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CNN Saturday Morning News

Did Enron Executives Commit Illegal Acts?

Aired January 12, 2002 - 09:03   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.
KYRA PHILLIPS, CNN ANCHOR: Well, getting back to the fallout from the collapse of energy giant Enron, the company was politically well connected, and part of their paper trail has vanished.

CNN's Sean Callebs has the details.

(BEGIN VIDEOTAPE)

SEAN CALLEBS, CNN CORRESPONDENT (voice-over): This much is clear. As Enron's problems began growing at the end of 2001, the company reached out for help from many of the political heavyweights they supported with campaign contributions.

The Treasury Department says Enron's president called several times to get a department official to intervene with banks in an effort to avoid the largest corporate bankruptcy in U.S. history. The Treasury Department refused, Enron went belly up. Thousands of people lost their jobs, and many more investors are stuck with worthless holdings.

RAJEEV DHAWAN, GEORGIA STATE UNIVERSITY: If you have a company that is goofing up on its strategies, the market will make you pay the price. And this is what happened to Enron.

CALLEBS: Enron's auditor, Arthur Andersen, admits to destroying thousands of documents critical to the bankruptcy.

HOWARD SCHILIT, FINANCIAL RESEARCH AND ANALYSIS CENTER: In the case of Enron, it's going to simply make the investigation much more difficult.

CALLEBS: Maryland-based Center for Financial Research and Analysis says Enron's collapse forced the company to rewrite four years of its financial history, wiping out $560 million of what had been reported as profit. By destroying documents, experts say Arthur Andersen may have wiped out the paper trail.

SCHILIT: The role of the auditor is to raise assurance amongst investors in the confidence in the companies, and auditors, more than any other profession, understands the importance of documentary evidence.

CALLEBS: President Bush is trying to steer clear of the controversy. A White House spokesman says if Democrats try to make a political issue of Enron, quoting here, "That dog won't hunt."

Sean Callebs, CNN.

(END VIDEOTAPE)

PHILLIPS: Well, the fallout from Enron's financial collapse is far-flung. It's already reaching the inner circle in Washington. The question now, will it reach even deeper?

Well, CNN White House correspondent Kelly Wallace joins us now with some perspective. Good to see you, Kelly.

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: Good to see you too, Kyra.

You know, this is a very, very complicated story, but there are a couple of points White House officials have been stressing over the past few days. Number one, that there is no allegation of any wrongdoing by anyone in the federal government. And number two, that Enron contributed to Democratic lawmakers, and that Enron had ties to Democrats as well.

In fact, administration officials disclosing on Friday that former Clinton administration Treasury Secretary Robert Rubin contacted a top Treasury Department official late last fall, Treasury Undersecretary Peter Fischer, the same individual contacted by Enron's president. Administration officials saying that the former Treasury secretary was inquiring to see if the Bush administration planned to contact credit rating agencies to try to intervene to avoid a collapse of the large energy company.

Administration officials say that Undersecretary Fischer said the administration did not believe it was appropriate to intervene, and that Secretary Rubin said that was a reasonable position.

So administration officials pointing to this as another example of how Enron and others lobbied the administration for action, but that the White House took no action. That was a point echoed by the president's top economic adviser, Lawrence Lindsey, who happened to still be the consultant for Enron before coming to the Bush White House. Mr. Lindsey and others saying that if Congress in -- investigates, hello -- investigates, it will find that Bush administration officials did nothing wrong.

(BEGIN VIDEO CLIP)

LAWRENCE LINDSEY, WHITE HOUSE ECONOMIC ADVISER: People in both parties have received money, there's no question. The important thing here is that American capitalism is not crony capitalism. In America, when a company makes a mistake, even when it's a big company, even when it's well politically connected, that that company bears a responsibility for its decision.

(END VIDEO CLIP)

WALLACE: And that entire interview with Lawrence Lindsey can be seen later today on "NOVAK, HUNT, AND SHIELDS" at 5:30 p.m. Eastern time.

Still, though, Kyra, some Democratic lawmakers are pushing for more information from the administration. Democratic Congressman Henry Waxman, the ranking Democrat on a key House committee, wants more information about the contacts we learned about on Thursday, that Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans both received phone calls from Kenneth Lay, the chairman and chief executive officer of Enron in the fall.

Again, the administration said, those cabinet secretaries did not take any action. But as we see, Democrats plan to push this and investigate for more information. But Kyra, the message from the White House is, no one here did anything wrong -- Kyra.

PHILLIPS: Yes, I guess the question I have, Kelly, is, doesn't -- or doesn't the White House have a fiduciary responsibility to disclose Enron's troubles, especially since, I mean, Enron went bankrupt, and before it was announced there were contacts made at the White House, and it seems pretty clear and fair that something should have been said.

WALLACE: Well, what's interesting is exactly when those calls from Mr. Lay, Kenneth Lay, were made to cabinet secretaries, and when calls from Enron's president were made to the Treasury undersecretary. Administration officials say when those calls were made, there was enough -- a lot of information already out in the public domain about Enron's financial difficulties.

So it is not as if, according to the administration, these Enron executives were giving information to the Bush administration, information that was not out in the public domain. But clearly that is a concern of people like Democratic Congressman Henry Waxman. They say that if cabinet secretaries were talking to Enron executives about the financial position of the company, maybe this administration should have done more or done something to get information out to these employees to prevent what happened, many employees losing all their life's savings in those 401(K)s.

So many questions. The administration saying that information it received was already out there, but some Democrats disagree, Kyra.

PHILLIPS: Hey, you mentioned the 401(k)s. I was reading that Bush announced the creation of a type -- a watchdog group to reform disclosure rules regarding pensions. Do you know anything about that, Kelly?

WALLACE: Exactly, Kyra. And that's another point this administration is trying to get out there. Thursday we heard the president when he was sitting there with his economic team announce that he is convening task forces, two separate task forces, to sort of look at, A, what happened with Enron and those employees and their 401(k)s, and to see if there need to be new regulations, new disclosure rules to basically help employees have -- who have most of their stocks and savings in their 401(k)s, if there needs to be a way to get more information out to employees or to allow employees to move around their stocks to prevent them from losing everything if a company goes under -- Kyra.

PHILLIPS: All right, our White House correspondent Kelly Wallace, thank you so much. And we'll see you again coming up in our "Reporter's Notebook."

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