Posted on 01/11/2002 3:09:16 AM PST by JohnHuang2
(CBS) The firm that audited the books of collapsed Enron Corp., Arthur Andersen LLP, disclosed Thursday that a "significant but undetermined" number of documents related to the company had been destroyed.
Meanwhile, officials of the U.S. Justice Department, which is investigating Enron, announced that Attorney General John Ashcroft has removed himself from involvement in the case because of campaign contributions from the fallen energy giant.
Accounting giant Andersen, which has come under fire from investors and lawmakers for signing off on Enron's books, said it had notified the Securities and Exchange Commission and Department of Justice that "in recent months individuals...disposed of a significant but undetermined number of electronic and paper documents and correspondence relating to the Enron engagement."
Andersen earned $52 million dollars working for Enron as an independent auditor and internal consultant, reports CBS News Correspondent Sharyl Attkisson. It was Andersen that approved Enron's financial statements which -- as it turns out -- concealed billions in losses and debt.
The Enron scandal is the third in a string of financial disasters for Andersen. The firm allegedly signed off on financial statements for Sunbeam Corp., which was later sued by the SEC for fraud, and for Waste Management, which later was found to have overstated profits by $1.4 billion. Andersen paid hundreds of millions of dollars to settle those cases and a $7 million government fine.
Federal law enforcement agencies and congressional investigators are seeking the documents as part of their inquiries into the failure of the giant energy-trading company, which left countless investors burned and employees out of work with billions of dollars of losses in their Enron-heavy retirement accounts.
Andersen has asked Missouri Attorney General John Danforth, a former U.S. senator, "to conduct an immediate and comprehensive review of Andersen's records management policy and to recommend improvements.
In a three-sentence statement released Thursday the Justice Department said, "the attorney general has not been involved in any aspect of initiating or conducting any investigation involving Enron."
Before President Bush named Ashcroft as attorney general, he had been a Republican senator from Missouri and an unsuccessful presidential candidate.
The Justice Department, which confirmed the investigation of Enron Wednesday, said "any and all responsibilities" that would be handled by Ashcroft in the case would be done instead by Deputy Attorney General Larry Thompson.
Enron, a major campaign donor to President Bush, called two Cabinet officers before filing for bankruptcy last year but the Bush administration chose not to aid the energy trading company, the White House said Thursday.
Fault Lines In Enron's Facade
The Justice Department and several jilted investors are taking a hard look at the energy giant's collapse. Some are asking why the captains of Enron didn't go down with the ship. CBS News Correspondent Sharyl Attkisson investigates for Eye On America.
The Justice Department investigation, and others by the Labor Department, the Securities and Exchange Commission and five congressional committees, are expected to focus on whether the one-time Wall Street darling may have misled investors about its accounts.
Houston, Texas-based Enron's problems could prove to be a political liability for Bush, with Democrats in Congress raising questions about the company's ties to the White House and many senior Bush advisers.
In what appeared to be an effort to inoculate the White House against political fallout from Enron's Dec. 2 bankruptcy, Bush on Thursday ordered government reviews of U.S. pension rules and corporate disclosure rules to prevent similar cases.
Mr. Bush, who worked in the oil industry and has known Enron's chairman since he was governor of Texas, also told reporters he had never discussed Enron's financial difficulties with its chairman Kenneth Lay and last met the executive last spring.
"I have never discussed with Mr. Lay the financial problems of the company," Bush said, adding that the last time he had seen Lay was last spring at a literacy fund-raising event organized by his mother, former first lady Barbara Bush.
White House spokesman Ari Fleischer disclosed Thursday that Lay telephoned Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans last autumn saying his company might not be able to meet its obligations. Lay also expressed concern about the effect Enron's problems might have on the economy, reports CBS News Correspondent Bill Plante.
Fleischer said Lay suggested the possibility of using the case of Long Term Capital Management (LTCM), a hedge fund which benefited from a private bailout orchestrated by the New York Federal Reserve in September 1998, as model for his company.
After studying the matter and concluding that Enron's problems would not have the kind of systemic effects on the economy that were feared in LTCM's case, O'Neill and Evans decided against taking any action.
"They both agreed no action should be taken to intervene," Fleischer said, adding that Bush was not informed of the decision but believes O'Neill and Evans acted "wisely."
At his daily briefing, the spokesman fended off questions about why Bush was not informed of the decision, the propriety and timing of Enron contacting top government officials about its problems, and whether Evans and O'Neill acted properly.
"Communication is not a wrong-doing. What took place here was they received phone calls and took no action," Fleisher said. "The charge has been did the government take any action, and the answer from these two officials is no."
Treasury spokeswoman Michele Davis said Lay called O'Neill on Oct. 28 and Nov. 8 -- after Enron's key Oct. 16 disclosure that it was taking huge charges related to its partnerships, which provided the first hint of its spectacular unraveling .
Enron, its employees and directors have given $623,000 to President Bush during his political career, from 1993 to November 2001, according to the Center for Public Integrity, a non-partisan research and investigative reporting organization, making it probably the largest single donor to Mr. Bush's political career.
Lay donated more than $166,000 to Mr. Bush's various campaigns. He also gave $25,000 to the John Ashcroft Victory Committee in October 2000, when Ashcroft was running for the senate.
Speaking to reporters after meeting with economic advisers on Thursday, Bush placed the emphasis on workers and investors who suffered as a result of Enron's troubles and ordered two reviews to recommend how to better protect them in the future.
He said the first review, by the Treasury, Commerce and Labor departments, would analyze pension and 401(k) rules and recommend ways to reform them so that "people are not exposed to losing their life savings as a result of a bankruptcy."
The review of disclosure rules would be conducted by the Presidential Working Group on Financial Markets, which includes the Treasury Department, Securities and Exchange Commission, Federal Reserve and Commodity Futures Trading Commission.
Once the world's largest energy trader, Enron slid in mere weeks last year from Wall Street stardom to the largest bankruptcy filing in U.S. history on Dec. 2. Its downfall, after withdrawal of a rescue takeover bid by rival Dynegy Inc. threw thousands out of work and hammered investors.
The episode sapped the life savings of many Enron employees who held large amounts of company stock in their 401(k) retirement plans, while top executives allegedly pocketed fat profits by selling before a plunge in Enron's share price.
"I have great concerns for ... (those) who put their life savings aside and, for whatever reason, based upon some rule or regulation, got trapped in this awful bankruptcy and have lost life savings," Bush told reporters at the White House, saying the groups would take a "good hard look" at the matter.
Mr. Bush also appeared to try to put some distance between himself and Lay, who served on a Texas business council when Bush was governor of the state, saying the executive was appointed by his Democratic predecessor, Ann Richards.
At the heart of Enron's problems were complex financial partnerships -- known as special-purpose entities -- set up by Enron executives and used to keep debt off the company's highly leveraged books. After some deals involving the partnerships went sour, Enron in October had to take a $1 billion charge against earnings and cut shareholder equity by $1.2 billion.
Those moves drew market attention to the partnerships, triggering a crisis in investor confidence and credit-rating downgrades that ultimately led to bankruptcy court.
©MMII CBS Worldwide Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.
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Democrats, who still bear the scars from the Clinton scandal machine, believe they've (finally) hit pay-dirt with the Enron debacle.And so does the media.
The 'Grey Lady' of yellow journalism, predictably, was on the warpath yesterday. In a piece ominously titled, "White House Moves to Contain Political Damage From Enron Turmoil", "reporter" Jack Lynch wrote in his opening paragraph that Enron chief Kenneth Lay "had contacted two Cabinet members a few weeks before the giant energy company's collapse to warn of it's growing difficulties".
Clearly, the writer's implicit aim was not to inform so much as to cast aspersions on the Bush administration with derogatory innuendo and smear. The reader is beckoned to assume the worst -- ergo, some malfeasance had taken place -- sans a smidgen of evidence. By artfully lifting these calls wholly out of context, Mr. Lynch ipso facto maliciously insinuates guilt -- guilt on Bush's part, as much as the two Cabinet officers Mr. Lay contacted.
Indeed, only well into his article (paragraph 7) does Mr. Lynch, after weaving his mudslinging web of innuendo, finally divulge the actual mission behind these calls, one to Treasury Secretary Paul O'Neill, the other to Commerce Secretary Don Evans. Both calls were reportedly made last October, prior to Enron's spectacular collapse in early December.
The reason for Lynch's beguiling foot-dragging? Simply this: Far from snarling Bush administration officials in wrongdoing, the calls were inherently exculpatory. Yes, you heard right -- exculpatory. After warning Secretaries O'Neill and Evans of Enron's precarious financial position, Mr. Lay beseeched them for a bailout. Absent massive government assistance, the troubled company would slide into bankruptcy, the officials were told. Their answer, according to White House spokesman Ari Fleischer, was flat-out no. No bailout.
Agree or disagree with the decision, the refusal is inconsistent with the notion of Mr. Lay having undue influence over this administration. In fact, the bailout denial is the opposite of what one would expect if campaign money and friendship were what they are cracked up to be.
Imagine the outcry had the bailout request been granted. The raging firestorm among frothing Bush critics would rival Nixon's Watergate.
"Quid-Pro-Quo! Quid-Pro-Quo!", they would shriek. As far as punishment, the haters would be divided, however: Some would demand impeachment, others a public hanging.
Instead, the erstwhile oil trading colossus, with 20,000 employees, and marketing business in everything from pulp to bandwidth, was allowed to go belly-up. It's high-flying stock tumbled from $90 per share to under a dollar today.
So much for the 'Ken Lay-controls-George W. Bush' urban legend.
Moreover, the Justice department's decision to convene a national task force to probe Enron's demise -- an unprecedented maneuver -- only further debunks the nitpickers' swill. But the department went even further yesterday. To avoid even the appearance of 'conflict-of-interests', Attorney General John Ashcroft (who had received Enron contributions during his Senate campaign) announced his recusal from all matters pertaining to the Enron investigation. The recusal includes his chief-of-staff, David Ayers.
To get even further ahead of the curve, President Bush yesterday directed the Treasury, Labor and Commerce departments to comb the plethora of rules governing 401 (k) and other pension plans with a fine tooth comb. His goal is to ferret out the flaws in a system which allowed Enron employees to lose their life's saving when the company went under.
The President wants reform in corporate disclosure rules, as well. To this end, he's ordered the formation of a 'working group', consisting of Sec. O'Neill, the Federal Reserve, the S.E.C. among other agencies.
Bottom line? The President has grabbed this bull by the horns and, for all the prattle about political "damage", he's handled this teapot-sized tempest with aplomb, to the chargin of all of the Bush-haters and bashers.
Another thing: If the vengeful Democrats, gung-ho on exacting revenge over Clinton's impeachment, see Enron as Bush's Waterloo, they're in for a crushing disappointment.
Their Enron obsession is understandable, of course: Bush's rock-solid popularity is holding steady, even as their party wallows in disarray and dysfunction. On the other hand, one thing does unite the beltway Democrats like nothing eles: Hate. Their shared hatred of Bush. It's ugly, it's spiteful, it's vile. And it's unseemly. For Bush-haters, it's not enough to disagree with the President: Policy differences must be criminalized.
This is the root of their Enron fixation. But unfortunately for them, Enron won't save them either. Their fanatical putsch will not only fail, it will backfire. The reason is simple: This President has forged a powerful bond with the people, especially in the wake of September 11. There's a chemistry there, one which Democrats, blinded in their hatred, have yet to fathom. This rapport, this wonderful chemistry, this mighty solidarity transcends race, ethnicity, party, religion, gender; Americans of all walks of life see in this humble man, this down-to-earth, straight-talker from Midland someone whom they can trust, someone they can believe in again. His persona embodies the optimism, the idealism, the cheerful self-assurance and confidence which makes us Americans.
America can not -- and will not ever -- say die.
So let the Democrats flail away in their smoldering anger; let them scour, let them probe, let them hound, let them stalk, let them rummage, let them shake their fists at this President: They will only hoist themselves on their own petard.
For America loves George W. Bush -- and nothing's going to change that.
God bless our President, God bless our troops and God bless the United States of America!
My two cents..
"JohnHuang2"
There's also another reason why this won't dim GW Bush, I think. He is being utterly forthright. And what is more, he has a reputation for being forthright. The pygmies in the Democrat Party may try to cast aspersions on him, but it won't stick - trying to make GW Bush into a devious figure in the public imagination is a laughable idea.Bull's-eye, amigo. Gee, didn't the rats waste years trying to pin scandal on the Gipper, only to meet with frustration every time? For the reasons you cited.
The Enron scandal is the third in a string of financial disasters for Andersen. The firm allegedly signed off on financial statements for Sunbeam Corp., which was later sued by the SEC for fraud, and for Waste Management, which later was found to have overstated profits by $1.4 billion. Andersen paid hundreds of millions of dollars to settle those cases and a $7 million government fine.
Could it be that AA is the real reason for Enron employee's losing millions? They were putting out false financial statements.
hmmmm...sounds familiar, doesn't it? What do they say about those who learn nothing from history?
This is the root of their Enron fixation. But unfortunately for them, Enron won't save them either. Their fanatical putsch will not only fail, it will backfire. The reason is simple: This President has forged a powerful bond with the people, especially in the wake of September 11. There's a chemistry there, one which Democrats, blinded in their hatred, have yet to fathom. This rapport, this wonderful chemistry, this mighty solidarity transcends race, ethnicity, party, religion, gender; Americans of all walks of life see in this humble man, this down-to-earth, straight-talker from Midland someone whom they can trust, someone they can believe in again. His persona embodies the optimism, the idealism, the cheerful self-assurance and confidence which makes us Americans.
I think the gloves came off last Saturday. The 'rats have opened up Pandora's box by trying to pin Enron's collapse on GWB. The real influence pedaling Enron engaged in with the Clinton administration will all be dredged up for public review.
Exactly -- and they will rue having cast the fall of Enron as a Bush political scandal.
You are, sir, right on the money (pardon the expression), as usual.
But you didn't go far enough, because the Dems themselves are hip deep in Enron.
This is one can of worms they don't want to open up.
Beware...GW...they don't play fair in DC
I'm listening to the radio at 0800et, and it's being played totally as a political story, not a business story. Of course, Ann Coulter for ABC is not my definition of smart. And rather ingnorant of a large picture on anything---she heads for a headline detail. Not deep, and for her age that means she'll never be good.
Ah, well.
I wish I could have found out more about their strategy.... but my mother in law knows her job well and doesn't say a thing.
"Exactly -- and they will rue having cast the fall of Enron as a Bush political scandal."
Maybe so, but will the Klintoon involvement be reported?
Another thing, why is this important at all? We were taught that such "corruption" is not relevant to running the country. And, if you were crying bloody murder with all the Klintoon scandals, you got no right to be speaking up now. You either have to admit Klintoon was guilty in order to accuse W or you have to say that both are irrelevant.
Of course, that only applies if you are intellectually honest, have a brain, and apply logic. Well, that eliminates leftist libs.
This is one can of worms they don't want to open up.
Indeed, I touched upon this angle in another essay I wrote yesterday:
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The decision by the U.S. Department of Justice to set up a special task force to spearhead a criminal probe of the circumstances surrounding the sudden collapse of Enron Corp. should come to no one's surprise.
After all, this isn't the Reno/Clinton DOJ anymore.
Recall the myriad stunts the Clinton White House would roguishly pull to frustrate, stonewall, impede or choke-off legitimate inquiries into Whitewater, Chinagate, Travelgate, Filegate, impeachment, etc. Indeed, in the Tyson Food case alone, tallying up the number of roadblocks and backroom maneuvers to bottleneck the work of Independent Counsel Donald Smaltz could easily fill the Clinton library -- and then some.
Moreover, the department's decision to plumb the depths of the looting and fraud -- the mammoth shellgame -- which led this erstwhile energy trading colossus, whose stock once traded at $90/share, straight into bankruptcy court last December has wider implications, beyond the prosecutorial.
The Justice Department, by taking this unprecedented step, steals the thunder right from under the partisan Bush-haters on Capitol Hill. U.S. Senators Carl Levin (D-Mich) and Joseph Lieberman (D-Conn) -- the latter mulling a run for the White House in '04 -- had planned to launch a lavish fishing expedition, featuring highfalutin, made-for-TV, dog-n-pony 'show-trial' "hearings", all in the "noble" pursuit of trafficking in innuendo, in the hopes of inflicting maximum damage on the Bush administration.
Senator Levin et al wouldn't want to jeopardize the Enron investigation, or undermine the tedious work of prosecutors while tipping-off potential criminal targets, just to indulge their cheap, political vendetta against this President, now would they? (Wink, wink).
In coordinating the work of prosecutors in cities across the land, and mustering the dept's fraud section to the task, DOJ catapults this probe on the fast track, rendering any shrieks of 'cover-up' wholly vacant and silly.
As in all investigations, expect the unexpected. In the end, ironically enough, the Democrats may rue having foolishly politicized the fall of Enron. DOJ, un-encumbered by petty political considerations, will probe ALL of Enron's nefarious dealings/machinations. Particularly delicious are the links between former TVA (Tennessee Valley Authority) director Johnny Hayes, Charles Bone of Wyatt, Tarrant & Combs, a Nashville law firm and one former U.S. vice-president who's sporting a beard these days. Gore pals Hayes and Combs, according to a recent MSNBC report, were paid lucrative sums last year by -- you guessed it -- Enron Corp. for lobbying purposes.
But that's not all. According to the Tribune-Review, Enron and the Clinton-Gore administration were joined at the hip, profiting mutually from their incestuous relationship. Bill Clinton personally opened up many overseas markets for Enron especially, and Enron, in return, introduced Clinton-Gore to the infamous Lippo Industries and John Huang. But there's more -- much more, all of which will now come under the proverbial kleig lights.
And they say character doesn't count, eh?
My two cents..
"JohnHuang2"
This is one can of worms they don't want to open up."
You know, I've heard this about a thousand times, and even believe it until now. If the dims are so damned scared, why are they running at break-neck speed to embrace it? I know that they are fundamentally flawed in their believes, but they can also be very, very shrewed. Is this a case of eating their own to get to W? What do they have to lose -- Klintoon's good name? Hahahahaha. This just isn't adding up in terms of the "they don't want to go there" arguement.
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