“My father had nothing to do with anything, and he’s lost a lot of money,” says John Feehery, press secretary to the House speaker. Feehery’s father doesn’t work for Enron, and doesn’t even own Enron stock. He lives in Chicago, far from the company’s epicenter in Houston. Yet he is taking a financial bath because the money market where he is invested has significant Enron holdings.
The senior Feehery’s balance sheet won’t suffer as much as the retirement accounts of thousands of Enron’s employees, whose nest eggs were wiped out when the company’s stock plummeted. But there are enough people like Feehery’s father to create a ripple effect that could pose both economic and political problems for the Bush administration. “People are outraged,” says Feehery. “A lot of people will want to spill their guts.” Disgruntled Enron employees have a Web site where they sound off and share their tales of woe (www.enronx.org).
To limit the damage, the Republicans are framing Enron’s sudden decline as a bookkeeping matter, and not outright fraud. “It’s not a Ken Lay problem, it’s an accounting problem,” says Feehery, referring to Enron CEO Kenneth Lay. When news of Enron’s downfall broke last week, the GOP-controlled House moved quickly to schedule hearings, which got underway before the House Financial Services Committee this week. Lay was invited to attend, but declined, and the Republicans didn’t press the matter. The less linkage there is with Lay, the happier the GOP and the White House. They don’t want a story line that focuses on Lay’s close personal relationship with President Bush, and the $2 million that Lay, his family, and his company contributed to promote Bush’s political future.
The prime opening-day witness was instead Joseph Berardino, CEO of the accounting firm Arthur Andersen, who conceded that his company had made what he termed “an honest error” by failing to list in its audit a spin-off company Enron had created apparently solely to conceal debts. Berardino said that Enron might have committed “possibly illegal acts” with its practice of shifting debts to apparently dummy companies set up for bookkeeping purposes. He chided his company, one of the most respected accounting firms in the nation, for making “a professional judgment … that turned out to be wrong.” Andersen signed off on Enron’s questionable financial practices for 10 years without raising a red flag.
The hearing was reported as a business story, not a political one, a victory for the Republicans. “The books were mismanaged,” says Feehery. “The Democrats will try to take some political gain, but we’re going to try to look at this as an accounting problem as opposed to a bigger philosophical issue.”
The lack of oversight that allowed a behemoth like Enron to fall almost overnight has congressional aides shaking their heads. One theory is that Enron’s rocket rise to the top as a corporation allowed them to get away with writing gibberish in their reports. A lot of smart people didn’t want to admit they didn’t understand this new market-trading scheme Enron had pioneered. “It’s damn impossible to understand what the company actually did,” confesses a former GOP aide who is now a lobbyist. “They learned how to be a megapurchaser of natural gas and a major purchaser of whatever they could lay their hands on, from broadband service to newsprint. They were voracious. When you went to a company seminar, the mission was to become the greatest company in the world, and they really meant it. There was an excess of hubris.”
Everybody in Washington knows how well connected Enron is, and how the Bush transition team consulted Ken Lay to fill senior slots in the administration. Lay handpicked the new head of the Federal Energy Regulatory Commission, Pat Wood. “At some point they knew this was a shell game,” says a Democratic congressional investigator. “Maybe they thought they were too big to fail.”
Henry Waxman, the ranking Democrat on the House Government Reform Committee, has put a tip line for disgruntled Enron employees on his Web site. Getting information that way may be easier than prying it out of the White House, which has stonewalled Waxman for months. Before the September 11 attacks put everything on hold, Waxman was on the verge of taking Vice President Cheney to court with the blessing of the Government Accounting Office over Cheney’s refusal to disclose with whom he met in formulating the nation’s energy policy.
At the least, Cheney has an appearance problem. He won’t reveal what was discussed in a secret meeting with Enron’s Ken Lay, reportedly the only energy executive granted a private one-on-one with the vice president. Those who know Cheney insist he is standing on principle in his obstinate behavior. “You know how Cheney can be. He’s very righteous,” says a friend. “And he goes home and talks to his wife, who’s four times as righteous. Together they say, ‘Screw them.’ We don’t have to tell them anything’.” Meanwhile, political guru Karl Rove must be slapping his thighs with joy at having sold his Enron stock for $250,000 before the bottom fell out. Economic adviser Lawrence Lindsey and Trade Negotiator Robert Zoellick also got out in time, having been on Enron’s payroll before joining the administration.
If these were ordinary times, the sudden collapse of a company the size of Enron, No. 7 on the Fortune 500 list, which is headed by one of the president’s best friends and financial underwriters, would have the opposition party salivating. Whitewater, a failed real-estate deal, kept Congress, the media and a special prosecutor employed for several years. Granted, Ken Lay is not as colorful as Jim McDougal, the con man of Whitewater fame, but the consequences of Enron’s behavior touch so many more people than anything the Clintons were involved in financially.
Yet the Bush White House is likely to escape unscathed. Democrats don’t seem to have the stomach to go after Bush the way the Republicans dogged Clinton. Al From, who founded the Democratic Leadership Council, measures his words. “If it’s as bad as it looks, it’s not something Republicans will be bragging about. But this guilt by association stuff doesn’t have a lot of bite in politics.” It’s not the time and place to go after the commander in chief. In the words of one lobbyist who is close to Rove and other top aides, “They’re not terribly worried, mostly because that’s their temperature on everything. It’s this general confidence. They’re doing well on the one thing that matters. Their attitude is, ‘Our guy has high approval. Who’s going to bother us about a CEO from Texas?’”
