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American Morning

Many Questions Raised About Enron's Political Connections

Aired January 11, 2002 - 08:05   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.
PAULA ZAHN, CNN ANCHOR: Up front this morning, the Enron collapse. Most investors and employees never saw it coming. And when the company went under, they were left holding the bag, and the bag was empty, but some insiders still made millions. Since then, many questions have been raised about Enron's political connections, including word that Enron officials spoke with cabinet members in the days before the company collapsed. Now, with a criminal probe under way, the stakes are even higher.

CNN's John King has more on the investigation, and what it might mean to the Bush White House.

(BEGIN VIDEOTAPE)

JOHN KING, CNN CORRESPONDENT (voice-over): Attorney General John Ashcroft is recusing himself from the criminal investigation of Enron, as is his chief of staff. The reason: $60,000 in political contributions from Enron and its top executives in campaign 2000, when Ashcroft was running for reelection to the Senate.

Another reflection of the political stakes in the Oval Office, the president, himself, announcing two new Cabinet level reviews to determine if the government needs stronger disclosure laws to protect shareholders and investors in 401k and other retirement plans.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: I have great concern for the stories -- for those I read about in the stories who put their life savings aside. And for whatever reason, based upon some rule or regulation, got trapped in this awful bankruptcy and have lost life savings.

KING: Energy giant Enron first gave a public hint of its financial troubles last October, and then filed for bankruptcy in early December, a major economic story in any event. And a major political story too, because Enron and its CEO, Ken Lay, have deep connections to the Bush family and in both political parties in Congress.

BUSH: I have never discussed, with Mr. Lay, the financial problems of the company.

KING: But Lay did alert top Bush deputies that Enron was in trouble and asked for help well before the December bankruptcy filing. He called Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans in late October, and O'Neill a second time in early November. Sources say Lay wanted help shoring up the company's bond rating. Aides say Secretaries O'Neill and Evans decided there was nothing the government could or should do. The White House says they did not pass the news onto the president or any other senior administration officials.

ARI FLEISHER, WHITE HOUSE PRESS SECRETARY: The president is pleased with the actions of his Cabinet secretaries took. He thinks they acted wisely and properly.

KING: Lay is an old Bush family friend, and he and his company a major donor to both political parties. In the 2000 campaign cycle alone, Enron and its executives contributed more than $2.2 million to federal candidates and political committees; $74,000 went to the Bush campaign, $1.5 million to other Republican campaigns and committees, and $640,000 to the Democrats. Four congressional committees are also investigating Enron, and Democrats want more information on the company's contacts with the Bush White House.

(on camera): Top Bush aides concede it would have been better if those contacts, between Enron's CEO and the Bush Cabinet secretaries, had been disclosed sooner. But they also say that any investigation will show this: That when a major Bush contributor asked for help, the answer was no, and that the president has no hesitancy at all now about launching investigations into a company run by an old family friend.

John King, CNN, the White House.

(END VIDEOTAPE)

ZAHN: So how far could this scandal spread, and who might ultimately be questioned? We are joined by one journalist who has been following this story since its start, Tom Hamburger, from the "Wall Street Journal." He joins us from Washington -- thanks for being with us, Tom.

TOM HAMBURGER, "WALL STREET JOURNAL": Good morning.

ZAHN: Good morning. I wanted to start off by talking about the vice president this morning.

HAMBURGER: Yes.

ZAHN: Your competitor, "The New York Times," is calling on him to come forward and provide a detailed description of what took place at these meetings with Enron officials and a further layout exactly who attended those meetings. What do you make of that?

HAMBURGER: Well, perhaps more significant even than "The New York Times" calling for it is that members of Congress are also asking the same question, Paula. So I think we can expect that this inquiry, this request for more information coming from the vice president is just one example of the sort of questions that we're going to be hearing over the course of the next weeks, months and the next year.

ZAHN: Let's talk about what we know so far. The attorney general, John Ashcroft, now having recused himself from the...

HAMBURGER: That's right.

ZAHN: ... Enron investigation, because he took about $61,000 in campaign contributions from Enron. And now, we have learned that the whole Houston U.S. Attorney's Office is recusing itself as well. So how deep does Enron's influence go?

HAMBURGER: Paula, you know, Ken Lay, the CEO of Enron, was known as a brilliant entrepreneur, and those of us who follow money and politics knew him also as a brilliant political investor. And I think your question is a very good one and apropos right now. The money went deep, and it went far and wide. More then 70 senators, 70 percent of the senators in the U.S. Senate currently serving, received Enron funds. Almost half the House, 40 some percent of House members, also received Enron money.

So as people begin to look around at contacts with Enron, yes, it was a company that gave primarily to Republicans, but there are also plenty of Democrats who received money, and members of Congress and the vast majority of the Senate received Enron funds.

ZAHN: When you're talking about numbers like that, Tom, what are the chances that this is going to be investigated to the satisfaction of the American public?

HAMBURGER: Well, I think we are going to see this investigated. That's probably the one thing we know for sure right now. In addition to the criminal probe at the Justice Department that was announced yesterday, there are investigations ongoing at the Labor Department, the Securities and Exchange Commission. On top of that, Paula, four or five separate congressional committees have launched investigations, most of them using subpoena power.

ZAHN: Let's move on to some of the other names we know that are being mentioned in relationship to this investigation, Senator Phil Gramm and his wife Wendy. What do we know about their situation?

HAMBURGER: Well, Wendy Gramm was a former chair of the Commodities Futures Trading Commission, which had some jurisdiction over the kinds of business that Enron engages in, and then joined the Enron board after leaving the CTFC. She was also on Enron's audit committee. So you can be sure, as investigators probe the precipitous collapse of this company, now is the largest bankruptcy in U.S. history, they'll have questions for Wendy Gramm.

Her husband, Phil Gramm, was the second largest recipient of Enron funds in the U.S. Senate, and was also active in some of the issues that concerned Enron in Congress. So there will be questions for Senator Gramm, particularly tough questions, though, for his wife, Wendy Gramm, on the board of Enron and on the firm's audit committee.

ZAHN: Tom, before we let you go, I'm going to quickly put up on the screen a graphic, which indicates other senior Bush administration officials that have some ties to Enron. They actually worked for Enron... HAMBURGER: Yes.

ZAHN: ... before joining the Bush administration -- Lawrence Lindsey, Robert Zoellick, Thomas White, Marc Racicot. And additionally, chief political strategic, Carl Rove, and Cheney's chief of staff, Scooter Libby, were big Enron stockholders. Final thought on that this morning.

HAMBURGER: Yes. Well, I think we're going to see as those documents that had not been destroyed are swept up by investigators, we're going to see a lot of questions asked of all of these officials, and including some questions asked of Clinton administration officials who may have had contact with Enron as well. So I think questions will be asked. We don't yet know what the answers will be, but all of these folks can expect questions.

ZAHN: Well, Tom, you certainly have done some insightful reporting in the "Wall Street Journal" on this very matter, and we'd love to stay in touch with you so you can keep us posted on the latest developments in the investigation -- a multiple of investigations at this point. Thanks so much for dropping by this morning.

HAMBURGER: Thank you.

ZAHN: We appreciate it.

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