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Greenfield at Large

Enron Investigations: Any Political Fallout?

Aired January 14, 2002 - 23:01   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JEFF GREENFIELD, HOST: Tonight, as fingers prepare to point all over Washington, we give the former head of the SEC the chance to say, "I told you so." We'll hear from a senator chairing one of the investigations. And we'll get a lesson in damage control from two of the sharpest political operatives around. The fallout from Enron tonight on Greenfield at large.

Some of the questions about Enron are relatively straightforward. How did a company so big fall so fast? Was there criminal or unethical conduct? How do we keep it from happening again?

Some of the questions are speculative. Will there be political damage from any of this? If so, to whom?

Later, we'll talk to the man who was head of the Securities and Exchange Commission, fought a losing battle for a reform that might, might have kept Enron from happening. We'll also talk to two top political operatives, ask them how they would advise the political players. And just to keep it interesting, we're going to ask them to advise the guys they spent their adult lives fighting against.

But first, we are joined by a senator who will chair one of the many investigations into the Enron collapse. He's New Mexico Democrat Jeff Bingaman, who chairs the Senate Energy Committee.

Senator, for eight years the Clinton administration complained about a culture of investigation, saying that it was basically interfering with the people's business. Now there are six separate investigations in the Senate alone. Is this just politics as usual or the culture of investigation as usual?

SEN JEFF BINGAMAN (D-NM), CHMN. ENERGY COMMITTEE: Well, I don't think it's just politics as usual. I think there are very legitimate questions, many of which you just articulated that need to be answered.

Now whether we should be doing it with six committees rather than one or two is a valid question. And the truth is, we don't have a coordinated approach in the Senate or in the House of Representatives. So each committee chair is doing what they believe it is their responsibility to try to do, and that is, ferret out the facts that fall within the jurisdiction of that committee.

GREENFIELD: Senator, there are unkind jaded journalists who suggest that one of the reasons for that is that no one committee chair's willing to give up his or her moment in the sun. Could you actually get together with your fellow chairs and say, "Look, maybe two, but six?"

BINGAMAN: Well, I think that would be a very good idea. And I would welcome that. I do think we'll see a lot of duplication of testimony. If all of the committees that currently plan to have hearings wind up having hearings.

GREENFIELD: Are you at all confident that you can keep politics out of this, that the urge to either attack or defend one side or the other can somehow be kept caged in, so you can actually find out what happened?

BINGAMAN: Well, I think that it depends on where the facts that come out lead. Obviously, if it turns out that one or another of the - of those in political office were, in fact, involved with something that is questionable, then that will become a major focus of attention.

If the problem is within the corporation, if it's Enron executives and management making either bad decisions or decisions that were based on motives that were illegal or otherwise, then I think that there's no reason that should be political or partisan, as I see it.

GREENFIELD: What do you most want to find out? You chair the Energy Committee. What's your biggest hope, in terms of finding out what happened?

BINGAMAN: Well, what we would like to do in the Energy Committee, is to determine if there are defects in the way we oversee and regulate energy markets, markets in which people trade, buy and sell natural gas, electricity, other commodities in the energy sector.

I think that's a valid area for our committee to be looking into. We're going to see whether or not there's a lack of information about what Enron was doing, that may have contributed to the collapse of Enron and to all of the fallout from that.

And we have some provisions in the energy bill we have pending in the Senate now, which will require more transparency, more ability to see what - at what price different energy contracts are trading at. We need to look at that legislation in light of what we learned at this hearing.

GREENFIELD: Senator John Ashcroft recused himself, because when he ran for the Senate in 2000, he got money from Enron. Except for Chuck Schumer, you got more money than any other Democrat. Does this give you pause about your own - the perception of you as the chair of this committee?

BINGAMAN: I don't believe so. I've never heard anyone suggest that I've taken action or planned any action that was in any way biased by virtue of that previous contribution that I received from Enron. GREENFIELD: Right, but Ashcroft, Senator - Attorney General Ashcroft stepped aside to avoid the perception of a potential conflict. You're not - that doesn't give you any pause at all, as you prepare to chair this committee?

BINGAMAN: Well, as far as I'm concerned, Enron contributed heavily to a great many members of Congress on both sides of the political aisle. And if everybody who is - who received a contribution from them steps aside, then I really don't know that Congress would be doing its duty to try to look into this issue.

GREENFIELD: And finally, might that not be one of the things that Congress should look into, the fact that if you tried to exclude people who got contributions, you couldn't get a quorum?

BINGAMAN: Well, I would agree. But that requires campaign finance reform. You've got to find a way to get some of the special interest money out of politics these days. And we've tried very hard to move that legislation. We've actually passed it through the Senate, some form of that legislation. I hope very much it'll pass before this Congress adjourns.

GREENFIELD: All right, Senator Bingaman, thank you very much for joining us. I appreciate your time. We will no doubt be seeing you again, as these investigations proceed.

BINGAMAN: Thank you.

GREENFIELD: Now if there's any - OK, senator. If there's anyone in this Enron story who has the right to say "I told you so," it is the man who chaired the Securities and Exchange Commission for eight years, Arthur Levitt.

One of his losing fights as chair of the SEC was the effort to stop accounting firms from also acting as consultants to the very firms whose books they were supposed to be checking. The exact situation the Arthur Andersen firm was in, when it signed off on Enron's books.

I spoke with Arthur Levitt earlier from Stuart, Florida.

(BEGIN VIDEOTAPE)

GREENFIELD: Mr. Levitt, back in June of 2000, when the SEC, which you chaired, proposed a rule to say to accounting firms, basically, you can't both be an accounting firm and a consulting firm. Is the Enron situation kind of a textbook case of what you had in mind?

ARTHUR LEVITT, FMR. SEC CHAIRMAN: It's one of many cases. It certainly is the most egregious, but it is the kind of situation where a lot of people dropped the ball. And there was obviously a conflict in terms of consulting fees and audit fees, which were enormous. And if you combine all that, you have a great deal of public disillusionment with the way the numbers are run. GREENFIELD: Why, in sum, couldn't you get this rule passed? I mean, was it just the opposition of some of the big accounting firms, I gather, that Congress was prepared to block this rule? What happened?

LEVITT: The accounting firms, three of the five accounting firms, fought this tooth and nail. They hired a number of lobbyists. And they waged a campaign in Congress which was the most hard fought of any in my eight years in Washington.

Some of the people today, who are calling for reform, were the very people who tried to hold us back in terms of splitting off consulting from auditing.

GREENFIELD: Like who?

LEVITT: Oh, I don't want to get into the names, because I believe in salvation. And if they're going down the right road now, I don't want to discourage them from that.

GREENFIELD: Well, that's very restrained of you. But particularly, what is it that so worried you about this? Is it basically the fact that an accounting firm was not going to call it as they see it, if that same firm they're auditing is giving them millions in consulting fees? Is it that simple?

LEVITT: Jeff, it's very simply this. An audit features maybe 100 different subjective calls. Are those calls going to be made in favor or management or the shareholders? And that decision will be looked upon by the investing public very differently if a firm receives millions of dollars in consulting fees, as well as audit fees. Perception matters. And the firms argued against us that perception doesn't matter at all.

GREENFIELD: Had your rule been in effect though, I've heard it said that look, even if Andersen was simply auditing the books of a company like Enron, an accounting firm can get in trouble if they call it straight, whether or not they're also doing consulting for business? Is that correct?

LEVITT: Yes, that is correct. And it is not nearly the accounting firm that was to blame for this tragedy. It was the board of directors that was seduced. It was the security analysts that simply weren't doing their job and had their own levels of conflict.

It was the rating agencies, which dropped the ball. It was the investment bankers that cooked up this scheme to hide the losses in the subsidiary companies. It was the standard setters, who were too slow to establish standards to prevent this kind of occurrence.

GREENFIELD: That being the case, let me ask this question as bluntly as I know how, why shouldn't the average Joe or Jane conclude that the old folk wisdom is right? That is, if there isn't a level playing field, that the insiders, the big shots, the people with the most money at stake, are always going to have a huge advantage over people who are kept out of this kind of closed circle? LEVITT: You know, another element in this was the public's willingness, at the height of a bull market, unprecedented in U.S. history, to accept numbers that they didn't understand. They were at fault as well.

Part of the process of a capitalistic system is the process of having miscreants, bad actors such as those involved in this scene called to task. We don't know who's going to come out of this as the real villains, but I've named a whole cadre. But there are remedies for this.

And the remedies, I think, include strengthening the boards of companies, so they include more members from independent sources, creating an oversight mechanism for the accounting profession, which doesn't have one. The SEC, in my judgment, should appoint a group of independent people to oversee the accounting profession as kind of a self-regulating mechanism.

And the NASD and the New York Stock Exchange, that establish rules for analysts, so that those gatekeepers do the job they were supposed to do. Right here, we had a failure of a whole host of gatekeepers that were intended to protect the investing public against this kind of thing.

GREENFIELD: Finally, Mr. Levitt, in terms of what we're going to turn to later in the show, would this have happened - would your rule have been blocked, had there not been, not just from Enron, but across the board, an enormous link between major, powerful institutions and campaign money, political money? Was this part of it?

LEVITT: I think it was part of it, but there was no one part. Nor do I think there is one legislative or regulatory fix. I think this is a question of culture. And American companies have drifted close to the edge of the envelope, in terms of using devices to color earnings in ways which deceive the public.

It's the job of the public, of the overseers, of the regulators to see to it that these areas are tightened up and clarified. We have an opportunity now to look at the system that we never had before. And the political stars are in the right alignment with Congress now mobilized behind an effort to get at fair and full disclosure. Let's not blow it by getting sidetracked into miscellaneous concerns.

GREENFIELD: All right, Arthur Levitt, former chairman of the Securities and Exchange Commission, thank you very much for joining us. Appreciate it.

(END VIDEOTAPE)

And still ahead, the political fallout, as we ask a Democrat and a Republican to give aid and comfort to the enemy.

(COMMERCIAL BREAK)

GREENFIELD: To say that the White House, the Congress, the two political parties are playing close attention to the Enron mess is a little like saying the sun will rise in the East tomorrow.

It's hardly surprising. Enron was a major campaign contributor to both parties. It had close connections to many in the Bush administration. And as a company, it had a direct intansitimes (ph) interest in the rules and regulations Washington set.

Over the weekend, voices from across the political landscape fanned out across America's television sets to make their points.

(BEGIN VIDEO CLIP, ABC THIS WEEK)

PAUL O'NEILL, TREASURY SECRETARY: Ken Lay didn't ask me to do anything. And you know, we did nothing.

(END VIDEO CLIP)

GREENFIELD: From the Secretary of the Treasury yesterday, an assertion that the administration did nothing to help Enron escape its fate and an equally strong assertion that there was nothing it should have done to alert investors or Enron workers.

(BEGIN VIDEO CLIP, ABC THIS WEEK)

O'NEILL: It's not the role of government officials to call attention to the things that are already being recorded in the media in a very strong way. I didn't know anything that you didn't know.

(END VIDEO CLIP)

GREENFIELD: From Commerce Secretary Don Evans, an assertion that a comment to White House Chief of Staff Andrew Card about a call from Enron was nothing out of the ordinary.

(BEGIN VIDEO CLIP, "MEET THE PRESS")

DON EVANS, COMMERCE SECRETARY: And so, with all the ongoing and continuing activity in Enron and Dynegy, I thought the White House ought to know. I was over there one day. And I stepped into Andy Card's office and told him I'd received this call. He simply listened to me and said, "Thank you very much."

(END VIDEO CLIP)

GREENFIELD: From Democratic Senator Joe Biden, a warning shot fired across the White House bow.

(BEGIN VIDEO CLIP, "MEET THE PRESS")

SEN JOE BIDEN (D), DELAWARE: If there was any involvement because of the incredible help the Bush campaign got from Enron here, it will be - I don't know that there has been, but it will be devastating.

GREENFIELD: But from fellow Democrat Joseph Lieberman, a far more benign view.

(BEGIN VIDEO CLIP)

SEN JOSEPH LIEBERMAN (D), CONNECTICUT: Based on the stories that are being told, I'd say that the cabinet members in the Bush administration who were called by Enron executives for help, as the company was about to go into bankruptcy, acted properly by not giving any help.

(END VIDEO CLIP)

GREENFIELD: And now for something almost completely different. Rather than argue the politics, we wanted to try to understand it. Instead of assuming scandal or controversy, we wanted to get a picture of how veteran political players think in such a time.

So we've asked Paul Begala, a principle campaign aid and White House advisor to Bill Clinton to join us. He's co-author with James Carville of "Buck Up, Suck Up." I have to say that carefully, "12 Winning Secrets from the War Room." We are assigning him, temporarily, the role of an advisor to George W. Bush.

Similarly, we have invited Alex Castellanos, a veteran of GOP wars. He worked on the Bush campaign in 2000, to serve for one night only, I assure him, as a council for Democrats.

Mr. Begala, you find yourself somehow in the Bush White House. And they say, "OK, you've been there when trouble - what's our do and what's our don't? What do we do? What do we don't do?"

PAUL BEGALA, DEMOCRATIC STRATEGIST: Well, let's not make a problem bigger than it is? So I've got four do's and four don'ts for you, Mr. President.

Number one, do bring in an outside investigator. Doesn't have to be some Ken Star, special investigator, but just some outside person. I would nominate Admiral McVugh (ph). He was a Democrat in Congress. He served with distinction on the court of appeals actually with Ken Star. He was Bill Clinton's general counsel in the White House, but he's had a distinguished career. And he won't need to make his bones by being unfair. He can get to the bottom of this. So do bring in outside investigators.

Second, do instruct your staff, all of them, to cooperate fully and under oath, so that they know this is serious.

Third, do produce everything, every paper, every e-mail, every call, because none of them are going to kill you. What's going to kill you is the fear in the public that you're hiding something.

And finally, the fourth do is once Abner McVugh (ph) is or whoever this investigator is, gets to the bottom of it, put everything out, let the chips fall where they may.

GREENFIELD: Hold off on the don'ts for a second, because I want to turn to our newly minted Democratic, Alex Castellanos. This is going to freak some of your friends out. Both of you, I realize. But Alex, maybe you want to start advising the Democrats with your, either do's or maybe even more appropriately, the don'ts. What do they have to be aware of?

ALEX CASTELLANOS, REPUBLICAN MEDIA CONSULTANT: I think more political battles are lost than won. We all know that. And I think the big danger for the Democrats here is not to overreach. Enron was bipartisan in its largesse. We know that. They have 259 members of Congress. And we know they contacted Secretary Rubin, things like that.

So I think that the first thing is, remember that this is a business scandal, that this is not a political scandal. Don't make this a partisan scandal. You know, Democrats benefit, frankly, when business stories, trouble stories are told, because Republicans are seen as the party of big business and Democrats are seen as the party of big spending.

So again, be modest and honest in your goals. I think that's the most important don't for the Democrats.

GREENFIELD: Would you remind the Democrats what happened to the Republicans in 1998, when I thought they had a - when in investigation, they caught the president of the United States with embarrassment and perhaps overplayed their hand?

CASTELLANOS: I think you can remind them of that. And also, you know, the Democratic party is still suffering from the legacy of Clinton. There are, you know, the Republicans I think benefit now, because you have a president who is perceived as an honest guy. He tells the truth. He calls it like it is.

The Democrats don't have the bully pulpit. And they don't have that advantage yet. So they're a little bit under the spotlight here. It is easy to overreach.

GREENFIELD: OK, that's cautionary advice for Democrats.

Now Mr. Temporary Republican Begala, you had your list of do's for the White House. What's your list of don'ts?

BEGALA: First, don't lawyer up. One of the mistakes we made in the Clinton White House, I think, is that there were too many lawyers involved. I love the lawyers. And some of them became good friends of mind, but - and I have a law degree.

GREENFIELD: Some of your best friends are lawyers, we established that.

BEGALA: Right, but don't lawyer up. OK? Because lawyers hide and deny. The public just needs disclosure here and you're going to be fine.

Second, and analogous to that, don't coordinate your stories. It may be human nature to talk about this around the water cooler, but those evil Democrats or Alex Castellanos are going to suggest that somehow that's trying to manage the news of coordinated or even obstruct justice. So don't let anybody talk to anybody, just put everything out.

Third, don't let your economic team talk about the collapse of 21,000 jobs as a beautiful thing or the miracle of capitalism at work. I understand the theory Mr. President, but this is going to kill you politically. If your team look callous to this collapse of this enormous corporation.

And then finally, fourth, don't get out head of the facts. Don't say anything that's misstating or misleading the facts. And Mr. President, you made big mistake last week when you falsely claimed that Ken Lay, the CEO of Enron, had supported Ann Richards against you, which we now know is not true. And when you said you only got to know him in the 1995, when lots of press accounts showed that you knew him for years and years before that.

Those aren't important misstatements, but a president must never lie. You can't sit in the Oval Office and say, "I did not have financial relations with that corporation, Enron."

GREENFIELD: Hmm, sounds familiar. Mr. Castellanos, you have some, I hate this word, proactive advice for your new Democratic clients?

CASTELLANOS: Sure.

GREENFIELD: Is there something - things they can do to get out in front of this story, without playing the politics of destruction?

CASTELLANOS: Absolutely. But first I have to say that I'm thrilled to hear Paul say that a president must never lie, though I do have to ask him when that exactly that went into effect.

It must've been recently. I want to interrupt you, because I don't want to make like of everything.

(CROSS TALK)

BEGALA: But my biggest danger for...

(CROSS TALK)

BEGALA: I was very candid that Bill Clinton should have never lied to us, but you should be just as candid and say that George Bush (INAUDIBLE) last week at Enron.

GREENFIELD: Fellows, I see some genetic roots re-emerging. Let's go back. Mr. Castellanos, what good advice do you have for the Democrats to get up in front in a proactive way.

CASTELLANOS: Well, let's follow advice from - probably one of the best politicians we've seen, pure politicians in that past few years. And that would be Bill Clinton.

Handle this the way Bill Clinton would handle it, not the way Al Gore would handle it. Bill Clinton, new Democrat. He was not an anti-business Democrat. He wouldn't use this as an opportunity to bash all big business out there. And the richer evil - most Americans now, 50 percent of Americans or so have investments in the stock markets, the mutual funds.

So treat this as a way a new Democrat would do and say, "Hey, big business is not bad, but there are some bad big businesses, and go after that specific one."

The one Al Gore would handle it? That's probably the wrong way to do it, an attack, a political attack on the power for the elite, the kind of speech Al Gore gave the Democratic National Convention, a kind of campaign.

GREENFIELD: Well, it's hard...

CASTELLANOS: That, I think, ends up backfiring on the Democrats. Makes the base happy, but it doesn't get you across the mail.

GREENFIELD Now, Mr. Begala, would you suggest to your client, President Bush, that maybe it's time for a reform agenda from the White House, that one way to actually capitalize on this, no pun intended, is to say, "OK, we're going to do some of those reforms, maybe a little Teddy Roosevelt action, to reign in the bad big business of which Alex speaks?

BEGALA: Yes, absolutely. In fact, Alex makes an important point. Both parties have a master narrative. And they have their heroes and their villains. And in the Republican party, in the main, big business is the hero.

And so, when Jeff Bezos of Amazon.com is "Time" magazine's "man of the year," as he was in the '90s, that's basically good for Republicans. But today, the combination of the collapse of Enron and September 11, all of a sudden, the former villains in the Republican myth, union members and government employees, are now all of a sudden, they're the heroes.

And the former heroes, the big business, now look like villains. So you've got to get, Mr. President, out ahead of that. You've got to show that you're actually on very sympathetic viewing toward these families that have lost their jobs, these investors that have lost all their money.

And there's a pro-capitalist way to do that, the way Arthur Levitt said earlier on your program. You know, the markets depend on sound regulations, so that investors get equal access to honest information.

And that's a pro business way of being for reform.

GREENFIELD: OK. Go ahead, Alex, quickly.

CASTELLANOS: And one thing that both Republicans and Democrats could do is ask, "If enough investors on Wall Street figure this out, to sell Enron short and make a lot of money, why didn't the news media figure this out?

Is it because cable news networks are making too much money from Enron ads and Andersen ads? You know, clearly, we need to get to the bottom of this.

GREENFIELD: See, now that the true colors prevail, as Democratic Castellano says blame the media. But maybe both of you guys agree with that.

Listen Paul Begala, Alex Castellanos, thank you. And please, you may now resume your regular daytime identities. I appreciate it.

[laughter.]

GREENFIELD: And when we come back, speaking of this, when it comes to class warfare, was there anyone on the other side.

(COMMERCIAL BREAK)

GREENFIELD: And another thing, whatever is left of the old American left has to looking at Enron and intoning "I told you so." Big shot executives building a $70 billion company with funny numbers, pocketing millions, seeing their stock as the company was going belly- up, leaving workers stuck with worthless stock.

But wait a second, why would all those Enron employees buy all that stock in their company? Because they had to? No, they bought all that stuff because understandably, they wanted in on what seemed like as sure thing. And therein lies a story.

As we've heard, all through the '90s, stocks essentially moved in one direction, straight up. And for tens of millions of Americans, working class and middle class, keeping your money in a bank seemed like a sucker's bet. In fact, between individuals and unions and company plans, as we heard, nearly half of All-American workers were invested in equities markets. And everyone was enjoying the ride.

Far from the nation embroiled in class warfare, most everyone, even with a modest amount to spare, was enlisting on the same side. Well now many of us are discovering that markets move two ways. Some of us are even learning that very big companies with high profile executives, can play fast and lose the facts and figures.

So maybe after all the investigations and the politics are over, we'll be able to figure out whether we have will and brains enough to create a genuinely level playing field, so that the golden rule does not mean whoever has the gold makes the rules.

I'm Jeff Greenfield. Thanks for watching. See you tomorrow.

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