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CNN Saturday Morning News

Reporter's Notebook: The Enron Investigation

Aired February 02, 2002 - 08:07   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.
MILES O'BRIEN, CNN ANCHOR: The investigation into the colossal collapse of Enron continues to widen. The Justice Department has asked the White House to retain all Enron-related documents dating back to January of '99 before President Bush took office.

Meanwhile, the White House has unveiled plans to protect workers from losing their pensions, like so many of the Enron employees did, details from CNN White House Correspondent Kelly Wallace.

(BEGIN VIDEOTAPE)

KELLY WALLACE, CNN WHITE HOUSE CORRESPONDENT (voice-over): To show his administration is responding quickly to the Enron collapse, President Bush used a Republican retreat in West Virginia to announce ways to give workers more control over their retirement savings.

GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: My plan will strengthen the workers' ability to manage their own retirement funds by giving them more freedom to diversify.

WALLACE: Mr. Bush wants the 42 million workers who participate in 401(k) and pension plans to be able to diversify their portfolios after three years, and says executives should be barred from selling company stock during so-called blackout periods when employees are barred from doing so.

BUSH: If it's OK for the sailor, it ought to be OK for the captain.

WALLACE: But would the president's ideas have helped Enron employees from losing their life savings? Actually, probably not very much. An analysis for CNN has found that Enron employees were free to sell 89 percent of their Enron 401(k) stock at any time, except the blackout period this fall, when the stock had already fallen from a high around $90 per share to just over $15.

In addition, the analysis found that no Enron senior officer or director sold a single share of stock during the blackout period. Workers rate that to say Mr. Bush's plan is a step, but says much more needs to be done to prevent employees from holding too much of their company stock.

KAREN FRIEDMAN, PENSION RIGHTS CENTER: I don't think there's a single provision in the administration's proposal that would have stopped Enron from happening, and prevent future Enrons from happening.

WALLACE: Analysts say the president's proposals are definitely a political response to the Enron debacle.

AMY WALTER, COOK POLITICAL REPORT: What this does for Republicans and for Bush is to say to the American public: Look, we understand that you are hurting; we understand the problems of average Americans who have 401(k).

WALLACE (on camera): Aides say this is not about politics, but governing. Still, advisers certainly know this can help deal with the perception problem that analysts say has gotten worse since Enron, and that is that Republicans are too close to corporations instead of rank-and-file workers.

Kelly Wallace, CNN, the White House.

(END VIDEOTAPE)

O'BRIEN: Which leads us to our "Reporter's Notebook." Kelly Wallace is standing by live. She'll be with us in just a moment to take your questions. Bill Schneider along with her, and we hope to have a correspondent from the "Houston Chronicle" weighing in as well. Julie Mason is her name.

We invite you to send us your e-mails to: wam@cnn.com. Do that forthwith. And also, the phone line is now open, 404-221-1855. Questions about Enron, questions about documents the White House might have, questions about Arthur Andersen, Enron itself, how about Ken Lay? We invite you to fire away. Stay with us.

(COMMERCIAL BREAK)

O'BRIEN: All right, we've got a lot of good questions, the e- mail box filling up. We've got some phone calls coming in, and here is our distinguished group of reporters, analysts, and soothsayers, who will be trying to answer your questions as best they can.

See, Bill Schneider knows who I'm talking about when I say soothsayer. There's Bill Schneider, our political analyst. Kelly Wallace, north lawn of the White House, a familiar place for her to be. And Julie, your last name, Mason, lost my notes there. Julie Mason of the "Houston Chronicle," my apologies to you.

Let's get -- first of all, let's get to the news of the morning, Kelly. The Justice Department sort of a shot across the bough, is that what you'd call it maybe to the executive side of things, to say, wait a minute just don't think this is a good time to be destroying e- mails or documents related to Enron. And, we're not just talking about Bush Administration stuff. This goes back to the previous administration. What's the reaction there?

WALLACE: Well, the significance certainly the Justice Department widening its criminal probe, definitely trying to have the White House, other Federal agencies hold on to all e-mails, notes, documents, dated back to January, 1999. Miles, administration officials here sort of playing down the significance, saying that the administration is full going to comply with this request and that there's no allegation that anyone here engaged in any wrongdoing.

But clearly, just as the administration is trying to distance itself from the Enron collapse, the Justice Department has widened its probe and said hey, make sure all those e-mails, documents, records, you keep, hold on to them because they could factor in to its criminal investigation. Miles.

O'BRIEN: All right. We want to remind folks that they can call in. That phone number once again is 404-224 -- I can't remember it now. I'm having a hard morning this morning. What's that number again? 221-1855. You know, maybe I should just give it up now.

All right. Let's take an e-mail, shall we. This one comes from Jim: "If the government can freeze the assets of countries, why can't they freeze the assets of Enron's Chief CEOs to help those who lost everything. They may not get all due to them, but it will help. It is a disgrace that the CEOs can get rich in such a manner."

Julie, want to take that one?

JULIE MASON, "HOUSTON CHRONICLE": Boy, that's a hard one. Certainly the government has never been inclined to interfere all too much in business matters, certainly a Republican administration less so.

Deregulation has been something that Enron has pushed for so long. I don't think that they would have supported a policy that would have allowed the government to freeze the assets of anyone at that company.

WILLIAM SCHNEIDER, CNN SENIOR POLITICAL ANALYST: Yes, that's right. The fact is, the executives of Enron had not been convicted of a criminal offense, so at this point, it would be hard to argue that the money should be taken from them (AUDIO GAP) that could happen down the road. The government has the power to do that. But remember, you are innocent in this country until you are proven guilty.

O'BRIEN: But there is someone in Connecticut who is already thinking otherwise, of Mr. Lay at least. "When is the former president of Enron going to go to jail?" This is from Mr. Cerreto in Connecticut. And the reason I put that out there is not to impugn Mr. Lay so much as to just ask you the time frame of all this. Any speculation -- this is obviously going to go on for years, but does anybody have any idea? Who wants to take that one? Kelly, want to take it?

WALLACE: Well, yes I'll start. I mean really we don't have any idea. Certainly the Justice Department Task Force and the FBI only a few weeks ago really started their criminal probe. You have the Congressional investigations underway. Certainly there will be high drama when Ken Lay goes before Congress on Monday. You know, Miles, there's been a lot of questioning, and Julie can probably jump in about whether he would actually testify, or whether he would sort of invoke his Constitutional right of the Fifth Amendment not to kind of say anything that could harm him, in terms of this criminal investigation.

But Senator Byron Dorgan, Democrat, saying yesterday he fully expected Mr. Lay to testify and obviously there will be tough questions for Mr. Lay, and that's Monday morning. So that's the start. But it's really impossible to say how long this will go on, really; most of the investigation just getting underway.

O'BRIEN: All right, and I just want to thank the person we call the FOD (ph) operator here for putting that phone number down there so I can remember it, 404-221-1855. I got a little cheat sheet there. We invite you to call in.

Let's take a phone call, as a matter of fact. Lee is in St. Louis. Good morning, Lee.

CALLER: Yes, good morning. My question is this, that when George Bush said that his mother-in-law lost $8,000, the question I haven't heard anybody in the media ask is, didn't that open the door to the flip question which is, how much did your family make? And, let's get these answers under oath, just like we did with the last administration on this whole thing. Thank you.

O'BRIEN: Good question, Lee.

SCHNEIDER: Well...

O'BRIEN: Bill, do you want to take it?

SCHNEIDER: The one thing we know is that George Bush got an awful lot of money from Enron, from Ken Lay, from Enron executives. I believe -- and Julie can come in on this because she may know more than I do -- I believe the company was the single largest contributor to governor and president Bush's campaigns for his entire career. That's not personal money that he could go out and buy a boat, but it was money that he used politically.

O'BRIEN: Julie?

MASON: Yes. That's absolutely correct.

O'BRIEN: All right. Say I met somebody...

WALLACE: Yes...

O'BRIEN: Go ahead.

WALLACE: I was just going to jump in, Miles. We really don't know that answer to the question about if President Bush or any of the members of his family actually made any money on Enron. I know Andy Card, the White House chief of staff, I believe was asked over the weekend if President Bush actually held any Enron stock. I believe Mr. Card said he did not think so.

We have asked Ari Fleischer, after this news about the president's mother-in-law came out, if any other member of the Bush family owns stock, lost money, made money. Fleischer said look, he doesn't speak for the Bush family, he speaks for the president. So it's a good question, one we really have not found the answer to just yet.

O'BRIEN: And an oracle response by a press secretary you might say, yes.

WALLACE: That's correct.

O'BRIEN: All right, let's go to the e-mail shall we? Dale Friesen, one of our frequent e-mailers and we always appreciate his support. "Could you give a brief explanation as to the nature of the documents that have been requested of the vice president?" Julie, would you like to take that one?

MASON: Well, I can take part of that. Some of the documents that Congressional investigators would like from the vice president include information about any meetings he might have had with officials from Enron, especially the task force that he headed up during development of the White House energy policy.

There's been a lot of allegations that Enron was extremely influential in persuading the White House to include certain items in that policy, and that's a very big thing that Congressional investigators want to have.

SCHNEIDER: And I think it's...

WALLACE: And...

SCHNEIDER: And I think it's their meetings with Enron executives as well as with anyone who influenced or testified or was consulted by the Energy Task Force, not just Enron. They are known to have had, what is it, five or six meetings with Enron officials. Dick Cheney met with Kenneth Lay and his staff on that task force, met with other Enron executives plus other companies.

One of the questions is, do they just want to know the times, the places, the topics discussed, or do they want to actually get the detailed notes of what was said? That could be a sticking point, because the "what was said, who said what to whom," what exactly did the executives request, that is something that the White House might insist -- is insisting should remain confidential.

WALLACE: And, Miles, if I can just jump in there because that's a very good point that Bill has raised. You know, the Congressional investigative arm, the GAO, at first was requesting meeting notes and detailed documents. But then it scaled back its requests.

So now it says what it wants if a list of who the task force met with, the dates, the location, the subject of that meeting, and the cost incurred. So, the GAO saying it has scaled back its request significantly.

Again though, the White House says, even that scaled back request goes beyond the GAO's authority and they are standing on principle, saying they're protecting the ability of the president and the vice president to meet with people in private to get advice and develop policy. Miles.

O'BRIEN: All right, potential Constitutional issue there. Let's go back to the phone lines. Bob is in Orlando this morning. Good morning, Bob.

CALLER: Hi. My question is, is there any legislation pending that would protect workers who've contributed in a standard pension plan from having the executives change to a cash balance plan late in their careers, and then losing their pension essentially?

O'BRIEN: Did we stump the panel? No, go Bill.

SCHNEIDER: My impression is that there are several pieces of legislation pending, most of which -- I'm not sure they would do exactly what the caller asked about, that is changing at a late date. I think they would limit the amount of stock that you could be required to hold in your own company.

One piece of legislation says, some of them say that you can only hold 20 percent in any one company. The various pieces of legislation do different things, but basically what they try to do is limit the requirement that employees of a company have to hold stock in one company or their own company.

O'BRIEN: Anybody want to add to that or -- that's pretty much...

MASON: No, Bill's absolutely right. There's an enormous amount of pending legislation or contemplated legislation on Capitol Hill. Unfortunately, it's too late for the Enron employees; but it does seek to impose a wide range of reforms on the 401(k) system.

O'BRIEN: All right. Go ahead.

WALLACE: Miles, I was just throwing myself in here. One thing that we did find in the Enron case, an analysis done by CNN's Brooks Jackson, was that about 89 percent of Enron employees had control of about 89 percent of their Enron 401(k) stock, but they chose to keep it in Enron.

So there are lots of questions and lots of Democrats especially, saying this shows the need, actual restrictions preventing employees from holding too much stock in the company they work for. And also, some talk about lowering the incentives or the tax deductions for companies to match their employees' contributions with stock in that company.

So, different steps to keep people from holding too much of the stock in the company they work for.

O'BRIEN: All right, Kelly. No apologies needed. You can barge in any time you like. Now let's go. We got a good follow-up as a matter of fact from Philadelphia on the line. Christian, go ahead.

CALLER: Yes, my question is, why don't they liquidate the assets of the top management who sold their stocks and distribute to the employees who lost their money, because it's a shame they will walk away with immunity and nothing will be done. This has happened over and over again. Can we do something about this, get down to it?

O'BRIEN: Julie, that sounds like it might be a good one for you?

MASON: OK, I'll take that one. Again, no one's been convicted of any wrongdoing. There are a number of civil lawsuits that aim to do something along the lines of that very thing, to collect some of the money back from who are alleged to be the wrongdoers in this case and redistribute it among the employees. Whether that will have any success remains to be seen.

O'BRIEN: Of course, you got to remember, Christian, and our panel, that Mrs. Lay was on the "Today" show saying they were having a crisis of liquidity, right Bill Schneider? So maybe they don't have anything to give.

MASON: I think I'm having the same crisis.

SCHNEIDER: Well yes, they claim they don't have any money anymore, that they're just broke. They're broke. We'll see about that when the investigation continues.

MASON: Yes, they had to sell those Aspen properties.

O'BRIEN: Yes, that Aspen real estate is hard to get rid of. All right, let's go back to the e-mail, shall we? Jacob is in Columbus and he has this: "What insurance do we have that the Bush Administration is not shredding documents, involving their talks with Enron right now?" Kelly.

WALLACE: Well, Jacob, a question, an important question certainly with the news the Justice Department has called on the White House to hold onto documents. There is no sense, talking to senior administration officials, no sense that anyone was actually destroying documents. But at the same time, no sense that the White House is taking any steps to hold onto these Enron e-mails, notes, documents.

And again, some of this information definitely goes back to the last two years of the Clinton Administration. So, a good question you raise. The White House is saying it's fully complying with the request from the Justice Department. But until it got that request yesterday, there was really no process underway to kind of hold on to all of this information, no sense it was going to be relevant for any criminal investigation.

O'BRIEN: All right, we've got another phone call on the line, this one from New York from Mark.

CALLER: Hello.

O'BRIEN: Good morning. Do you have a question? CALLER: Good morning, yes.

O'BRIEN: Yes, go ahead.

CALLER: Considering there are a number of investigations going on at Enron, I really wanted to know how far back they're going to go in the investigation with the former CEO Skilling, and if there's any implications that he had any wrongdoing. Would that also involve him and the current CEO?

O'BRIEN: Who would like that, Bill or Julie?

MASON: Yes, Skilling absolutely is under investigation as well, and he's supposed to testify next week on Capitol Hill. A lot of people have a lot of questions to ask him.

SCHNEIDER: Yes, they're going to go back as far as it takes to get to the bottom of this, both in the criminal and the Congressional investigations, civil lawsuits. And I think the administration has a real interest in pushing this back politically, because they want to show it's not just us who were influenced by Enron, who had ties to the Enron administration.

It was also the Clinton Administration. Bill Clinton played golf with Ken Lay. Democrats got money from Enron. So if they can share the burden with the Democrats, they'd be pleased to do that.

WALLACE: Yes, and we heard Karen Hughes, the president's counselor really the day before the president's State of the Union Address, the first time we really heard a senior Bush official saying, look what about the regulators? What were they doing, and in the last couple of years when Enron's problems may have been underway?

And you know, Miles, a big thing that might come out of all of this is certainly looking at accounting standards and disclosure requirements, making, you know, the president even said corporate America must be more responsible.

So maybe steps will be taken that would obviously not help the Enron employees, but certainly will protect future employees to make sure that the balance sheets, those annual reports are correct and they can trust those numbers s they make their investment decisions.

O'BRIEN: Folks, we're going to have to put it on hold for just moment. We have a bit of breaking news for you, but don't go away.

(INTERRUPTED FOR CNN COVERAGE OF BREAKING NEWS)

O'BRIEN: You've already sent us a bunch of great e-mails. Keep sending them, wam@cnn.com is the place, questions about how journalists do their job in the line of fire.

Now the first "Reporter's Notebook," which we interrupted for that, as you can understand, will continue in just a moment. Stay with us.

(COMMERCIAL BREAK)

O'BRIEN: All right, back now with the "Reporter's Notebook," the first version for this morning, and we were talking about Enron, a lot of questions about Enron. It obviously is going to generate questions for quite some time to come. I'd like to kind of close it on this note, and I know you all are not financial analysts, but this is obviously a sentiment that's out there for a lot of people who are working for large corporations.

What suggestion do you have on how can employees protect themselves from being another Enron type of victim?

Let's start with our guest, Julie, and then we'll take it through our CNN panelists. Julie, go ahead.

MASON: Well, one of the issues with Enron is that employees claim that they were not adequately informed of what the company's true financial picture was. They were encouraged to invest in the company. It was considered sort of patriotic within Enron to have as much Enron stock as you possibly could.

Also, the company felt that if the employees had a lot of Enron stock, it would make them better employees, because they would want the company to do well. Now they say that they weren't told. So better disclosure absolutely, and that's certainly one of the things that they're talking about on Capitol Hill and at the White House.

O'BRIEN: Bill Schneider.

SCHNEIDER: One word: "diversify." There is often powerful incentives for employees to hold stock in their company, and they don't understand in many cases the consequences of doing that. I think they are very likely to be laws passed that do not -- that limit those incentives. I don't think we're going to go back to the old system of ten years ago and long before that when there were defined benefits. You knew exactly what your pension was going to be.

There is still going to be a certain amount of risk involved, and employees are still going to have to face those risks, but we hope and expect that laws will be passed so they get better information and they are not forced to limit their stock holdings to a small number of companies.

O'BRIEN: Well, and implicit in that question is there another Enron out there lurking?

SCHNEIDER: That's what Wall Street is very much worried about. A lot of firms are going over their books. A lot of analysts on Wall Street, stockholders, are very nervous that this scandal could spread and other companies will be found to be -- have done similar things, perhaps not as irresponsible as Enron, which is one of the reasons why the stock market fell last week.

O'BRIEN: Kelly, final word.

WALLACE: Well, you know, not too much to add. You know, knowledge is power really, so people should obviously look at their quarterly reports or annual reports, to their retirement savings plans, maybe get outside advice. But the key is even while there might be some legislation coming down the road, just as Bill says, diversify.

You know, we're not financial experts, but it makes sense that if you sort of put all your eggs in one basket and then that basket collapses you're left with nothing. So best to spread out your savings around a variety of companies and consult with outside experts. That might be the best advice of all.

O'BRIEN: CNN's Kelly Wallace at the White House, CNN's Bill Schneider at our Bureau, Julie Mason of the "Houston Chronicle," not in Houston, in Washington. She told me earlier they have one of those new-fangled Washington offices there for the "Houston Chronicle." Good to have you there. We appreciate all your insights on the "Reporter's Notebook." And thank you, all of you, for your good questions and phone calls.

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