Lights Out: Enron's Failed Power Play: To George W. Bush, the Head of Enron Was 'Kenny Boy'-Until Now. as the Shock Waves from the Largest Bankruptcy in U.S. History Shake Washington, the Scandal Machine Is Cranking Up in Search of a White House Connection. Let the Enron Wars Begin
Fineman, Howard, Isikoff, Michael, Newsweek
Byline: Howard Fineman and Michael Isikoff
Commerce secretary Donald Evans was busy, halfway around the world in Moscow, but not too busy to reach out to Ken Lay in Houston last fall. "Kenny Boy," as President George W. Bush had nicknamed him, was not just any CEO. He was the Big Enchilada of Texas business, head of Enron, the largest energy-trading company in the world--and the biggest sugar daddy in Bush's political career. So although Evans was conducting a trade mission to Russia (the first trip abroad by a cabinet member after September 11), he took time to call Lay to discuss Enron's money-losing power plant in India. Specifically, Evans suggested that Lay consult with Sig Rogich, a veteran Republican PR man (and another Bush family friend), who was on his way to New Delhi to pitch his services to the government. Perhaps Rogich could soothe the locals, who had been loudly accusing Enron of price gouging.
Ever since there have been Commerce secretaries (nearly a century), they've made such phone calls: strands in a global web of American dealmaking. But what makes this one noteworthy--and worthy of suspicion to Bush's enemies--is the date on which it took place, Oct. 15, for Lay knew that his world was about to fall apart. In a conference call with Wall Street analysts the next day, he would have to disclose that Enron had lost an astounding $618 million in the third quarter. More important, it would soon become clear that Enron had lost $1.2 billion in a labyrinth of partnerships that probably should have been--but weren't--counted on the company's books. Enron, one of the most innovative and admired companies in the world, was near collapse. Didn't Lay and Evans, an old friend in the Texas energy bidness, discuss the impending crisis? They both say no. But investigators--at least on Capitol Hill--will want to ask, preferably in a hearing on TV.
As Enron's beleaguered employees and investors know all too well, the company imploded last Dec. 2, producing the largest bankruptcy in American history. But now the shock waves have moved from Houston and Wall Street to Washington, rattling a White House that had been focused on the popular enterprise of fighting the war on terrorism. The Lay-Evans call, it turns out, was the prelude to a flurry of others (all initiated by Lay) in which the Enron chief executive emitted increasingly urgent distress signals--and barely disguised pleas for help--to Evans, Treasury Secretary Paul O'Neill and Federal Reserve chairman Alan Greenspan.
Despite his munificence as a contributor--perhaps, ironically, because of it--Lay apparently got no help. White House officials insist that he never contacted them, and they never contacted him, though he was running (into the ground) the seventh largest corporation in the country and the second largest (after Exxon-Mobil) in Texas. They flatly deny that Bush or Vice President Dick Cheney (or any aides) had had direct knowledge of Enron's predicament. No evidence surfaced last week to contradict their story and, as they say in the law, the thing speaks for itself: Enron did collapse. Bushies pointed out with relief that someone else had called O'Neill on Enron's behalf: Robert Rubin, respected Treasury chief under Bill Clinton and now a leader of Citigroup, one of Enron's largest creditors. Lay, who, with Enron, gave $500,000 to Bush in 2000, had become a mere acquaintance. At a press "avail," Bush referred to him stiffly as "Mr. Lay." Over at Commerce, a top aide laughingly called him "Ken Who?"
Still, the collapse of Enron was no laughing matter. In Houston there was growing and justifiable outrage. Earlier in 2001, Enron's brass had feverishly unloaded company stock. But at the very time Lay was sounding his alarms, the rank and file were barred from touching their modest, but Enron-heavy, 401(k) portfolios. Inside the Beltway, the scandal-making machinery--idled since stripping a gear on the Gary Condit saga last year--sputtered to life. …