Rubin Asked Treasury About Aid to Enron
By Dana Milbank and Susan Schmidt Washington Post Staff Writers Saturday, January 12, 2002; Page A01
Former Clinton Treasury secretary Robert E. Rubin telephoned a top Treasury official last fall to explore whether the Bush administration could intervene on behalf of Enron Corp. as the giant energy company neared collapse, officials said yesterday.
Rubin, chairman of the executive committee at Citigroup, one of Enron's main creditors, called Peter Fisher, Treasury undersecretary for domestic finance, and asked "what he thought of the idea" of calling bond-rating agencies to help forestall a crippling reduction in Enron's credit rating, according to a statement released by the Treasury Department.
Fisher told Rubin that he didn't think it was advisable, and did not make a call, Treasury said.
The news of Rubin's efforts concluded another day of disclosures at the Treasury Department, on Capitol Hill and elsewhere about the extent of government contact with Enron executives in the weeks before the company's filing for bankruptcy court protection.
Yesterday's developments included the Treasury Department's disclosure that Enron President Lawrence "Greg" Whalley had "six to eight" conversations last fall with Fisher, including one in which he asked Fisher to call Enron's lenders as they decided whether to extend credit to the company.
Also yesterday, Congress moved closer to filing a lawsuit against Vice President Cheney to force the release of information on administration meetings with energy industry executives last spring. Congressional Democrats want to know how much influence the executives may have had on administration energy policy.
Enron's Dec. 2 filing for bankruptcy law protection was the largest in U.S. history, wiping out the pensions of thousands of workers. The Justice Department opened a criminal investigation into the collapse, and President Bush on Thursday created task forces to examine changes to the law to protect pensioners in bankruptcies.
That same day, Enron's auditor acknowledged it had destroyed thousands of documents; two Bush Cabinet secretaries said they had received calls from Enron's chief executive, Kenneth L. Lay, as the company neared collapse; and Attorney General John D. Ashcroft recused himself from the government's criminal probe because he had received contributions from Enron for his 2000 senatorial campaign.
As lawmakers and the administration tried to sort out the legal and political consequences of the growing controversy, the administration argued forcefully that there was no wrongdoing because its officials did not intervene to aid Enron. But some Democrats, including Rep. Henry Waxman (D-Calif.), said the administration should have tried to protect Enron workers and pensioners after learning the company was about to declare bankruptcy.
The Treasury Department's statements about Rubin showed Enron's political reach and the administration's determination to point out that the company had contacts with prominent Democrats as well as Republicans.
According to the Treasury statement, Rubin inquired Nov. 8 whether the government could encourage the bond agencies to work with Enron's lenders to "see if there is an alternative to an immediate downgrade" of Enron's credit rating. The downgrade likely would have forced the company into bankruptcy.
A source close to Rubin said the Treasury statement was "largely accurate," but that Rubin prefaced the call by telling Fisher, "This is probably not a good idea." The source said that a potential merger between Enron and its Houston neighbor, Dynegy Inc., was in trouble and that Rubin was "trying to hold it all together."
Citigroup is one of Enron's two principal bankers, along with J.P. Morgan. The banks were side by side with Enron in November as it struggled to keep alive the Dynegy deal. The banks have taken the lead in trying to raise as much as $1.5 billion to help Enron through its bankruptcy reorganization effort.
The Treasury Department also said that in one of his telephone calls to Fisher during late October and early November, Whalley suggested Fisher help Enron secure a credit extension. Enron yesterday suggested the comment was made in jest. Fisher declined to ask for the extension, Treasury spokeswoman Michele Davis said, but he did talk to banks about whether Enron's collapse would so roil the banking system or capital markets that the government would be forced to intervene. The answer Fisher received, Davis said, was that the banks and markets could absorb the loss.
The disclosures portray more intensive contact between the administration and Enron than the White House had indicated on Thursday. The administration said then that Lay had two conversations with Treasury Secretary Paul H. O'Neill and one with Commerce Secretary Donald L. Evans.
Lay suggested to Evans that it would be helpful for Evans to try to persuade a private credit-rating agency not to downgrade Enron's debt, and Evans declined, according to the Commerce Department.
The administration said nobody intervened to aid Enron. White House spokesman Ari Fleischer and Mary Matalin, senior aide to Cheney, said they do not believe any White House officials, including Bush and Cheney, heard of the approaches from Enron officials until Thursday.
Congressional aides said yesterday that senior Democratic senators were preparing a letter to the investigative arm of Congress, the General Accounting Office, encouraging it to proceed with efforts to obtain records of meetings by Cheney's energy task force, which drew up the administration's energy policy last spring. The GAO has said it would decide within a month whether to file a lawsuit to obtain the records, which the White House has said it would not provide. Congressional officials said GAO action is likely to come soon, but the agency is waiting for a guarantee of support from lawmakers. Senate aides said Sen. Byron Dorgan (D-N.D.), who heads a Commerce subcommittee examining Enron, has been working on a letter of support to the GAO, possibly to be joined by others.
A spokeswoman for Sen. Joseph I. Lieberman (D-Conn.), chairman of the Senate Governmental Affairs Committee, said he believes "Congress has a right to the information" and hopes the administration will turn it over without a lawsuit.
Some Republican lawmakers have also called on the White House to provide the records of its energy task force. "It is just basic information that should be provided and isn't all that big a deal, except for the fact that the administration doesn't want to share it, which makes it a big deal," said Rep. Christopher Shays (R-Conn.), who called on the GAO to proceed. Earlier this month, the White House disclosed that its energy task force met six times with Enron officials but said the company's finances were not discussed.
Matalin said the administration position on releasing the information was unchanged. "If they want to know what we discussed, read the first energy policy in a generation," she said. The House Energy and Commerce Committee asked yesterday for hundreds of new records from Enron's auditor, Arthur Andersen LLP, including the personal files of David Duncan and five other Andersen partners involved in the audit of the company. The committee believes many of the destroyed documents were e-mails sent to and from executives, committee spokesman Ken Johnson said.
The Senate's Permanent Subcommittee on Investigations issued 51 subpoenas to Enron and Andersen yesterday. Its chairman, Sen. Carl Levin (D-Mich.), said, "We are going to be looking into the circumstances surrounding the board members' Enron stock and option trades, the conduct of the board's audit committee, the conduct of the board with respect to both internal and external audits."
While congressional committees pursued their investigations, political party officials tried to taint each other with donations received from the company. Since 1989, Enron has made $5.8 million in campaign donations -- 73 percent to Republicans and 27 percent to Democrats.
The Republican National Committee pointed out that a large number of top Democrats received Enron contributions, including Lieberman, Senate Majority Leader Thomas A. Daschle (S.D.) and House Minority Leader Richard A. Gephardt (Mo.). The RNC also pointed out that the Democratic National Committee had received $285,000 in Enron contributions in 2000. But Rep. Thomas M. Davis III (R-Va.) said yesterday the National Republican Congressional Committee will return $100,000 donated by Enron last year and called for bipartisan investigation into the company's bankruptcy and requests for government help.
"If anybody else wants to focus on politics, that's their prerogative, but the president's focus is on getting to the bottom of this fully," Fleischer said. As a political issue, he said, "this dog won't hunt."
Fisher, the Treasury official asked to intervene with Enron's lenders, is a Democrat. He was previously with the Federal Reserve Bank of New York and helped orchestrate a private-sector bailout for Long-Term Capital Management, a $4 billion hedge fund.
His current job is to monitor the financial markets. He kept in contact with the big players on Wall Street, constantly asking if they sensed any fallout from Enron's market condition. Michelle Davis said Fisher "politely demurred" when he sensed he was being asked to contact the banks. Robert Bennett, an attorney for Enron, said Whalley called Fisher whenever there was bad news to report, but suggested his comments were less sinister than the Treasury Department indicated. According to Bennett, Whalley told Fisher, "It would be nice if you could get these banks to lend us some money. But I should tell you, our credit is not good." Bennett said Whalley then laughed.
In addition to calling O'Neill and Evans, Lay called Federal Reserve Chairman Alan Greenspan on Oct. 26. "We will not characterize the conversation," a Fed spokeswoman said. "The chairman did nothing in response to the call because it would have been inappropriate."
Karen Denne, spokeswoman for Enron, said: "Mr. Lay does not believe he asked for anything. He wanted to provide information."
Staff writers John M. Berry, Glenn Kessler and Spencer Hsu contributed to this report.