Administration: Enron President Sought Aid

Jan. 11, 2002 -- The Treasury Department acknowledged today that Enron's president sought government help in receiving a credit extension while the staggering energy company was trying to avoid bankruptcy last fall.

A Treasury spokeswoman said today that Enron President Lawrence "Greg" Whalley asked Undersecretary for Domestic Finance Peter Fisher to intervene with bankers to help the company get a much-needed credit extension. Undersecretary Fisher spoke with Whalley six or eight times in late October and early November, but did not intervene on the company's behalf.

With the Enron controversy reaching a fever pitch, members of the Bush administration have been downplaying the significance of contacts they've had with the beleagured energy company's CEO Kenneth Lay.

The White House has acknowledged contacts between Enron's CEO and Cabinet members, disclosing that Lay contacted both Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans last fall, as the firm was entering a very public downward spiral leading to the biggest bankruptcy filing in U.S. history.

But in an interview with ABC's Good Morning America, Treasury Secretary Paul O'Neill said Lay's call was simply to give the Treasury secretary a "heads-up" about the financial problems the company was having, not to ask for government help.

"It's the kind of thing I would expect expect any big company executive to do if they understood how the government works and that the Treasury department has some responsibility to make sure the world capital markets are not unsettled by events that are going on in the private sector," O'Neill said. "I thought it was business as usual."

President Bush has also said he never talked about the firm's prospects with Lay.

No Intervention; Should Problems Have Been Publicized

O'Neill and Evans decided not to intervene in the matter. President Bush said Thursday he only learned of the problems at Enron — his most staunch campaign contributor over the years — when they became public knowledge.

A government bailout of a troubled company is not unheard of. The government most recently bailed out hedge fund Long Term Capital Management in 1998. But the issue of whether or not Enron — formerly the world's leading energy-trading firm, and a company with close ties to the White House — specifically asked for help raises some unsettling questions for the Bush administration.

An intervention into the situation might have been seen as a demonstration of favoritism. Conversely, many Enron workers have seen their retirement savings essentially ruined because of the dramatic drop in the company's share price, while some top Enron executives cashed out $1.1 billion of their shares when the stock price was near its peak.

Enron's 401(k) Disaster

In his conversations with the cabinet members, Lay told O'Neill and Evans the company was in serious financial trouble. The White House says Lay spoke with O'Neill on Oct. 28 and with Evans on Oct. 29, when O'Neill and Evans decided not to take action.

O'Neill also apparently discussed the matter with Fisher and talked to Lay again on Nov. 8 — the day Enron filed documents announcing it had sustained $586 million more in trading losses than it had previously announced.

Rep. Henry Waxman, D-Calif., a persistent critic of the administration's ties to the Houston-based company, sharply criticized O'Neill and Evans after the contacts came to light, saying, "It is now clear the White House had knowledge that Enron was likely to collapse but did nothing to try to protect innocent employees and shareholders who ultimately lost their life savings."

In an earlier development this week, Vice President Dick Cheney, head of the administration's energy task force, acknowledged he and his aides had a series of six meetings in 2001 with Enron executives, including Lay. Cheney maintains the meetings were to discuss energy policy and not financial concerns.

Cheney: We Met Enron Execs

Ashcroft Out of Inquiry; Accounting Documents Destroyed

But the extent of the administration's ties to Enron was underscored Thursday afternoon when Attorney General John Ashcroft recused himself from the Justice Department's criminal investigation of Enron, on account of campaign contributions he accepted from the energy trader while running for Senate.

Lay and Enron itself combined to contribute at least $50,000 to a political action committee supporting Ashcroft's unsuccessful bid to hold onto his Senate seat from Missouri in 2000. Lay and Enron have also contributed hundreds of thousands of dollars over the years to Bush's various political campaigns.

The entire Houston office of the Justice Department assigned to the case has also recused itself from the inquiry, citing family or financial ties to Enron. There is no indication that Bush administration officials are targets of the Justice Department inquiry.

In a separate development Thursday, Enron's accountant, Arthur Andersen LLP, announced that a "significant but undetermined" number of documents related to the company had been destroyed. Justice Department officials and congressional committees have been seeking information from Andersen about Enron's financial workings.

"The destruction of documents by Arthur Andersen will not deter us from pursuit of our investigation and will be included within the scope of our investigation," said Steven Cutler, head of enforcement at the Securities and Exchange Commission.

The Senate's Governmental Afairs Committee has issued 51 subpoenas to Enron and Arthur Andersen, and the company has said it is suspending its current records management policies.

Who's Watching Enron's Watchdog?

Enron's Stunning Losses

In November, Enron revealed its financial position was $1.2 billion worse than its publicly filed financial statements previously indicated.

Congressional inquiries into the company's activities — including possible wrongdoing by Lay and former Enron President Jeffrey Skilling — began in December and will resume on Jan. 24, after Congress' recess ends. The SEC is also investigating the company.

Enron's Death Spiral

On Wednesday, the Justice Department signaled that it had formed a special task force to investigate Enron, which last month filed the biggest bankruptcy claim in U.S. history.

What is now the largest criminal investigation ever launched against a corporation is expected to scrutinize whether Enron used off-the-books investment vehicles to hide the severe financial problems that led to its sudden downfall. The criminal probe will be based in Washington but will involve federal prosecutors from around the country, Justice Department officials said.

Senior FBI officials also tell ABCNEWS it will focus on possible fraud and insider trading charges.

From Enron to Washington

The close ties between the Bush administration and Enron come from a long-standing relationship, and campaign-finance watchdogs generally considered the company to have been Bush's most staunch benefactor.

Enron's Close Ties to Bush

According to the Center for Public Integrity, Enron has contributed more than $500,000 to Bush's political activities, starting with his Texas gubernatorial campaigns. As recently as Oct. 16, with a crisis atmosphere swirling around Enron, the company gave $60,000 to the Republican National Committee.

Lay at one point worked with the Bush transition team and helped screen candidates for the Federal Energy Regulatory Commission. Bush's most prominent economic adviser, Larry Lindsey, and his point man on trade issues, Robert Zoellick, have both served as Enron advisers.

Lindsey received $50,000 from Enron for his services, while Bush's chief political strategist, Karl Rove, owned Enron stock while the energy task force was conducting its work. Rove sold his shares for $68,000 last June.

In response to the growing furor, Bush announced Thursday he would order the Treasury Department to review the rules governing company pensions and 401(k) plans.

"This administration will fully investigate issues, such as the Enron bankruptcy, to make sure we can learn from the past and make sure that workers are protected," said Bush.

ABCNEWS' Peter Dizikes, Terry Moran, Jackie Judd and Catherine Valenti contributed to this report