|
|
Enron Mail |
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 © 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 chairw
|