White Should Go-Now

Article excerpt

Army Secretary Thomas White appears to be inching closer to becoming the first Bush Administration casualty of the Enron scandal. Senators Dianne Feinstein and Barbara Boxer of California have asked Attorney General John Ashcroft to launch a criminal probe into Enron's role in manipulating California's electricity market, after Enron memos released by the Federal Energy Regulatory Commission showed how Enron boosted electricity prices in California and created shortages.

People close to Feinstein and California Congressman Henry Waxman said the lawmakers will ask Ashcroft to direct that the criminal investigation include White and whether the unit he helped lead, Enron Energy Services, played a part in California's two-year energy crisis. "We believe we have evidence, based on our conversations with former Enron employees, that Mr. White and other executives from Enron Energy Services may have worked side by side with Enron's traders and supplied inside information about the amount of electricity California needed," an aide to Feinstein said. "We believe, based on this information, that the traders were then able to create shortages and manipulate the price of power in the state."

Neither a spokesman for White nor for Enron returned calls for comment. Enron is already under investigation by California Attorney General Bill Lockyer for allegedly manipulating the price of electricity and natural gas. White is being investigated by the FBI on the timing of his sale of Enron stock last year and by the Inspector General's office on his use in March of a government airplane to fly to Aspen to sign papers on the sale of a $6.5 million house he owned, prompted by Enron-related financial problems. Separately, he engaged in a dispute with Defense Secretary Donald Rumsfeld over the Crusader weapons system; Rumsfeld continued to express support for him.

Former employees of EES have come forward saying that the retail unit, under White's leadership, played a role in California's power crisis and that White told his staff that EES would earn millions in profits because of the crisis. In addition, former employees are coming forward with information about White that indicates that his involvement with Enron's suspect accounting was far deeper that he has let on. White has said that EES was a legitimate operation and not a house of illusory profits.

John Olson, an analyst now with Sanders Morris Harris, recalls asking White in 1999 how EES, a relatively small operation, could show millions of dollars in profit with barely a shred of business. "I did not believe Mr. White, nor any of the other Enron executives I spoke with, were being honest or forthcoming about EES's profits," Olson said. "When I pressed Mr. White for an answer he said, 'One word: California.'"

White told EES's sales team in 1998 that they could earn hefty bonuses by signing energy contracts with large businesses in California to manage their electricity needs for a substantially cheaper price than these companies had been paying through their local utilities. …