns, and helped to cover the costs of both the recou= nt battle and his inauguration gala. In return the company has had a major = influence on the Bush energy strategy, successfully pressing for greater de= regulation.=20 But though three quarters of Enron's $5.8m of political donations since 199= 0 went to Republicans, Democrats too were beneficiaries. The investment pai= d off when Congress exempted Enron's key energy trading activities from a b= ill overhauling federal oversight of commodity markets.=20 In his call to the Treasury, Mr Rubin asked Mr Fisher about the possibility= of pressing the bond-rating agencies not to lower their estimate of Enron = bonds - and thus provoke a crisis of confidence in the group. According to = the Treasury Department yesterday, Mr Fisher opposed the idea. Subsequently= , agencies did indeed slash their assessment of Enron's creditworthiness, t= riggering its demise.=20 The latest disclosure capped three days of turmoil. First, details emerged = of numerous calls by Mr Lay to senior Bush officials last autumn, telling t= hem of Enron's growing problems. Hours later John Ashcroft, Attorney Genera= l and thus head of the Justice Department, which is now conducting a crimin= al probe of Enron, formally took himself out of the case, admitting he had = taken $60,000 of Enron donations in his failed 2000 campaign to retain his = Senate seat.=20 But the biggest bombshell was the confession by the Arthur Andersen account= ing firm, which audits Enron, that it had destroyed many documents relating= to the audit. Andersen was already under fierce criticism for failing to d= etect the private partnerships into which Enron executives had shunted mill= ions of dollars of debt to keep them off the main balance sheet. Caption: Robert Rubin, top, deflected attention from George Bush=20 Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Features - Sunday Comment - They can't pin this on Bush It was Clinton who = lavished over $4 billion on Enron. By Mark Steyn. 01/13/2002 The Sunday Telegraph P24 (c) Telegraph Group Limited, London, 2002 The first time I gave any thought to Enron, the world's biggest energy trad= er, was during last summer's California blackouts, when the state had a go = at blaming their woes on the company's chief executive, Ken Lay. "I would l= ove," said Bill Lockyer, California's Attorney-General, "to personally esco= rt Lay to an 8 x 10 cell that he could share with a tattooed dude who says,= `Hi, my name is Spike, honey.' "=20 Fortunately for Mr Lay, he lived not in California but in Texas, beyond the= reach of Mr Lockyer's summary cell-share programme. And, as Enron itself h= as now short-circuited, in the largest bankruptcy in US history, Lockyer an= d his fellow Democrats have moved on. These days, they and their media chum= s are positively salivating at the prospect of using Enron to do to the Bus= h Administration what the State of California wanted Spike to do to Mr Lay.= On Friday on CNN, in the corner of the screen where of late "AMERICA FIGHT= S BACK" has been emblazoned, there loomed instead the dread suffix: "ENRONG= ATE". The New York Times has lapsed into its lethal passive voice: "Questio= ns were being raised." The only "question" really being "raised" is: How can we pin this on Bush? = Short answer: You can't.=20 For those who want to turn a bona fide business scandal into a political on= e, Ken Lay is supposedly the unacceptable face of Bush capitalism - of a pa= rticular Texan energy-industry backslapping business culture. The argument = is that Lay has been writing cheques to Dubya's political campaigns since h= e first ran for dogcatcher, and that in return he's been rewarded with "acc= ess". Thus the headline in Friday's Washington Post: "Enron Asked For Help = From Cabinet Officials. CEO Sought Intervention Before Bankruptcy."=20 Hmm. I must fish out The Washington Post of November 23, 1963: "President M= akes Visit To Dallas. JFK Well-Received By Most Texans." The real news in t= he story is not Lay's phone calls but the officials' response: when Dubya's= buddy tried to call in his chits, the Bush guys were unmoved. The headline= should have read: "Cabinet Officials Declined To Help Enron. CEO Told, `Aw= fully Sorry To Hear About All These Problems, Ken. Look, I Gotta Run, But L= et's Get Together And Do Lunch Sometime Next Year.' "=20 Meanwhile, the Attorney-General, John Ashcroft, has recused himself from th= e Justice Department investigation on the grounds that he too has been the = beneficiary of Enron's largesse. At a stroke, Ashcroft sets the bar at a he= ight the Democrats can't rise to. After all, in terms of their political in= vestments, Enron had a widely diversified portfolio: 71 of America's 100 Se= nators got cheques from the company, among them half the Democratic caucus,= including Ted Kennedy and Hillary Clinton. If Senators and Representatives= are as punctilious about conflict of interest as the Attorney-General, the= re'll barely be enough of them to man the Congressional hearings.=20 In other words, if this is "another Whitewater", it's a bipartisan one: in = Monica terms, it's as if, in between oral sex with the President, she was s= queezing in bondage sessions with Newt Gingrich and rounding out the day la= pdancing with Strom Thurmond.=20 In so far as anybody did "special favours" for Enron, it wasn't Bush but th= e Clinton Administration, which lavished over $4 billion in Federal funds o= n the company.=20 But Bush? Ken Lay must be utterly bewildered: he gives half a mil to his Te= xas buddy and what does he have to show for it? Nothing, except investigati= ons by the Justice Department, Commerce Department, Securities and Exchange= Commission and eight Congressional committees. Right now, 30 days with Spi= ke would be a pretty good plea bargain. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 OUTLOOK Editorials ENRON / Shoes keep dropping; let's see the closet Staff 01/13/2002 Houston Chronicle 4 STAR 2 (Copyright 2002 Houston Chronicle) The Enron mess continues to grow messier with each passing day. Enron's aud= itor, Andersen, says its employees destroyed many Enron records. Who is wat= ching the watch dogs? It's revealed that Ken Lay called Commerce Secretary = Don Evans and Treasury Secretary Paul O'Neill, not for help, according to L= ay, but to alert them to the energy company's problems. O'Neill and Evans s= ay they never told President Bush about Lay's calls.=20 Enron President Lawrence "Greg" Walley reportedly asked Peter Fisher, the T= reasury Department's undersecretary for domestic finance, to try to influen= ce bankers to extend credit to Enron. Fisher never called the bankers, Trea= sury officials said. And so it goes, one day after another with new revelations about the energy= giant's dealings and its relationship with politicians and others.=20 A number of investigations are under way, and a number of politicians, no d= oubt, are champing to have a go at the Bush White House over its Enron asso= ciations.=20 All of this, plus concerns about the future of remaining and former Enron e= mployees and stockholders, underscores the need for the probes to go forwar= d with swiftness, fairness and openness.=20 The shoes keep dropping, but we need now to see the whole closet. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Profile: Investigation of collapse of energy giant Enron; Treasury Secretar= y Paul O'Neill discusses phone calls made to him by Enron; Employees and sh= areholders are hardest hit by Enron's collapse; Shareholder advocate Willia= m Lerach discusses lawsuit being filed against Enron's executives; Former S= ecurities & Exchange Commission Chairman Arthur Levitt discusses who might = be to blame for Enron's collapse; Helping athletes break records defeats pu= rpose of athletic competition 01/13/2002 ABC News: This Week (c) Copyright 2002, American Broadcasting Companies, Inc. All Rights Reserv= ed. Announcer: From ABC News, THIS WEEK with Sam Donaldson and Cokie Roberts. S= AM DONALDSON, co-host:=20 It burst into the headlines, the collapse of Enron. How the biggest corpora= te disaster in American history lost billions of dollars, bankrupted thousa= nds of investors, and forced President Bush to answer questions about his l= argest contributor, Enron chief Kenneth Lay. President GEORGE W. BUSH: I have never discussed with Mr. Lay the financial= problems of the company.=20 Senator JOSEPH LIEBERMAN (Democrat, Connecticut): The relationship between = Enron, its executives and the Bush administration is a part of the story.= =20 DONALDSON: Who made it happen? Who let it happen? And how can the governmen= t keep it from happening again?=20 Unidentified Man: This hearing will come to order.=20 COKIE ROBERTS, co-host:=20 Our guests from the White House: Treasury Secretary Paul O'Neill, the Senat= e's top investigator, Democrat Carl Levin, shareholder advocate William Ler= ach and former Securities and Exchange Commission Chairman Arthur Levitt.= =20 Announcer: That's THIS WEEK featuring George Will and George Stephanopoulos= . Now Sam Donaldson and Cokie Roberts.=20 ROBERTS: Welcome to the program. Today we've decided to devote the entire b= roadcast to a single subject: the collapse of Enron. With criminal, Congres= sional and regulatory investigations all under a political overlay, Enron's= troubles have taken center stage here in Washington. Sam:=20 DONALDSON: Absolutely, Cokie. Just a year ago, Enron, the giant Houston-bas= ed energy company that traded natural gas contracts, marketed electricity a= nd other commodities, was riding high. The seventh-largest corporation in t= he country, its stock hitting $83 a share, its revenues $100 billion a year= . But as the months went by, things began to fall apart. A huge debt was mo= unting out of public view. The stock price fell, and in desperation, top En= ron officials reached out to the Bush administration last fall for help. Af= ter all, Enron and its officers had been the single biggest contributor to = Bush political campaigns. Administration officials say they did nothing to = help, and on December 2nd, Enron filed for Chapter 11 bankruptcy protection= , wiping out an estimated $60 billion of stockholder investment and approxi= mately $1.3 billion of employee retirement savings.=20 In the wake of this debacle, investigations are planned by the Justice Depa= rtment, the Labor Department, the Securities and Exchange Commission and fi= ve different Congressional committees, all spurred on by last week's bombsh= ell admission by the accounting firm of Arthur Andersen that its Houston em= ployees have shredded documents relating to its audits of Enron. For its pa= rt, Enron says it will cooperate with investigations and warns the public a= gainst allowing the scandal machine to take over spreading unsupported spec= ulation. Enron's embattled chief executive, Kenneth Lay, blames what happen= ed on the recession.=20 Mr. KENNETH LAY (Chief Executive Officer, Enron): Many companies in 2002 ar= e undergoing the difficult but cleansing effects of the current economic do= wnturn. Enron itself has been a casualty of these events and many other eve= nts. For this consequence, I am deeply saddened.=20 DONALDSON: Inevitably, Enron's collapse has resulted, as Cokie says, in pol= itical battle lines being drawn here in Washington. Our chief White House c= orrespondent Terry Moran has the latest on that. Terry:=20 TERRY MORAN reporting:=20 Well, Sam, those investigations you mentioned are certainly heating up. The= latest development: this six-page letter from Representative Henry Waxman.= He's the ranking Democrat on the House Government Reform Committee. It's a= letter to Treasury Secretary O'Neill and Commerce Secretary Evans, and it = can fairly be categorized as a blanket request for information and document= ation by the two men's contacts with Enron. All this comes as the shock wav= es from Enron's collapse continue to reverberate in both political parties = this weekend.=20 (VO) On Friday, the Bush administration disclosed that Energy Secretary Spe= ncer Abraham called Enron chairman Ken Lay last November 2nd to ask about t= he company's situation. And former Clinton administration secretary, Robert= Rubin, spoke yesterday for the first time about this November 8th phone ca= ll to Treasury Undersecretary Peter Fisher, seeking help in propping up Enr= on's credit rating.=20 Yesterday Rubin told ABC News: "I called Peter and said, `I think it is pro= bably not a good idea. On the other hand, this is a national economic issue= .'=20 Pres. BUSH: In light of the most recent bankruptcy, Enron, there needs to b= e a full review.=20 MORAN: (VO) The political storm broke Thursday morning at an Oval Office me= eting with his economic team to announce administration action on the Enron= collapse. President Bush was asked about his relationship with Ken Lay.=20 Pres. BUSH: Ken Lay is a supporter, and I got to know Ken Lay when he was t= he head of the--what they call, the Governor's Business Council in Texas. H= e was a supporter of Anne Richards in my run in 1994.=20 MORAN: (VO) Democrats say that answer understates how close Mr. Bush has be= en over the years with Enron's founder.=20 Democrats are also looking at phone calls from Lay to Commerce Secretary Do= n Evans and to Treasury Secretary Paul O'Neill last fall as Enron neared co= llapse. Lay was looking for help.=20 Mr. ARI FLEISCHER (White House Press Secretary): Secretary Evans talked to = Secretary O'Neill and they agreed that no action should be taken.=20 MORAN: (VO) At the same time, Enron President Lawrence Greg Whalley called = Treasury Undersecretary Fisher six or eight times, asking Fisher to interve= ne with Enron's bankers. As he did with Rubin's request, Fisher declined.= =20 The flurry of calls and years of political contributions have some Democrat= s in the mood for a major investigation.=20 Sen. LIEBERMAN: This series of contacts between the highest official of Enr= on and the Bush administration is a source of concern.=20 MORAN: The main investigation so far is the nationwide criminal probe launc= hed by the Justice Department. But in a sign of just how complicated this s= ituation is for the administration, the attorney general, John Ashcroft, wi= ll not be leading that probe. He has recused himself because his campaign c= ommittees in his 2002 Senate rate--race took more than $50,000 from Enron. = And finally, Newsweek has added some details to an October 15th call betwee= n Ken Lay and Commerce Secretary Evans. Evans was in Moscow at the time. Th= e key information there is the date, October 15th. The next day, Enron anno= unced a stunning, more than $500 million loss that led to its collapse. Sam= :=20 DONALDSON: Thank you, Terry.=20 Joining us now from Pittsburgh is the secretary of the treasury, Paul O'Nei= ll.=20 Welcome, Mr. Secretary.=20 Mr. PAUL O'NEILL (Treasury Secretary): Good morning.=20 DONALDSON: Well, on October 28th, which was a Sunday--I presume you were at= home--Kenneth Lay...=20 Mr. O'NEILL: I was.=20 DONALDSON: ...Enron's CEO called you. What did he want?=20 Mr. O'NEILL: He called to tell me that he thought it would be useful for hi= s technical people to talk to our technical people so that we could assure = ourselves that the problems they were having were not going to cause disloc= ations in the US and world capital markets.=20 DONALDSON: Did he specifically bring up Long-Term Capital Management, which= was a company that had a--help from government in a financial bailout?=20 Mr. O'NEILL: Well, first, let--let me correct what you just said. As I reca= ll, Long-Term Capital didn't get any assistance from the government at all.= The New York Fed, I believe, called together the major banks that were inv= olved with Long-Term Capital, and the major banks decided to take some acti= on to avert a problem in the US capital market. So I think Long-Term Cap--h= e mit--he mit--I think he may...=20 DONALDSON: It did--excuse me, Mr. Secretary. It did not get any direct gove= rnment subsidy, but government officials...=20 Mr. O'NEILL: Right.=20 DONALDSON: ...helped organize a bailout. And did he not bring that up?=20 Mr. O'NEILL: I--as I recall, he mentioned that we should pay attention to t= he technical details because the technical problems could well be of the na= ture of Long-Term Capital.=20 DONALDSON: All right. Now, you then subsequently--according to what you've = already said--called Peter Fisher, the undersecretary, and asked him to loo= k into it. Is that correct?=20 Mr. O'NEILL: I did, yes.=20 DONALDSON: And did he do so?=20 Mr. O'NEILL: Yes, he did. And he came back to me and said he didn't think t= here were parallels, that he was talking with people in the capital markets= , and it didn't look like it would cause problems at other places.=20 DONALDSON: Well, now, the president of Enron, Peter--rather, Lawrence Greg = Whalley, called Fisher six or eight times. Which is it?=20 Mr. O'NEILL: Well, I honestly don't know. You know, as I've been watching t= his the last few days, I've been surprised to see--I didn't know there were= six or eight calls. I knew that Peter was in touch with the president of E= nron, and I didn't know unti--frankly, until I saw it on the news that Bob = Rubin had called Peter as well. So, you know..=20 DONALDSON: What do you--what do you think of former Secretary Rubin's call?= Was that proper?=20 Mr. O'NEILL: Well, you know, when I left Washington the last time, I--I wen= t to New York and I made a deliberate decision that I was not going to trad= e on what I knew about the government and people that I knew in the governm= ent. And--and so, for me, I never would have made such a call. But Secretar= y Rubin, I think, did a great job when he was in the government. He'd gone = on to be a very high-level official at Citigroup. And--and, you know, I--I-= -I think, at face value, Secretary Rubin's involvement, that he felt it was= appropriate for him to make that call. And, you know, I'll let other peopl= e decide that. But I--you know, the whole idea of finding fault and--and--a= nd--and other things in--in what I would consider to be kind of normal busi= ness of people calling when there are problems like this, you know, making = a big deal out of it, I--I--I just don't understand it.=20 DONALDSON: But--but you would not have made that call? That's what you told= me.=20 Mr. O'NEILL: Well, you know, because I decided when I left Washington, I wa= s done with Washington.=20 DONALDSON: All right. Now, the spokesman--the spokesperson for the Treasury= Department, Michelle Davis, said--and let me just take a look at what she = said--that Treasury Undersecretary Peter Fisher inferred he, meaning Kennet= h--meaning Whalley, was being asked to encourage the banks to extend credit= to Enron lenders. Do you agree with that?=20 Mr. O'NEILL: I don't know. You--you have to rely on what Peter and Michelle= have said about this.=20 DONALDSON: Well, didn't he discuss it with you, Mr. Secretary? Do you mean.= ..=20 Mr. O'NEILL: He didn't. Never, no.=20 DONALDSON: All during this time, you asked him to look into it, and he--he = didn't discuss it with you?=20 Mr. O'NEILL: Well, he just came back to me and said that he couldn't find a= ny evidence that it was going to be a problem. You know, Sam, I think it he= lps to put these things in context. You know, the call I had from Ken Lay w= as three or four minutes. At the same time, I'm working on prosecuting the = financial war on terrorism and putting together World Wide Web to--to inter= dict and confiscate the money the terrorists have used to do things like Se= ptember the 11th. At that time, I was working very hard trying to get the C= ongress to pass a stimulus bill to help people who were affected by Septemb= er 11th, slow down the economy, trying to get the Congress to pass a terror= ist risk insurance bill, working on the problems of Argentina and Turkey an= d other places around the world that have got problems. You know, this is a= three or four-minute telephone call...=20 DONALDSON: All right.=20 Mr. O'NEILL: ...and--and what I got from Ken Lay was no more than what I al= ready read and--in the newspaper and seen on--on your and other television = shows saying Enron was having problems.=20 DONALDSON: All right. Granted, lots on your plate, Mr. Secretary. But on No= vember 8th, he called again. Did you make that call or did you place the ca= ll?=20 Mr. O'NEILL: No, he called me.=20 DONALDSON: What did he want?=20 Mr. O'NEILL: He called me to tell me that they were deep into conversations= with Dynergy, another energy company, and that sustaining their credit rat= ing was--was a critical aspect of their deal. It was an information call. H= e asked me for nothing.=20 DONALDSON: He asked you for nothing. You know, Bob Bennett, who is now Enro= n's attorney here in Washington, says, and I quote, that Whalley told Fishe= r, "It would be nice if you could get these banks to lend us some money, bu= t I should tell you our credit is not good." Bennett said that Whalley then= laughed, meaning that that was a joke. It doesn't sound like a joke to a l= ot of people.=20 Mr. O'NEILL: Well, what would you have me make of that, Sam?=20 DONALDSON: Well, I'm asking you. I mean, you...=20 Mr. O'NEILL: I'm--what--what are you asking me?=20 DONALDSON: Well, I'm asking you, if it does not appear from these separate = little pieces that I've just read, that your own spokesperson says that Fis= her inferred that he was being asked to do something. Then it says...=20 Mr. O'NEILL: OK, well, perhaps--perhaps so, but nothing was done.=20 DONALDSON: All right, nothing was done.=20 Mr. O'NEILL: What does--what does that tell you? I think it tells you we we= re doing the diligent thing to make sure that the world and US capital mark= ets didn't get damaged, and we had no responsibility to help an individual,= private firm and we didn't.=20 DONALDSON: Well, I want to show you what Enron spokesperson Mark Palmer has= said about all of these calls, and not only to you but to Don Evans. He sa= id, "At no time did Lay ask for any assistance from the government, nor did= he intend to leave any impression that he was ask--asking for assistance."= We've had what you've had to say, but, of course, Don Evans says flatly th= at he was asked to help out on the Moody's Investment Service. So that stat= ement isn't correct, is it?=20 Mr. O'NEILL: You know, you can draw your own conclusions. Ken Lay didn't as= k me to do anything, and, you know, there--we did nothing. I think we did t= he right thing. We made sure that in our area of responsibility, which is t= he US and the world capital markets, that the problems that were occurring = at Enron had no spillover effect for the rest of the economy.=20 DONALDSON: Mr. Secretary...=20 Mr. O'NEILL: But, you know what the president has charged me to do now is t= o look at these events and see if there are necessary changes in the rules = to protect individual employees and to protect investors, to see if there a= re weaknesses in the rules that we should correct, because the president's = really concerned as he sees these stories about people losing their 401k pl= ans, savings, and--and--and--and as a special concern, he wants to make sur= e that disclosures are appropriate so that investors are not misled or...= =20 DONALDSON: Mr. Secretary, I think a lot of people think that's a good idea,= of what the president has asked you to do. But coming back to what has hap= pened, when you knew, no matter how long the phone calls were, that this bi= g company was in deep, deep trouble, didn't you feel an obligation to tell = the public so that the stockholders...=20 Mr. O'NEILL: Sam--Sam, you and your other friends in the print media were t= elling the people every day, I didn't learn anything from Ken Lay that wasn= 't public property.=20 DONALDSON: So you don't think that the secretary of the treasury and the se= cretary of the commerce, if they had spoken out, wouldn't admit more to inv= estors and employees than a newspaper story?=20 Mr. O'NEILL: Well, I--you know, I don't think so. Would you have had me say= something as I watched LTV Steel going down? Should I have gotten on top o= f the building and said, `LTV is going down.' I don't think--that's not the= role of government officials to call attention to the things that are al--= already being recorded in the media in--in a very--in a very strong way. I = didn't know anything that you didn't know.=20 DONALDSON: All right, Mr. Secretary. Finally, I'm told that you didn't info= rm the president until last Thursday.=20 Mr. O'NEILL: Right. That's true.=20 DONALDSON: Wouldn't it have been better to give him a head's up...=20 Mr. O'NEILL: I didn't--I...=20 DONALDSON: ...because of this political problem that's coming, was one that= could have been foreseen.=20 Mr. O'NEILL: I--well, frankly, I don't think so. You know, I get lots of ca= lls from lots of people in big and small companies, and governments around = the world. You know, do I run across the street every time I've had a telep= hone call with, say, the finance minister in Argentina and tell the preside= nt? Absolutely not. Why would I do that? I'm a big boy. I've got responsibi= lity. I swore to uphold the laws and--and--and--and constitutional duties o= f the United States, and I'm going to keep doing that. And--and--and I'm no= t going to spend, you know, endless hours running across the street telling= the president about telephone calls.=20 DONALDSON: Secretary O'Neill, thank you very much for joining us this morni= ng.=20 Mr. O'NEILL: You're welcome.=20 DONALDSON: It's always good to see you.=20 Mr. O'NEILL: Nice to see you, too.=20 DONALDSON: Cokie:=20 ROBERTS: Joining us now from New York is Senator Carl Levin, Democrat of Mi= chigan. He's chairman of the Permanent Subcommittee on Investigations which= will be holding hearings into the whole Enron situation.=20 Thanks for being with us, Senator Levin.=20 Senator CARL LEVIN (Democrat, Michigan): Good being with you, Cokie.=20 ROBERTS: Now, starting with these phone calls that Sam and--and the secreta= ry were talking about, were those calls proper? Should Ken Lay have been ca= lling these Cabinet secretaries?=20 Sen. LEVIN: Well, it depends on what he said. I have no doubt they were ask= ing for the government to take action. I think when Ken Lay denies it and o= ther representatives of Enron deny that they were asking for things, I thin= k that is a--just false. It's as false as some of their financial statement= s. As a matter of fact, I don't believe that for one minute. But I do accep= t when Secretary O'Neill says that nothing was done in response to those re= quests, and I have no doubt, again, that there were requests made. And I ju= st don't believe Enron on that, but I do believe Secretary O'Neill when he = says that no action was taken.=20 ROBERTS: Should the secretaries have informed the regulators? Forget about = the public, as he said, there were newspaper stories out there, but should = they have informed the SEC of these conversations?=20 Sen. LEVIN: Well, I don't know what the requirements are there. The SEC, of= course, had already been involved in this matter, as they should have been= . But what we're focusing on at the Permanent Subcommittee on Investigation= s, is--are the deceptive practices of Enron, and the failure of the auditor= s, Arthur Andersen, to try to block those deceptive practices, to say no--t= he failure of the board of Enron--to say no to the deceptive practices whic= h cost the employees their jobs, their future retirements, which cost thous= ands--tens of thousands of stockholders to go under with this stock. And--a= nd that's what we're focusing on. And there's a lot there to be investigate= d. Let me tell you, what Enron did here was to use outside entities in orde= r to deceive the public and to increase the value of their stock.=20 ROBERTS: All right.=20 Sen. LEVIN: These were not accounting errors, by the way, these just weren'= t errors...=20 ROBERTS: These partnerships you're talking about...=20 Sen. LEVIN: ...these were outside partnerships.=20 ROBERTS: But Senator, you--you heard earlier in the broadcast, your colleag= ue Senator Lieberman saying that the relationship between Enron and the adm= inistration, the fact that Ken Lay has been the biggest contributor to the = administration, is an area of concern. Is that something that you will be l= ooking into?=20 Sen. LEVIN: Yeah, campaign contributions are a major concern, but it's not = the concern of our investigation. It's the concern of what we're trying to = do in Congress, to pass campaign finance reform to put a ban on these big c= ontributions by corporations. Corporations are not supposed to give any mon= ey at all to campaigns, and yet because of that loophole, as you well know,= tens of thousand, hundreds of thousands of dollars went from Enron to the = political parties, both political parties, and that's what we've got to put= an end to to stop these kind of appearances of impropriety that are create= d, and the sale of access. I have no doubt that Enron had greater access be= cause of huge campaign contributions.=20 ROBERTS: Greater access to Cabinet secretaries and to White--White House st= aff and secretar--and Vice President Cheney?=20 Sen. LEVIN: I have no doubt that they had greater access, not just to the a= dministration, but to members of Congress because of huge campaign contribu= tions, and that's what we've got to end.=20 ROBERTS: Now...=20 Sen. LEVIN: But it's the actions of Enron, the improprieties, the false sta= tements. They were selling glass as real diamonds, and that is false. We've= got to put an end to it. That is the major concern of my subcommittee. And= that is what, it seems to me, the American people want us to focus on.=20 ROBERTS: Now, Congressman Waxman from California has sent letters to the se= cretaries asking for all of the documents, all of the meetings, any--any co= ntacts at all between the administration and--and Enron. And implying that = maybe--that even though Enron didn't seem to get energy policy changed to s= uit it, but maybe the administration was advocating a tax policy that would= be helpful to Enron at the time that all these contacts were taking place.= What's your reaction to that?=20 Sen. LEVIN: Well, I think it's appropriate to ask for all that material. Ou= r 51 subpoenas, which we requested this--which we issued this week and have= now been served, are the subpoenas to Enron, its board, its managers, to A= rthur Andersen for all the documents involved in the creation of these enti= ties and in terms of any stocks sales and option sales. That's what we're f= ocusing on are the failures of this corporation, the deceptive practices of= this corporation and the failures of its auditors and board that are suppo= sed to be a check on manager--managers to be a check on managers. That's wh= at our focus is on.=20 ROBERTS: Do you see a change in the laws coming as a result of this? Re-reg= ulation of energy, for instance?=20 Sen. LEVIN: Well, I'm not sure about the re-regulation of energy, but I am = confident that in terms of the practices of boards and auditors that we hav= e got to tighten up the law significantly. We have to be able to rely on bo= ard members and on auditors to carry out their fiduciary duties. And that--= those duties mean that a corporation is supposed to be in business for its = stockholders and not for its managers.=20 ROBERTS: Of course...=20 Sen. LEVIN: Managers here line their pockets with--with hundreds of million= s of dollars of stock sales at the same time a corporation was going under,= and the stockholders and employees were left holding the bag.=20 ROBERTS: Now...=20 Sen. LEVIN: I think we've got to tighten the laws.=20 ROBERTS: One of those..=20 Sen. LEVIN: I'm sure the tightening will come as a result of these hearings= .=20 ROBERTS: One of those board members was Wendy Gramm, the wife of Senator Ph= il Gramm of Texas. And--and Senator Gramm appears to have, in one of those = late-night end-of-session moves, been the person who was successful in gett= ing the--the Commodities Futures Trading Commission to exempt Enron from it= s oversight. I know it's uncomfortable for senators to look at other senato= r's actions, but is this part of the scope of your investigation?=20 Sen. LEVIN: The scope of the board is surely part of our investigation, the= activities of the board, all members, including Wendy Gramm. I don't know = whether or not--I think that Senator Gramm has denied, as a matter of fact,= that that amendment that was added was added by him. So I don't even know = that it's accurate that he was the one that added that amendment. But in an= y event, as I understand the background for that now--and again, as you poi= nt out, it was not a subject of the vote of the Senate--but as I understand= now, that had broader application than just Enron. But I--I'm not sure of = the details of that, because that's not the focus of my investigation. Othe= rs will be looking into other activities and other pieces of this puzzle.= =20 ROBERTS: Senator, I--we're out of time, but I know that you are looking at = the company. But there are a lot of Democrats licking their lips over this = at the moment, and seeing an--an opportunity to get at the Bush administrat= ion. Do you think there's a danger for Democrats here?=20 Sen. LEVIN: Well, I think if anyone is doing that, they're making a mistake= . I think the public has been burnt here. Democrats, Republicans and indepe= ndents have been hurt. And it's our obligation, on a nonpartisan basis, to = go after Enron, to go after its auditors, to go after board members, to loo= k for improprieties here, to tighten the law. That is our responsibility. W= e're going to do it on a bipartisan basis. We have the support in our inves= tigation of my ranking Republican, Senator Collins. I know that Senator Lie= berman has the support of Senator Thompson in the broader investigation of = the full committee. So this is going to be a bipartisan investigation, as i= t should be.=20 ROBERTS: Thank you very much, Senator Carl Levin.=20 Sen. LEVIN: Thank you, Cokie.=20 ROBERTS: Still ahead, who was to blame for the fall of Enron? But first, wh= en we come back, those hurt most by its demise: the employees and other inv= estors who lost hundreds of millions of dollars. Stay with us.=20 Announcer: THIS WEEK with Sam Donaldson and Cokie Roberts brought to you by= ...=20 (Commercial break)=20 DONALDSON: As we heard earlier, Enron chief Kenneth Lay blames his company'= s collapse on the recession. Well, a lot of people think other factors, inc= luding some that may result in criminal charges, are to blame. Our chief Ca= pitol Hill correspondent Linda Douglass takes a closer look. Linda:=20 LINDA DOUGLASS reporting:=20 And Sam, one of the big questions is: Was there insider trading when the to= p officials sold their stock when the stock was up? The people who were har= dest hit by this, of course, were the employees. They were stripped of thei= r jobs and they were robbed of their retirement savings.=20 Offscreen Voice: We're going to investigate that.=20 DOUGLASS: (VO) Sixty-four-year-old Janice Farmer had begun living off her r= etirement fund when suddenly it vanished.=20 Ms. JANICE FARMER (Former Enron Employee): I trusted the management of Enro= n with my life savings. Senators, I won't mince words here, they betrayed t= hat trust.=20 DOUGLASS: (VO) Enron's employees had put their money into company-run 401ks= , made up mostly of Enron's stock. When employees begun suspecting trouble = in the company last summer, they worried about their stock. CEO Ken Lay rea= ssured them in a e-mail, saying: "Our performance has never been stronger. = Our business model has never been more robust. Our growth has never been mo= re certain."=20 In mid-October, Enron finally revealed it was losing money. But panicked em= ployees were told that because the company was in a transition period, they= would not be allowed to sell their stock. Many Enron officials had made a = billion dollars selling their own stock months before.=20 Senator RON WYDEN (Democrat, Oregon): Enron was just sinking like the Titan= ic, and you've got the top officers up on the deck selling the shares and a= ll of you are locked in the boiler room, not able to get rid of the stock.= =20 DOUGLASS: (VO) There were other victims: big pension funds which held Enron= 's stock. Florida's lost $325 million, Ohio's lost $59 million, California'= s lost $45 million, New York's lost $58 million. And small investors whose = brokers kept telling them Enron was hot. Widow Mary Bain Pearson lost $175,= 000.=20 Ms. MARY BAIN PEARSON (Enron Shareholder): I'm just a pebble in the stream.= A little bitty shareholder. I didn't lose millions, I didn't even lose a b= illion. But what I did lose seems like a billion to me.=20 DOUGLASS: The employees and the shareholders have filed separate lawsuits t= rying to recover some of what they've lost. But it is not clear at all wher= e Enron would get the money to pay those claims if they should win in court= , Sam.=20 DONALDSON: Thank you, Linda.=20 Yes, more than 60 lawsuits have already been filed in an attempt to recover= money lost by investors and Enron employees. But most of these suits have = been put on hold by Enron's bankruptcy filing. One of them, however, a clas= s action suit titled Amalgamated Bank vs. Kenneth Lay, is ongoing since it = is directed at Enron officials and board members rather than the company it= self. And joining us now is the lead attorney in this suit, Bill Lerach.=20 Welcome, Mr. Lerach.=20 Mr. WILLIAM LERACH (Shareholder Advocate): Good morning. Thank you.=20 DONALDSON: Company's go belly-up in capitalism all the time. What did Enron= do wrong?=20 Mr. LERACH: Well, Enron did a great many things wrong. But most importantly= , Enron falsified its financial statements, reporting over $600 million in = phony profits and over a billion dollars of phony stockholder equity over a= four-year period while the top insiders in that company were selling off $= 1.1 billion of their stock. We think this is one of the most massive securi= ty frauds we have ever encountered.=20 DONALDSON: Well, now, a federal judge has now agreed that she the authority= to freeze these assets of the officials that you are suing, but she says y= ou have yet to make your case that she should do that.=20 Mr. LERACH: We haven't had an opportunity yet to trace where the money is, = whether it's offshore in the Cayman Islands or it's been used to buy yachts= or whatever. We're going to be doing that, we hope, with the judge's permi= ssion in the next few weeks. And I think if we find any significant amount = of that money is in danger of being secreted or dissipated, I think the fed= eral court will take appropriate action to freeze it.=20 DONALDSON: Well, let's look at just three of these 29 Enron officials, or f= ormer officials, and some of their sales. And I want to ask you about it.= =20 TEXT:=20 ENRON EXECUTIVE STOCK SALES=20 Stock sales from 10/19/98 to 11/27/01=20 Total shares Value sold Kenneth Lay 1.8 mil $101 mil Jeff Skilling 1.1 mil = $66.9 mil Wendy Gramm 10,256 $276,912=20 Source: Amalgamated Bank v. Kenneth L Lay=20 DONALDSON: Kenneth Lay, the chief executive, from 1998 to last year, during= the period that you are suing for, sold stock worth $101 million. Jeff Ski= lling, the former CEO sold stock worth $66.9 million. And Wendy Gramm, a bo= ard member, sold stock worth $276,912. But Mr. Lay says he only sold 24 per= cent of his holdings. He has lost most of his holdings along with anyone--e= verything else. And Wendy Gramm says she sold hers in 1998, long before any= suggestion of this funny wrongdoing came to light. Why is it fair to go af= ter them?=20 Mr. LERACH: Well, first of all, Mr. Lay only paid pennies a share for his s= tock. His stock was stock option stock. So it's wrong to say that he lost m= oney when the stock collapsed because he didn't pay the inflated price for = his stock that ordinary investors did. And you have to look past the playin= g with the percentages. A hundred and one million dollars of stock by a CEO= or chairman of a company is a huge bailout, especially when it's compared = to what's happening to the workers inside the company who are losing everyt= hing and who aren't on the inside knowing the profits have been falsified a= nd the company is failing.=20 DONALDSON: You're suing for $25 billion, and I know that Arthur Andersen is= also part of the suit. Where do you think you can get that money?=20 Mr. LERACH: Well, Arthur Andersen is a large company. They have the wherewi= thal to respond. In addition, there's directors' and officers' liability in= surance running to the hundreds of millions. And, I must tell you, Sam, not= all the defendants have been named yet. This case is going to continue to = evolve and expand. There are other professionals, lawyers, investment banke= rs and the like who appear to be deeply implicated. A fraud of this scope a= nd size simply cannot be perpetrated without the assistance of sophisticate= d professionals to get stuff ba--past the regulators.=20 DONALDSON: Are you going to name any politicians?=20 Mr. LERACH: No, I didn't think we're naming politicians as such as defendan= ts. We're not concerned with the politics of the case, we're concerned with= the economics of the case.=20 DONALDSON: Knowing what you know now, do you think people will eventually g= o to jail here?=20 Mr. LERACH: It's dangerous to speculate, but the fraud here appears to be v= ery substantial. It must have been deliberate. I don't like to see anyone g= o to jail, but there has to be accountability in the system so that this ki= nd of thing won't continue to happen. If there's not accountability for tho= se who perpetrate it, then it will happen again and again.=20 DONALDSON: Mr. Lerach, thanks very much for joining us today.=20 Mr. LERACH: Thank you, Sam.=20 DONALDSON: When we come back, how did this happen? We'll examine the role o= f Enron's management, its accountants and government regulators. And then G= eorge Stephanopoulos will speak with the former Securities and Exchange Com= mission chairman, Arthur Levitt, right after this.=20 (Commercial break)=20 GEORGE STEPHANOPOULOS reporting:=20 We've seen that both Enron and Arthur Andersen will be playing defense in t= he courts, but Congress will also be asking who else is to blame. Here's Li= nda Douglass again with more on the blame game.=20 DOUGLASS: George, everyone is trying to figure out who is to blame for the = collapse of Enron. Was it the government regulators? Was it the accountants= ? Was it the stock analysts? Was it the Enron officials cutting too many co= rners as they tried to get rich?=20 (VO) Enron reeked of success. Its revenues had tripled in three years, maki= ng it the seventh largest company on the Fortune 500. Brokers urged investo= rs to, `Buy! Buy!' even though most did not really understand how the compl= ex energy trading company made its money.=20 Mr. PATRICK McGURN (Institutional Shareholder Services): The company was su= ch a good performer that people really weren't willing to say that the empe= ror potentially didn't have any clothes on.=20 DOUGLASS: (VO) Turns out Enron was built on a house of cards. It hid its de= bt by shifting it to mysterious partnerships, some of which were run by top= Enron officials, such as Chief Financial Officer Andrew Fastow who made $3= 0 million in the process.=20 In November, Enron was forced to admit it that it had overstated its profit= s by half a billion dollars. Did Enron's accountant, Arthur Andersen, help = the company cover up a lie?=20 Sen. LIEBERMAN: Why did the Enron's auditors allow the company to overstate= its profits for four years using what appear now to be very questionable a= ccounting practices?=20 DOUGLASS: (VO) Enron was paying Andersen a million dollars a week to be a c= onsultant and to audit its books. The SEC permits such arrangements, which = some call a conflict of interest. Andersen now admits that some of its empl= oyees destroyed Enron documents which could be crucial to the investigation= .=20 (OC) Now, the Enron employees are also, again, the victims. Their 401ks wen= t up in smoke, and many people say that's because 60 percent of those retir= ement funds were made up of Enron stock. Some in Congress are now saying th= at the percentage of company stock that should allowed in a 401k should onl= y be 20 percent. George:=20 STEPHANOPOULOS: Thanks, Linda.=20 And now we're going to turn to someone who's an expert on all these issues.= Arthur Levitt was chairman of Securities Exchange Commission from 1993 to = early 2001, and he joins us now from Santa Monica, California.=20 Good morning, Mr. Levitt.=20 Mr. ARTHUR LEVITT (Former Chairman, Securities & Exchange Commission): Good= morning, George.=20 STEPHANOPOULOS: Mr. Levitt, I think a lot of people are wondering if the SE= C should bear some of the blame. When--when 29 top officials of a corporati= on sell off $1.1 billion in stock--nearly half their holdings--shouldn't al= arm bells go off at the SEC?=20 Mr. LEVITT: The SEC bases its security regulation not on merit regulation b= ut on full disclosure. It's interesting, the issues that brought about the = Enron debacle could have occurred in almost any other corporation, and some= of the people now who are calling for reforms were the very same people wh= o frustrated the SEC in our efforts to get full disclosure, in our efforts = to get the accounting industry to have some semblance of auditor independen= ce.=20 STEPHANOPOULOS: But--but these sales were disclosed, were they not?=20 Mr. LEVITT: The sales were disclosed, but the blame here falls on a whole h= ost of factors. It's not just the auditors, it's the security analysts, it'= s the rating agencies that dropped the ball, it's the investment bankers wh= o cooked up the scheme to hide matters from the general public. And I think= this is a time we've got to take a look at how standards are set. This has= been a long-standing battle that the Commission has had to fight, and we'v= e been frustrated by the business community and their impact on the Congres= s to dissuade these standards-setters from doing the job they should be doi= ng.=20 STEPHANOPOULOS: Mr. Levitt, Secretary O'Neill was on this phone--was on thi= s program earlier. When he got those phone calls from Ken Lay, do you belie= ve he had an obligation to call the SEC chairman?=20 Mr. LEVITT: I'm not sure whether it's an obligation, but historically when = there have been economic problems of this kind--Long-Term Capital, for inst= ance--or any of the other events that occurred while I was there--Alan Gree= nspan and Lloyd Benson and Bob Rubin always communicated with--with me so t= hat we were aware of the problem at the same time and could do something ab= out it.=20 STEPHANOPOULOS: So it would have been a good idea?=20 Mr. LEVITT: It just happened during--during my years.=20 STEPHANOPOULOS: This--this whole episode is over real serious problems in t= he accounting industry. Arthur Andersen just this weekend revealed that the= y shredded documents related to the Enron case, maybe even after the SEC in= vestigation began. That's a crime, isn't it?=20 Mr. LEVITT: I think it is. I think it is a violation of our securities laws= , and it's highly unusual, at best. Arthur Andersen was one of three firms = that fought the commission on this issue of auditor independence about a ye= ar ago.=20 STEPHANOPOULOS: Now, this is the latest in a series of problems for Arthur = Andersen. They paid millions of dollars in fines for the Waste Management c= ase, the Sunbeam case. Do you think they can survive this third strike?=20 Mr. LEVITT: Well, that's very difficult to tell. I--I'm simply not sure. I = think it's easy to look at this in a vacuum and say this will kill the firm= . But I think it's premature to say that. They've got a real problem. But a= s I've said before, this could happen in other American corporations. And I= think we've got to take a new look at the way standards are set, in the wa= y the accounting industry is overseen, in the way rules are formulated in t= he business community.=20 STEPHANOPOULOS: Does that mean independent boards and banning accounting fi= rms from being both consultants and auditors?=20 Mr. LEVITT: Not necessarily a blanket ban but it does mean the appointment,= in my judgment, of an independent group to oversee the accountants. But mo= re than that, I think it calls for a new look at the way America's boards a= re constructed. I think that we should have a majority of members of a boar= d come from the public, rather than from within the corporations. And the a= udit committee should be empowered to prevent this kind of occurrence from = happening by having to approve any consulting contract that is given to the= auditor before it is awarded to the auditor.=20 STEPHANOPOULOS: OK, Mr. Levitt, thank you very much.=20 Mr. LEVITT: OK, George.=20 STEPHANOPOULOS: When we come back, the ROUNDTABLE weighs in on Enron. Georg= e Will joins us after this.=20 (Commercial break)=20 Announcer: THIS WEEK with Sam Donaldson and Cokie Roberts will continue in = a moment after this from our ABC stations.=20 (Commercial break)=20 DONALDSON: Now our ROUNDTABLE and Enron, where we give our opinions. And as= always, joining us, George Will.=20 Good to see you, George.=20 GEORGE WILL reporting:=20 Sir.=20 DONALDSON: And, of course, George Stephanopoulos back.=20 Does George W. Bush have anything to worry about here, George Will?=20 WILL: He has lots to worry about. Look, the Democratic Party is always an i= nherently vulnerable to the suspicion that it is associated with the wilder= shores of the cultural left. The Republican's inherent vulnerability is bi= g business in the sense that big business is corrupt. Furthermore, there's = the whole stereotype of Texas culture. Furthermore, the president, in his s= tatement in the Oval Office when he said, `Mr. Lay supported Anne Richards = in 1994,' was being Clintonian. That is, slippery. That is, he was technica= lly right, but on the real matter, wrong.=20 DONALDSON: Well, George Stephanopoulos...=20 STEPHANOPOULOS: Slapped on the wrist by George Will, that's not the...=20 DONALDSON: Well, Mr. Lay said in a television interview before that electio= n that while it was difficult, he was actually going to support George Bush= .=20 STEPHANOPOULOS: Well, yeah, he was, and he gave, like you say, three times = as much to George Bush than Anne Richards in `94. It was an odd moment for = the president. I think it was to distinguish between the kinds of trouble h= e is in. You know, you hear all week long this is like Whitewater. It's exa= ctly like Whitewater in this respect: No matter how much you investigate, y= ou're not going to find any abuse of power in the White House or by top gov= ernment or Cabinet officials. You're not going to find that. Where--where B= ush could be vulnerable is just this whole web of influence and contacts th= at he had with Enron. And these ties, as George says, to big business, part= icularly big oil.=20 ROBERTS: But, you know, the Democrats are in danger of overreaching, as the= y always are, or as either party is when it comes to something like this. A= nd they--they understand that. And there some people urging caution and par= ticularly since many Democrats also took large sums of money from Enron.=20 DONALDSON: But Senator Levin said to you, Cokie, that he was not going to..= .=20 ROBERTS: Right.=20 DONALDSON: He--he accepted all this that O'Neill and others were saying; th= ey didn't do anything.=20 ROBERTS: But, you know, I do think that the president could do a couple of = things that would make you crazy (looking towards George Will). The first w= ould be to come after campaign finance reform. He doesn't care about it. He= 's made it clear he doesn't really care much about it, so why not support i= t, and then--and then he gets rid of that whole issue. The other thing that= the White House could do that would make a big difference would be to stop= all of the bandying about with the House members--Republicans and Democrat= s and the general accounting office--about the energy task force. Just thro= w them mounds of paper from the energy task force.=20 STEPHANOPOULOS: And if they don't--if they don't, they're going to get sued= ...=20 ROBERTS: Sued by the GAO.=20 STEPHANOPOULOS: ...by the GAO. But, you know, I spoke with a White House of= ficial late Friday and yesterday, and they are still insisting that they ar= e going to go right down the line on this. And what they're doing is making= these documents more valuable.=20 DONALDSON: Well, the stone wall seldom works.=20 WILL: Cokie's right. Look, there are four things. You've mentioned two of t= hem. Campaign finance may get passed. It shouldn't, but it will because of = this. He may lose--Cheney may lose his argument with the GAO. He shouldn't,= but he may because of this. Gray Davis will be helped in his election in C= alifornia because he can turn his mismanagement of their energy crisis back= on evil Texans. And furthermore, the whole drive to privatize--partially p= rivatize Social Security will be hurt by this. Shouldn't be, but...=20 STEPHANOPOULOS: Well, it wasn't going anywhere, anyway.=20 WILL: I understand.=20 STEPHANOPOULOS: Absolutely. But what else will be hurt, though? There's ano= ther part of Bush's agenda which will hurt him substantively but help him p= olitically: this whole effort to deregulate, particularly in the environmen= tal area. It's going to be much harder for him to do that. If he doesn't do= it, though, it takes away one of the Democrat's best issues.=20 ROBERTS: But you know what, on the longer term, one of the things that--tha= t both parties--but particularly Democrats because they have been the party= of government--is going to have to worry about is that we have seen in the= last few months since September 11th this tremendous surge and trust in go= vernment and a trust in the Congress, of all things, and the--and the presi= dent and the leadership. I think this is going to send that sinking.=20 STEPHANOPOULOS: But--no, but right now there might be more calls now for th= e use of government, for the tools of government, calls for the re-regulati= on...=20 WILL: I agree--I agree entirely with George. War is the health of the state= . We've said often this fall scandal can be the health of the state. Becaus= e now attention will be turned back to the 1995 bill...=20 ROBERTS: But don't you think it all gets to...=20 WILL: ...where by one vote...=20 DONALDSON: They chose it...=20 WILL: ...they overrode Clinton's veto of a deregulate--of a weakening of th= e securities bill.=20 STEPHANOPOULOS: Make Congress cease...(unintelligible).=20 DONALDSON: Another aspect. I mean, let's assume that the administration doe= sn't have any culpability in this directly. Who did? Who is to blame? What = happened here?=20 ROBERTS: It--it looks like a good many people are out there to blame.=20 STEPHANOPOULOS: I mean, there's two people are going down for sure. I mean,= Jeffrey Fastow (sic), the--the man who set up the partnerships is in big t= rouble. Arthur Andersen looks like it it's going straight down the tubes. T= hey've tried to blame it on--on Enron, but they're not going to get away wi= th. The other day I spoke with a man who made a fortune short-selling Enron= . His name is James Chanos. And he said all the clues were there. You had t= he insider selling, you had indecipherable footnotes on these--on these par= tnerships...=20 ROBERTS: And he was sending up warnings a year ago.=20 STEPHANOPOULOS: ...and you had front loading of profits. Those clues were a= ll there. Arthur Andersen is to blame for a lot of it.=20 DONALDSON: Well, clear--clearly, employees of Arthur Andersen in Houston ma= de the calculation it was better to take the rap, which could be criminal, = for shredding these documents than actually letting the documents be made p= ublic.=20 WILL: I argued last Sunday, Sam, that this is not a Washington story. Prima= rily, it's a New York Arthur Andersen and Houston/Enron story. But, you kno= w, in--in California and other states that have `three strikes and you're o= ut,' you got to jail forever. Sunbeam, Waste Management and Enron, how many= strikes does Arthur Andersen get?=20 DONALDSON: And what about the other accounting companies? How do we know th= at some of them haven't also been playing fast and loose?=20 STEPHANOPOULOS: We don't. In fact, that bill that George was talking about = just a--just a minute ago, since then there have been four to 500 restateme= nts by accounting firms of all of their different reports. And this is goin= g to go across the board.=20 ROBERTS: But, you know, it's also true that Enron is not the only company t= o have done what its done in terms of the executives getting big bucks out = and the employees being left holding the bag. And I do think that that's wh= at most--most people care about. Most people want to make sure their 401ks = are OK, most people want to make sure they're not getting stiffed. And--and= really, Enron is just one example of that in recent years.=20 STEPHANOPOULOS: And--and that's why you can bet that the first Bush task fo= rce to report back is going to be the one for 401k reform. They're going to= try to move something through very quickly on that. Harder to get reform o= f corporate governance. even though people will want it, all the lobbyists = are going to come in and try to slow that down.=20 ROBERTS: And that's going to be a real test of the ideology of this adminis= tration as well. Does the ideology take over and--and the whole idea of reg= ulation of corporations become forbidden?=20 WILL: Well, 120 large US corporations have 401ks for their employees in whi= ch at least a third of the stock held by them are those corporation's stock= . That ought to change. But there's a larger point here that you point to. = And conservatives have to understand that capitalism and free markets don't= just spring up like crab grass. They're the product of a very complicated = set of laws and enforcement and provisions.=20 ROBERTS: That's right.=20 WILL: Capitalism's a government program.=20 DONALDSON: And also you--I must understand and I think people do--in capita= lism there are winners and there are losers. And not everyone can be protec= ted against loss. But you would think that if there is a fraud involved..= =20 STEPHANOPOULOS: That's right.=20 DONALDSON: ...the kind of mismanagement that we see here, there ought to be= some protection.=20 ROBERTS: And the rule of law has to prevail.=20 STEPHANOPOULOS: Yeah, and the rule of--if it looks too good to be--if it lo= oks too good to be true, it probably is. Don't even ask.=20 DONALDSON: You got the last word, George. Thank you.=20 And when we come back, there are more questionable transactions causing con= troversy in THIS WEEK's edition of the George Will commentary. George expla= ins it right after this.=20 (Commercial break)=20 ROBERTS: George Will, Enron and football?=20 WILL: Cokie, Enron's accounting books should be filed under fiction. And af= ter last Sunday, so should the NFL's record book. Going into the last regul= ar season game, New York Giant Michael Strahan needed just one sack of the = quarterback to set a record. Late in the fourth quarter, he still needed it= . So quarterback Brett Favre, whose Packers had the game won, gave it to hi= m. Watch this. Favre kept the ball and ran towards Strahan. Your Aunt Minn = (ph) could have sacked Favre. Then Strahan's teammates gave Favre's friendl= y pats. Everyone was so nice.=20 In 1998, a Connecticut basketball player suffered a career-ending injury ju= st one basket shy of the school scoring record. So, her coach and the visit= ing team agreed to exchange uncontested lay-ups. The player got the record.= Everyone was nice.=20 Some say Joe DiMaggio got help with his 50-game hitting record. Official sc= orers may have turned what should have been errors into Dimaggio hits. The = scorers were being nice.=20 In 1910, Ty Cobb was detested and Napoleon LaJoie was nice. On the last day= of the season, one team tried to help LaJoie beat Cobb for the batting tit= le. The team's third baseman played far back, LaJoie got eight hits, six of= them bunts towards third. The team was being nice.=20 Last Sunday, many people said, `Michael Strahan is nice, and Brett Favre wa= s nice, so what's the harm?' Well, here's the harm: The moral seriousness o= f sport derives from the integrity of the competition. Absent that, you hav= e a sham like professional wrestling. Records are worth keeping and celebra= ting and striving to break because they certify excellence, excellence achi= eved under the pressure of competition. Rig the competition in order to be = nice, and records will certify nothing. Sport is morally serious because at= hletic excellence cannot be faked. Niceness isn't nice when it produces fak= ery on the playing field.=20 ROBERTS: So much for nice.=20 Sam and I will be right back.=20 (Commercial break)=20 ROBERTS: Well, Sam, it's neither Enron nor football on dot-com.=20 DONALDSON: That's right. Some news organizations, including ours, want the = trial of Zacarias Moussaoui, who is charged with complicity in the Septembe= r 11th attack on America, to be televised. And prosecutors say that's too d= angerous. You can see the arguments if you logon to sam.abcnews.com.=20 ROBERTS: And until next week, that's THIS WEEK. Copyright ? 2000 Dow Jones & Company, Inc. All Rights Reserved. =09 Sarah Palmer Internal Communications Manager Enron Public Relations (713) 853-9843