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The Nation | THE ENRON INQUIRY

Enron Sought Cabinet's Help With Bankers

Inquiry: Failing energy company called a top Treasury Department official, the government says. Congress is looking into whether politics may have played a role.

January 12, 2002|EDMUND SANDERS and RICHARD SIMON | TIMES STAFF WRITERS

WASHINGTON — Struggling to avert a financial meltdown, Enron Corp. asked a top Treasury Department official for help in securing a much-needed loan from the company's bankers during a series of phone calls last fall, government officials revealed Friday.

The disclosure is the strongest indication yet that Enron, one of President Bush's biggest campaign supporters, appealed to administration officials for specific assistance before its Dec. 2 bankruptcy, and before the full extent of its problems were known. Treasury officials said they declined to intervene.

In addition to calling government officials themselves, Enron executives received an assist from one of the company's powerful lenders, New York-based Citigroup.

Robert E. Rubin, head of Citigroup and a former Clinton administration Treasury secretary, called the same Treasury Department official, Peter Fisher, on Nov. 8 to suggest that Fisher take steps to prevent Enron's credit rating from being downgraded, according to Treasury Department spokeswoman Michele Davis.

"Fisher responded that he didn't think it advisable to make such a call," Davis said. "Rubin said he thought that was a reasonable position. Fisher made no such call."

Officials at Citigroup could not be reached for comment late Friday. It was unclear whether Rubin was concerned about his bank's investment or about how Enron's collapse might affect the nation's financial markets.

Friday's disclosures heightened the debate in Washington about whether energy giant Enron had attempted to use its political clout to ease its financial problems or was merely consulting with government leaders concerning issues that might have roiled financial markets.

Reports of Enron's contacts with government officials had some members of Congress vowing Friday to step up their investigation into whether political relationships played any role in the government's actions in the matter.

Since Enron's collapse, Congress, the Justice Department and government regulators have begun looking into whether the company illegally concealed the extent of its financial problems from its investors and accountants. Enron's bankruptcy wiped out the retirement savings of thousands of employees and cost investors billions of dollars.

Rep. Henry A. Waxman of Los Angeles called on administration officials to make public the details of all contacts with Enron representatives before the company's bankruptcy filing last month.

Waxman, the top Democrat on the House Government Reform Committee, said in a letter Friday to administration officials that he wants to determine why the administration "apparently did nothing to mitigate the harm of the Enron bankruptcy to thousands of its employees and shareholders."

Sen. Joseph I. Lieberman (D-Conn.), chairman of the Senate Governmental Affairs Committee, said the contacts between Enron and administration officials are a "source of concern."

"The close ties between Enron and the administration eventually have to be a subject of inquiry," he said in a television interview. But, he added, "it's important that we don't jump to conclusions."

Earlier this week, the government disclosed that Enron Chairman Kenneth L. Lay called Treasury Secretary Paul H. O'Neill, Commerce Secretary Don Evans and Federal Reserve Chairman Alan Greenspan to inform them about Enron's problems.

Lay told Evans, Bush's former campaign manager, that Enron would welcome any assistance he could provide in helping Enron prevent a credit rating agency from downgrading the company's debts.

White House Press Secretary Ari Fleischer insisted that the Enron case would have no political ramifications for the president.

"This dog won't hunt," he said. "The president's approach is that people need to be helped. And this needs to be fully investigated to determine if there was any criminal wrongdoing by Enron."

On Friday, the Treasury Department said that, after Lay called O'Neill, Enron President Lawrence "Greg" Whalley followed up with six to eight phone calls to Fisher, Treasury's undersecretary for domestic finance, in late October and early November. On Nov. 8, Enron disclosed that its accounting practices for five years had grossly overstated profits, triggering its meltdown.

Thus, at least some of the calls were made before Enron publicly disclosed the depth of its problems.

Whalley asked Fisher to call Enron's bankers to help secure a loan, Davis said. Fisher is a former official at the Federal Reserve Bank of New York who played a large role in the government bailout of hedge fund Long Term Capital Management in 1998.

"As Enron's negotiations with its bankers for an extension of credit neared a decision point, the president of Enron asked Undersecretary Fisher to call the banks," Davis said. "Undersecretary Fisher inferred he was being asked to encourage the banks to extend credit. He made no such calls."

Enron attorney Robert S. Bennett said the calls by Enron executives to Bush administration officials were "perfectly appropriate."

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