Threat to Bush in Enron inquiry
Matthew Engel in Washington and David Teather in New York Friday January 11, 2002 The Guardian
President Bush moved rapidly yesterday to distance himself from the collapsed Enron Corporation as speculation grew that the bankruptcy of the giant energy trading company could turn into his administration's most dangerous scandal.
Hours after the justice department announced it was setting up a nationwide team of prosecutors as part of a criminal inquiry into Enron, the White House ordered a review of rules affecting pension rights and corporate disclosure. Mr Bush told reporters he had not seen Enron's chairman, Kenneth Lay, since last spring and had never discussed the company's financial problems with him.
However, it emerged last night that Mr Lay had contacted the US treasury secretary, Paul O'Neill, in late October to propose a bail-out for Enron, which suggested the White House had been aware of the company's problems before they were made public.
Enron, the seventh ranked company on the Fortune 500, collapsed last month, the biggest bankruptcy in corporate history. About 6,000 workers were laid off, many also losing their pensions because they subscribed to a retirement plan based on Enron shares, which dropped from $90 (£62) to pennies in a year. The list of creditors runs to 54 pages but senior executives were able to sell their stock before the price plummeted.
Enron accountants Arthur Andersen, already under the microscope, admitted last night that a "significant but undetermined number" of documents relating to its audit of the energy company had been destroyed.
It said employees working with Enron had disposed of papers, emails and other correspondence, although it is unclear when they were destroyed. Investigators have issued subpoenas to obtain files from Enron and Andersen and described the development as "very serious".
Enron is believed to be the largest donor to Mr Bush's campaign funds over the course of his career, and Mr Lay is an old Texas friend of the president. He was named as one of the president's energy advisers last year.
The links between the administration and the company operate on many levels. Marc Racicot, Enron's Washington lobbyist, was named last week as chairman of the Republican national committee. The president's chief economic adviser, Lawrence Lindsay, and the trade negotiator Robert Zoellick were advisers to the company.
Vice-president Dick Cheney is known to have met Mr Lay in April to discuss energy policy and staff from Mr Cheney's energy taskforce met Enron executives at least six times. The administration insists the meetings covered only policy matters.
The White House spokesman, Ari Fleischer, was peppered with questions yesterday about whether Mr Bush and Mr Cheney were aware of the situation and if not, why not.
"Conversation is routine be tween people in this country and government," he said at the daily briefing. "There's a difference between corporate contact and wrongdoing."
A justice department investigation on this scale into a single entity is thought to be unprecedented. Officials would not say whether the attorney general, John Ashcroft, was involved in the decision, though, Mr Ashcroft, himself a recipient of Enron political largesse, said last night he would not have any future involvement in the case.
Congressional Democrats, conscious of the efforts poured into the largely abortive investigation of Bill Clinton's property dealings at Whitewater, are beginning to crank up their own investigations.
"Enron makes Whitewater look like peanuts," the syndicated columnist Bill Press said.