Could Enron sink Bush?

Almost 30 years have elapsed since the “third rate burglary” of the Democratic National Committee headquarters on June 17, 1972, that opened the dam of the Watergate scandal. The press and members of Congress largely ignored the crime, as then President Richard M. Nixon kept the nation’s focus on the war in Vietnam.

Similarly, with the press and Congress distracted by President George W. Bush’s war in Afghanistan, they are ignoring another scandal. No third-rate burglary, the Enron Corp. scandal involves millions of dollars in campaign contributions to Bush, U.S. Senator Phil Gramm and other members of Congress. The cozy relationship between the Bush White House and Enron enabled Kenneth L. Lay, then Enron’s CEO, to meet in secret with Vice President Richard Cheney to help mold the nation’s energy policy. Bush’s presidential campaign received $1.14 million from Enron.

Enron officials exerted similar political power in Sacramento during the mid-1990s through last year when they were perhaps the most vocal and forceful advocates of deregulating California’s electricity market, a change that enriched power companies but ended up hurting both the state and consumers.

Shortly after taking office, President Bush waged a battle against the imposition of federal price controls in California that allowed Enron to price-gouge consumers by extending the energy crisis in California, costing the state billions of dollars. Enron reported increased revenues of almost $70 billion from the previous year.

Bush also resisted attempts to crack down on Enron’s utilization of its 847 offshore subsidiaries in countries with lax banking-regulation laws. The consumer-rights watchdog organization Public Citizen alleges that some of these offshore havens helped Enron defraud its stockholders.

Moreover, while Senator Gramm was working the Congress to pass legislation favorable to Enron (and collecting nearly $260,000 in campaign contributions from the company), his wife, Wendy Gramm, first was chairwoman of a regulatory committee overseeing Enron’s business activities and later a paid member of that company’s board of directors. Enron paid her between $915,000 and $1.85 million, according to Public Citizen. Senator Gramm has announced his decision not to seek re-election for another term in the Senate.

Enron, whose stock price plummeted from almost $85 per share to $0.25 per share within one year, forced its employees to invest their retirement plans in the company stock while corporate executives were free to make out like bandits by selling their stock when it was near its peak before anyone caught wind of the company’s impending collapse. Jeffrey K. Skilling, who resigned his position as Enron’s chief executive in August, sold more than $30 million worth of his stock in the company this year. Lay, who was Skilling’s predecessor, was able to unload about $23 million worth of his Enron stock.

Meanwhile, employees, who invested in Enron stock through their company’s 401(k) plan, were prohibited from diversifying into other securities. They lost their shirts while 500 of the company’s top executives divided up $55 million worth of bonuses. The remaining 20,000 employees were given severance packages of not more than $4,500 each.

Eventually, during the Watergate scandal, members of Congress began to take a closer look at what first appeared to be an event that was unrelated to the White House. Armed with much more evidence of a White House conflict of interest than Watergate, Representative Henry A. Waxman (D-California) has opened a congressional investigation on the Enron matter. In a letter dated December 4, 2001, to Vice President Cheney, Waxman expresses concern about the administration’s secret meetings with Lay and the company’s subsequent failure.

Waxman also mentions “the fact that senior Enron executives were enriching themselves at the same time that Enron was lavishing large campaign contributions on President Bush and the Republican Party and apparently influencing the administration’s energy policies.”

Public Citizen urged Congress to bring Senator Gramm and Wendy Gramm along with Secretary of the Treasury Paul O’Neill to give sworn testimony about what they know about possible accounting fraud and the use of offshore tax and bank regulation havens. The consumer-rights organization also called for President Bush, Vice President Cheney and political adviser Karl Rove to answer questions about whether discussions involving energy price controls, energy regulations or tax havens took place with Enron executives.

Specifically, what investigators need to determine is who knew what and when did they know it? As Waxman wrote in his letter to the vice president, “It is appropriate to ask whether Enron communicated to (Cheney) or others affiliated with (his) task force information about its precarious financial position. This is especially important since this information was apparently hidden from investors and the public … ”