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CNN Saturday Morning News

Reporter's Notebook: The Enron Collapse

Aired January 12, 2002 - 11:29   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: Now to the fallout from the investigation into the Enron bankruptcy case. This week, the story exploded back into the headlines with details of White House contacts, shredded documents, and deep pockets. And some are calling it a much bigger story than Whitewater.

Joining us to take your questions about Enron and the power politics involved are White House correspondent Kelly Wallace, CNN senior political analyst Bill Schneider, and "Los Angeles Times" correspondent Ron Brownstein.

Welcome to all three of you.

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT: Good to be with you.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Good morning.

PHILLIPS: Good morning, good morning. Well, we've got a number of e-mails folks, so let's get right to them. This one comes from Dale: "What kind of tax advantages did Enron reap as a result of its political campaign contributions?" Mr. Bill, why don't we start off with you?

SCHNEIDER: I don't think political contributions are tax deductible, so I'm not sure that they would have reaped any tax advantages. I'd have to get an accountant to answer that authoritatively.

PHILLIPS: Very good response -- Ron.

RON BROWNSTEIN, "LOS ANGELES TIMES": Well, I think the question may have been more, did they get any kind of special favors as a result of all of their contributions to both parties, and to the president over the course of his career. And that is really what we're examining in the media and certainly the overlapping Congressional investigations in both Houses.

There are some questions about legislation that was passed in 2000 that may have limited the ability, for instance, of the Commodity Futures Trading Commission to oversee some of the complex trading instruments and futures instruments that Enron was trading.

So the big question really is what exactly did they get, if anything, for all of those contributions that may or may not have contributed to their collapse and to all of these people who are now holding worthless stock in their pension plans.

PHILLIPS: Well, definitely we're going to talk more about the pension plans. We've received a number of e-mails on that. Let's get to #2 here from David. He's actually got two questions here that interest him, as far as political parties go.

First, "how much money did Jeb Bush receive for political contributions from Enron for his election to governor for the state of Florida?"

And number two: "of the players in President Bush's administration, how many owned Enron stock before election 2000?"

Part one regarding Jeb Bush, who wants to jump on that?

SCHNEIDER: I don't know.

WALLACE: I don't know.

BROWNSTEIN: I think we're all stumped on Jeb Bush. Part two, Kyra, there is an answer as of yesterday interestingly, a Washington watchdog group did put up a study on its web site that 14 of what they termed the top 100 officials in the Bush Administration did own Enron stock, and a 15th who they did not include, a former Enron official who is also in the administration.

So there are about 15 people who did own stock of varying degrees when the administration began.

SCHNEIDER: Fortunately for them, some of the top ones, like Karl Rove, a White House political adviser, and the Army Secretary Thomas White, sold their stock early on when it was worth a great deal of money, made a lot of money on that stock before it collapsed, and they had to sell their stock because it was a way of making sure there were no conflict of interest charges when they were in office. Lucky them.

PHILLIPS: Well sure, selling that stock, and Bill also from what I understand, just before it was announced or made public, that Enron was going public that top White House officials didn't say anything. My question is, don't they have a fiduciary responsibility to disclose Enron's troubles prior? Do they have a responsibility?

SCHNEIDER: You mean those who had stock in the company?

PHILLIPS: Absolutely, or even just the White House officials that knew about the bankruptcy before it was announced publicly.

SCHNEIDER: Well, the question is when did they know? What did they know? When did they know it? Look, you had Wall Street analysts looking into this. You had Arthur Andersen, a major accounting firm looking into this. They didn't sound any alarms.

There is a question being raised by Henry Waxman and other Democrats, namely not whether the administration did any favors for Enron, but whether they had an obligation when they found out about Enron's troubles to sound warnings to help protect the people, not the company but the people.

There's a real debate about that because, first of all, companies go bankrupt all the time. Second of all, when we know that there were White House contacts with the Secretary of Commerce and with the Treasury Secretary, the stock had already started to collapse. It was about a month before the company declared bankruptcy. It was widely known the company was in serious trouble.

So it's not clear when they knew about the company's troubles or what they could have or should have done about it.

PHILLIPS: That's true. Kelly mentioned that earlier on in the past couple of hours. Here's another e-mail. This one comes from Kevin in Capitol Heights. "As a layman to the inner workings of the legal system, I don't quite understand the delay in bringing Enron executives to justice. They clearly violated the law and misrepresented the company's financial standings to their workers and the world. What type of outcome can the American people expect in this case, and when?"

Kelly, you want to start from the White House perspective?

WALLACE: Well, I will certainly start. You know, we do know, we learned this week that the Justice Department had opened or has opened a criminal probe into the Enron matter, to see if any criminal wrongdoing took place.

Now the writer might feel like the Justice Department may have been slow to do this, but U.S. officials say that investigation is ongoing, that a task force is being convened, that it will include prosecutors in Washington. And as we know, a number of attorneys in the U.S. Attorney's Office in Houston have recused themselves because of ties to Enron, so there will be other prosecutors down there investigating.

Obviously a lot to sort out, a very, very complicated story indeed. But you do have the criminal probe underway. You also have several Congressional committees that are investigating. We learned yesterday a Senate Subcommittee issuing 51 subpoenas for Enron executives, so likely to have a criminal probe, a Congressional probe, and of course we have sort of other internal investigations underway as well.

BROWNSTEIN: Kyra, can I just jump in there?

PHILLIPS: Yes, absolutely. Go ahead, Ron.

BROWNSTEIN: The Securities and Exchange Commission is also conducting an investigation, but one question I think will be when Congress comes back in this week, whether there will be pressure to move the investigation out of the Justice Department, into some sort of special counsel.

Now the Independent Counsel Law was allowed to lapse after all the controversy over Ken Starr's investigation of Bill Clinton. But the Attorney General still has the authority to bring in an outside counsel to conduct an investigation like this, and you're beginning to hear some government reform groups argue that connections between the administration and Enron are so deep and pervasive, the Attorney General for instance had to recuse himself as well as all of those prosecutors in Houston, and you have contacts from the president on down.

Some people are arguing that it may be appropriate to bring in an outside counsel to conduct this investigation. I can assure you it is something that after the Clinton experience, the Bush White House is going to resist tooth and nail. Democrats may be ambivalent about how hard they want to push it, after criticizing the Independent Counsel Law during the Clinton years. But that is something that we could see more of in the next week or two.

PHILLIPS: And the White House has given little information all year about the relationship with Enron. Do you see a pattern, Ron?

BROWNSTEIN: Well you know, in fact, long before this bankruptcy, they were resisting Congressional efforts. The point at which they came to -- the venue which had come to a point was Congressional efforts to get more information about who the Dick Cheney energy task force was meeting with.

The General Accounting Office has been pressing for that information all year at the request of Congress. The Administration has been resisting them. Only last week, just before these contacts between the Secretary of Treasury and Commerce and Enron were revealed, the task force acknowledged that there have been six meetings with Enron officials, while they were formulating their energy report.

So yes, in general the administration has viewed a lot of these requests as sort of inappropriate or an intrusion on their executive prerogatives. And now, I think there's going to be a lot more pressure on them, often backed with subpoena, to detail I think in much greater extent the breadth of the administration contacts with Enron.

PHILLIPS: A question here from Canada. Bill, let's take this one to you. "The Bush Administration fails to tell us that the Department of Labor is obligated to intervene on behalf of those who lost their life savings. They keep on saying they did nothing wrong, but this is a crime of omission."

SCHNEIDER: Well, that's the question. Did they have an obligation to intervene in this? I mean companies fail all the time. Investors bear some responsibility. The question is, there seems to be a differentiation between the employees of the company, who were prohibited from taking their savings out of Enron stock because their pension plan was changing administrators, and other investors including a lot of pension plans in states like California and Florida that were heavily invested in Enron stock.

Whether the Department of Labor was obligated to intervene in advance on this, I think that's a point of some debate.

PHILLIPS: And Kelly, hasn't there been talk there already at the White House about how folks would be compensated possibly?

WALLACE: Well certainly, Kyra, as we've talked about, you know as Bill's mentioning the Department of Labor looking into this and then the president on Thursday announcing task forces that he is convening to look at this very matter. To A, look at the Enron situation, but also to look at if there need to be new disclosure rules, new regulations, new requirements to prevent this from happening again.

As Bill mentioned, employees holding Enron stock were not able to sell their stock or move their money around in their 401(k). So there is a question about whether there should be new requirements, new regulations, new powers for employees when they're holding so much of the company stock in their 401(k) when the company is starting to enter some financial troubles -- Kyra.

PHILLIPS: A phone call now from New York. Ted's on the phone. Go ahead, Ted.

CALLER: Good morning, Kyra. My question is for Ron and for Bill. Back during the bad old Clinton days, it seemed the press parsed, re-parsed and re-re-parsed everything that Bill Clinton said about Whitewater.

Now earlier this week, George W. Bush said that Kenneth Lay had backed former Texas Governor Ann Richards back in 1994. Well, according to a Houston Chronicle story this morning, the opposite is true. Ken Lay and others say that they vigorously supported Bush.

So it turns out that George W. Bush has once again lied to the American people, and the press is saying almost nothing about it. What gives?

SCHNEIDER: I just read a story in the paper that said that, you know, corrected the record on precisely that point. It said while Ken Lay had given money to Ann Richards, she was the governor in 1994, he had also given a lot more money and was publicly backing George W. Bush. All that information has come out, and when the White House makes a statement, I think the press looks into it very, very carefully.

The White House has been clearly trying to back away from Ken Lay, but we do know one important thing. Ken Lay and Enron virtually financed George W. Bush's political career. They were the single biggest backers of President Bush. It's going to be very hard for him to say that he has a distance from them.

BROWNSTEIN: Yes, I agree with Bill. I mean that that original statement by the president really seemed to be misleading in the way that he tried to minimize the breadth and the length of his relationship with Ken Lay.

Look, this was someone who, as Bill said, the company has been by some accounts the single largest contributor to Bush throughout his career. They provided company airplanes during the 2000 campaign that he used. There were a big funder of the inaugural. Ken Lay had private meetings about appointments. He had a lot of influence over who was named at the Federal Energy Regulatory Commission, the principle agency that regulates them. He was on an administration transition team on energy.

Now whether any of these contacts have anything to do with what happened to Enron or the stress of the workers and the pension -- the people whose pensions have been vaporized, that is a very different question.

But there is no doubt that this is a deep relationship and a strong supporter, and the White House probably does itself no good by trying to minimize what is a matter of public record.

SCHNEIDER: Yes. The president was very closely associated with the man whose company is under investigation for criminal activity. That is not good. The caller mentioned Whitewater. Well, there is one interesting comparison.

The first thing we learned about Bill Clinton was his relationship with Gennifer Flowers and the draft letter, and people had the image that he couldn't really be trusted. Is the president a liar? And then of course, Whitewater brought those questions right back.

Well in the 2000 campaign, the first things people learned about George W. Bush was that he raised an awful lot of money. He had a lot of rich friends, and he might be out of touch with ordinary people.

Well now this Enron controversy, whether the president is charged with any wrongdoing or not, it brings that image right back, that he's a front man for the big money boys and that is damaging, particularly at a time of economic downturn.

WALLACE: And, Kyra, I just wanted to jump in here for one second too, because I can tell you talking to White House officials, they are quite frustrated with any sort of comparisons to the troubles encountered by the former president, President Clinton, especially over Whitewater because they say right now there is no allegation of any wrongdoing by anyone in the Federal Government.

That's what White House officials are saying but they're also conceding, Kyra, a bit. They probably could have handled this a bit better because, if you recall on Wednesday at a briefing here, Ari Fleischer was asked if anyone in the White House had spoken to any Enron executives about its financial problems.

And on that day, he said he was not aware of anyone in the White House talking with Enron about its financial position. And then it was the next day, Thursday morning, Ari Fleischer during a sparsely- attended morning briefing, announcing that yes, in fact, the Treasury Secretary and also the Commerce Secretary had received phone calls from Kenneth Lay. So again, the White House absolutely conceding some official thing that probably would have been better to get that information out more quickly, and obviously right now there's no sort of major internal review going on. But basically the word is to Federal agencies to make sure if there are any other contacts between an U.S. officials and Enron, that those contacts are reported as quickly as possible.

PHILLIPS: Kelly, Bill, Ron hold tight. We're going to take a quick break and continue this discussion. We'll be right back.

(COMMERCIAL BREAK)

PHILLIPS: We're going to continue our discussion now on the Enron fiasco, I guess we could say. White House Correspondent Kelly Wallace, CNN Senior Political Analyst Bill Schneider, and Los Angeles Times Correspondent Ron Brownstein joining us and taking e-mails and questions. Welcome back, you guys.

Let's go right to a phone call. Luke is on the line from Tennessee. Go ahead, Luke.

CALLER: OK, good morning. If Dick Cheney keeps stonewalling on the Energy Commission reports, do you think the Senate will finally get up the nerve to subpoena him and those records?

SCHNEIDER: He is technically a member of the Senate. He's the president of the Senate. Will they subpoena those records? Well, they have requested them. He's reluctantly given over some of them. We know that there were a couple of meetings with Enron representatives. My guess is, in the end that he's going to see the better part of wisdom is to turn over those records of whom the Energy Committee task force met with, because that's a matter of very high public priority.

BROWNSTEIN: Yes, and in fact, probably the political climate for him saying no has changed significantly as a result of what's happened with Enron. And the point would be, I don't know about Senate subpoenas so much as General Accounting Office lawsuit may be where it all comes to a head.

But I do think that as a result of Enron, it may be harder for them to hold back this information than it would have been otherwise.

PHILLIPS: Kelly, I see you acknowledging that point.

WALLACE: Well, just the point that Ron's mentioning. The General Accounting Office indicating that possibly in a month's time, it will decide it is going to take the administration to court over access to those documents.

But as both Bill and Ron mentioning, the climate really has changed, and obviously there's more of an interest, U.S. officials conceding getting that information out than it was before.

PHILLIPS: Another e-mail to you guys. This comes from John in Maryland. "If these same set of circumstances had occurred during the Clinton Administration, outcry from Republicans and the various news media would have been so deafening that impeachment proceedings would be the talk of D.C. by now. Why is the reaction to the Bush Administration indiscretion so muted, compared with Clinton-era political scandals?"

Oh boy, I bet you all three have a comment on that. Bill.

SCHNEIDER: Well, number one because so far there have been no allegations of criminal wrongdoing by the president or anyone in the White House. Whitewater was a direct allegation of criminal wrongdoing by the president of the United States when he was Governor of Arkansas. That was a very tiny land deal.

This is a much bigger business failure, the biggest bankruptcy in American history, but with huge public consequences. People suffered in a way they didn't with Whitewater, but it doesn't yet involve any allegations of criminal wrongdoing.

If that were to surface, believe me, this would explode instantly into a major political issue and possibly people would start using the "I" word. But we're very far from that. No one is alleging any criminal wrongdoing by the president, or so far anyone in the White House at this point.

BROWNSTEIN: I would probably just add two, quickly two big reasons, war abroad and the memory of war at home. I mean obviously in wartime Democrats are more reluctant to be seen as hounding a commander in chief who's trying to exercise his duties.

And secondly, and perhaps even more importantly, the legacy of the Clinton years when the investigative process was politicized to such an extent, both the Congressional process and the independent counsel process, I think it left Democrats genuinely as the opposition party, the ones who would be raising this, genuinely ambivalent about how far they want to go.

They spent eight years arguing that Republicans were unfairly using accusations of scandal as a political weapon, and I do think they are genuinely ambivalent about whether and how far they want to proceed in the same direction, especially when you have a president with such a high approval rating during wartime.

PHILLIPS: Kelly, final word.

WALLACE: Yes, I just want to add to that, Democrats also facing a little bit of a delicate balancing act, because as we know a number of prominent Democrats in the Senate and the House also received money from Enron.

And also we learned on Friday, administration officials definitely wanting to get out the word that former Clinton Administration Treasury Secretary Robert Ruben actually made a phone call to a Treasury Department official inquiring if the administration might intervene to prevent the collapse of Enron. So Democrats a little bit of a dicey situation there since they have received money from Enron, and since other Clinton Administration officials did step in as well -- Kyra.

PHILLIPS: Kelly Wallace, Bill Schneider, Ron Brownstein, such a pleasure. Thank you for the answers, discussion, points well made.

BROWNSTEIN: Thank you.

SCHNEIDER: Thank you.

WALLACE: Good to be with you.

PHILLIPS: Appreciate it.

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