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Army Secretary Defends Role at Enron

Senate: Democrats on Commerce Committee attack his credibility about bookkeeping at the energy giant. Some call for his resignation.

July 19, 2002|ESTHER SCHRADER | TIMES STAFF WRITER

WASHINGTON — Senate Democrats, continuing their offensive against the Bush administration's close ties to big business, grilled Army Secretary Thomas E. White on Thursday on his role at Enron Corp., and some called for his resignation.

In sometimes hostile exchanges with White, lawmakers questioned the credibility of his statements that he knew nothing of the shoddy accounting practices and manipulation of California's energy market that Enron is alleged to have engaged in while he was vice chairman of a major Enron division.

They also questioned why federal regulators have not expanded their investigation of the Texas energy firm to include White, now serving as the Army's top civilian.

"This looks to me like a textbook case of an administration insider getting kid glove treatment," Sen. Byron L. Dorgan (D-N.D.) said.

"There are a lot of regulators in this executive branch who apparently came to government service hoping not to regulate."

White's appearance before the Senate Commerce Committee came as an administration stacked with former captains of industry is under increasing scrutiny as amid a spate of corporate accounting scandals. It was the first time White has been asked to testify on Capitol Hill about the Enron affair.

President Bush on Wednesday rebuffed calls for more details of his own business practices as a Texas oil executive in the early 1990s and said he expects Vice President Dick Cheney to be cleared by a Securities and Exchange Commission investigation into the accounting practices of Halliburton, the Texas energy firm Cheney once led.

White has not been implicated in any wrongdoing, although former Enron employees have alleged that the division he headed used questionable accounting practices during his tenure to overstate profits by hundreds of millions of dollars.

White told the panel that the accounting practices in question were standard in the industry at the time.

In a letter to White released Thursday, Sen. Barbara Boxer (D-Calif.) called on him to resign and said his testimony was "deceptive, argumentative, and not helpful in any way to the committee's quest for the truth."

Boxer wrote that there is a likelihood that further inquiries into White's role at Enron would distract from his duties as head of the Army. "The cloud surrounding you ... has grown darker," she said.

Boxer was not alone. Sens. Joseph I. Lieberman (D-Conn.), a prominent critic of the administration concerning Enron matters, and Harry Reid of Nevada, the second highest-ranking Democrat in the Senate, said this week they would support calls for White's resignation. But Reid added that he was unsure how many Democrats shared that view.

At one point rapping his pen on the witness table, White defended the accounting practices of the Enron division and the propriety of 77 phone calls he made to Enron executives at the same time he was selling shares in the company worth more than $12 million.

"I am responsible for the portion of that company that I ran," he said. "The deals that we put together, within the accounting structure that was the standard in the industry, I stand behind."

White was vice chairman of Enron Energy Services, which traded power to large energy companies. Critics say the division engaged in questionable electricity trading that helped drive up electricity prices during the 2000-2001 California power crisis.

The Justice Department began a criminal investigation of Enron in January aimed at determining whether the company defrauded investors by deliberately concealing crucial information about its finances. California state investigators are looking at what role Enron played in the costly California energy crisis.

White told the panel he was unaware of transactions detailed in a December 2000 Enron memo that spelled out strategies that critics say were meant to improperly take advantage of California's power shortages. He said his division worked independently of Enron's wholesale unit, whose traders wrote a memo detailing schemes they dubbed Death Star, Fat Boy and Get Shorty to profit from the California energy crisis

"I can categorically say that it was not ever in the interest of [his division of Enron] to see wholesale energy prices escalate," White said. "We were not in the California power market for the sake of buying and selling and swapping and trading and whatever else electricity. We were there to serve retail customers."

Dorgan said he found it hard to believe that White's division was unaware of what other company divisions were doing in allegedly attempting to manipulate electricity prices.

"It's all part of the Enron Corp. You're all kissing cousins here," Dorgan said.

White said he is "appalled and outraged at the facts that have come to light since I left Enron" and told senators he counts himself among the stockholders who were duped by the company.

White made about $50 million while at Enron, from salary and stock sales, but would have made even more if he had sold some of his stock earlier, before the company's slide into bankruptcy.

He agreed to sell his Enron holdings in May 2001, when he was named Army secretary, but missed a 90-day deadline to do so.

Boxer suggested that it was ludicrous for White to compare himself with small investors and employees of Enron who lost everything. "I would ask you in the name of, I don't even know what to call it--candor," she said, "not to do that."

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