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Ashcroft Recuses Himself From Probe Into Fallen Energy Giant

Investigation: Enron's vast connections in D.C. and Texas have created an obstacle to the Justice Department's inquiry.

January 11, 2002|JOSH MEYER and JAMES GERSTENZANG | TIMES STAFF WRITERS

WASHINGTON — Enron's many financial and political ties to the Bush administration and other government officials are already complicating a nascent criminal probe by the Justice Department into the bankrupt energy company.

And Enron's entrenched network of connections at the White House and on Capitol Hill--forged by political contributions, lobbying and personal ties--are making it difficult for politicians to keep at arm's length the growing furor engulfing the company.

The most obvious example is Atty. Gen. John Ashcroft's announcement Thursday that he and his chief of staff, David Ayres, are recusing themselves--removing themselves from any involvement in what will surely be one of the Justice Department's highest-profile criminal investigations of the year.

The reason: Ashcroft and Ayres didn't want anyone to think that they--or the Justice Department--would go easy on Enron because the company's chief executive, Kenneth L. Lay, other Enron employees and the company's political action committee had contributed more than $57,000 in 2000 to Ashcroft's failed senatorial campaign, which Ayres managed.

Ashcroft insisted that he has not been involved in any aspect of the Enron investigation. He said his deputy, Larry Thompson, would take his place if and when high-level consultations are needed.

In Houston, Enron's hometown, U.S. Atty. Michael T. Shelby recused not only himself Thursday but also his entire office of federal prosecutors, who were expected to play a prominent role in the criminal investigation.

In Shelby's case, the recusals came for the opposite reason: Too many prosecutors--himself included--had friends and family members who had worked for Enron and had suffered numbing financial losses when its stock price plummeted.

"We might be viewed as being overly aggressive because we know people, and in some cases are married to people, who lost substantial amounts of money as a result of the collapse of the company," Shelby said in an interview. "In my case, it's my wife's brother who works there."

Whether they fear being perceived as going too easy or too hard on Enron, the prosecutors' ties to the company could well hamper the investigation in its early stages, some Justice Department officials and outside legal experts said Thursday. Because of the likelihood of conflicts in the Houston office, the Justice Department this week convened a task force out of its Washington headquarters in an effort to determine whether any laws were broken as the company collapsed late last year, shredding billions of investor dollars and costing thousands of jobs.

"This investigation needs to go forward, and it needs to go forward in an expeditious and focused way," Shelby said. "And there needs to be a seamless transition between this office and the Department of Justice."

Enron has long sought to be influential in Texas and Washington, and it has succeeded through political contributions to both parties, extensive lobbying and personal ties.

Although few, if any, elected officials have said they will recuse themselves from the congressional investigations into the Enron collapse, many have connections to the company.

The most obvious example is Sen. Phil Gramm of Texas, the senior Republican on the Senate Banking Committee, which is investigating the Enron matter. Gramm's wife, Wendy, has served on Enron's board of directors.

And Enron has deep links to President Bush and others in his administration.

It was disclosed Thursday that Lay called two Cabinet members, Treasury Secretary Paul H. O'Neill and Commerce Secretary Don Evans, late last year to discuss the company's financial problems. O'Neill, through a spokeswoman, acknowledged being an acquaintance of Lay's. Evans, a former oil company executive, has long-standing connections to the Texas political and business worlds as well.

Overall, Enron's political action committee and the company's employees and directors contributed a total of $5.7 million to candidates and the two political parties--73% of that to Republicans--in the last seven election cycles, according to an analysis conducted by the Center for Responsive Politics. Bush received $113,800 for his presidential campaign, Gramm received $97,350, and Texas' other Republican senator, Kay Bailey Hutchison, received $99,500.

Enron's employees and directors have given $623,000 to Bush during his political career, according to the Center for Public Integrity.

Bush's chief economic advisor, Lawrence B. Lindsey, served on an Enron advisory board and, according to documents the White House made public last year, received $50,000 from the company before he joined the administration a year ago.

Karl Rove, Bush's senior advisor, delayed selling his significant portfolio of Enron stock for several months after taking office, to avoid having to pay capital gains taxes on his profits, and met with Lay while holding the stock.

Former Montana Gov. Marc Racicot, soon to become chairman of the Republican National Committee, was recently a lobbyist for Enron.

Some Democrats plan to take up the issue of the Bush administration's connections to Enron as the various investigations progress.

"The White House has to do a complete disclosure of all the contacts administration representatives had with Enron," said Phil Schilero, chief of staff to Rep. Henry A. Waxman (D-Los Angeles).

*

Times researcher Robert Patrick contributed to this report.

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