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American Morning

Enron Under Congressional, Wall Street Scrutiny

Aired January 14, 2002 - 09:34   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.
JACK CAFFERTY, CNN ANCHOR: More on Enron. The spectacular collapse of what was the country's seventh-largest company, is sparking not one or two, but a total of four Congressional investigations. And a criminal investigation going on over at the Justice Department.

What's Congress likely to turn up, and what are they going do with the information they get in light if the fact that many of them took money from Enron?

CNN Congressional Correspondent, Jonathan Karl, joins us now from Capitol Hill. Jonathan, nice to see you. A bit of sticky wicket, as they say, for the Congressional investigators.

JONATHAN KARL, CNN CONGRESSIONAL CORRESPONDENT: Yeah, and you know, Jack, congress isn't even back from its holiday recess for another week. But, already plenty of sound and fury about the Enron scandal. You've got the subpoenas that are already flying out. The committees, no just four but eight committees planning investigations or hearings on Enron.

But, one key player in this, Joe Lieberman, the Democrat, who will be holding the very first Enron hearing of the new year, came out over the weekend and said that he sees no indication, yet, that any senior officials of the Bush administration did anything wrong.

(BEGIN VIDEO CLIP)

SEN. JOE LIEBERMAN (D), CONNECTICUT: I have not seen any evidence, up to this time, that officials of the Bush administration acted improperly with regard to Enron. In fact, 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)

KARL: But that won't stop Congress from charging ahead. After all, there are serious questions about the activities of Enron's executives and the activities of its document-destroying auditor, Arthur Andersen.

All told, Jack, eight committees. Break that down. That's six committees and subcommittees in the Senate, the democratically- controlled Senate, planning to hold hearings on this. Over in the House, you have two committees.

Actually, this graphic you're seeing right now is about all the money they've spent here on Capitol Hill. 71 -- an astounding 71 of the 100 U.S. Senators getting donations from Enron. 188 members of the House getting money from Enron. But, all that money doesn't buy you much when scandal hits, because you have all those committees planning their investigations. Six in the Democratically-controlled Senate. Two in the Republican-controlled House of Representatives. Enron learning that, you know, money -- well it buys you only so much. And when times get tough, it doesn't buy you a lot.

As Harry Truman used to say, "In Washington, if you really want to get a friend, buy a dog." Because here, when scandal hits, your friends tend to run out.

CAFFERTY: How much veracity can the American public put in these Congressional investigations when the guys asking the questions were cashing checks from these people that they're investigating?

KARL: Well, Jack, if everybody had to recuse themselves from this because they received money, like John Ashcroft has recused himself in the investigation over at the Justice Department, there would be nobody left to hold the investigation. But what you learn up here, though, is when scandal hits, those that receive the money are often the most aggressive out there pursuing the company that's under investigation, because they want to prove their independence.

Think back to Charles Keating in the Savings and Loan debacle back in the '80s. Charles Keating was a big donor up here on Capital Hill. But, when the S&L scandal hit, that didn't help Charles Keating very much.

CAFFERTY: No. The righteous indignation, though, you're right -- it surfaces in times like these. Thank you, Jonathan, very much. Appreciate it.

Jonathan Karl on Capitol Hill.

Joining us now to talk more about Enron and the business news of this day and this week as we go forward, Andy Serwer, who's the Editor at Large of "FORTUNE" Magazine.

Good morning. Happy Monday.

ANDY SERWER, "FORTUNE" MAGAZINE: Jack, how are you doing? A big earnings week this week. 700 companies reporting, IBM, American Airlines, Intel, Microsoft, a whole bunch of them. But everyone on Wall Street continues to talk about Enron.

I'm all up on Enron. The more I think about it, the more work I do, and the madder makes me. And I tell you, a couple of points. First of all, this is not a Washington story.

CAFFERTY: Right. SERWER: Senator Lieberman said, so far the Bush administration didn't do anything wrong. They were right to field the phone calls; they were right to listen; and they were right not to do anything.

CAFFERTY: And apparently they did nothing. So they might be clean in this.

SERWER: So far that looks very good. That's a very -- the system is working, so far. Number two, people are saying is it illegal? Is what happened -- or is it just an unfortunate company that spun out of control?

SERWER: Yeah. Exactly. Listen. What happened was illegal. Let's face it. This is Judge Serwer here talking, I know that.

CAFFERTY: Fair enough, your honor.

SERWER: But I tell you. What happened was illegal. And in accounting, for instance, if you say that a three is a two, that's clearly illegal, right? You're lying about...

CAFFERTY: That's not just a simple mistake?

SERWER: But, in this case, what they did is, they decided not to tell you about the three. So it's lying by omission, by evasion. That's lying also.

CAFFERTY: At the same time that they were selling stock, they were concealing some of these off-the-book partnerships that they later had to go back that affected their earnings numbers. Right? I mean, it smells.

SERWER: Yeah, exactly. It's rotten from the top down. And the other point. Jim Kramer in "NEW YORK MAGAZINE" made this point. He said, in the 1980s Michael Miliken, Ivan Bowski, all these guys, they went to jail because of insider trading scandals. So far, all these accounting scandals, Cendant, Sunbeam, Waste Management, now Enron, no one has gone to jail.

You know, I think we need some jail time here for some of these people, as a deterrent. I'm serious. Our accounting system is at the core of the stock market, our financial system. It undermines credibility, and pretty soon people will stopping investing in the stock market if they can't trust these companies' numbers. And I think that we really need to send a strong signal here.

CAFFERTY: I'm glad you don't have any opinions about this story.

SERWER: No. I will tell you what I really think tomorrow.

CAFFERTY: All right. Andy Serwer, "FORTUNE" Magazine.

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