Washington Friends Desert Enron Chief

Money. Access. A first-name relationship with President Bush that stretched back for years.

Until recently, Kenneth L. Lay, chairman and chief executive of beleaguered energy giant Enron Corp., was a fixture in Washington--a man whose entree to the highest levels of the Bush administration was considered unrivaled in the energy industry--or in any industry, for that matter.

Now, in a rapid reversal of fortune, Lay is finding out how cold and lonely Washington can turn.

After filing the biggest bankruptcy in U.S. history, Lay’s company is the target of numerous government inquiries, including a criminal probe into what caused the collapse that left thousands unemployed and cost investors billions of dollars.

But as the investigations gear up, the White House appears to be doing little to come to the aid of Bush’s old friend or his company. Instead, the administration is trying to avoid any appearance that Lay or Enron are getting special treatment.

White House officials have been encouraged to minimize contact with the Securities and Exchange Commission even on unrelated issues, for fear it might be perceived that they were trying to intervene in the SEC’s investigation of Enron’s spectacular financial meltdown, according to one prominent GOP lobbyist.

Publicly, the White House is taking a hands-off posture, keeping its distance from the company as the scandal has unfolded.

“The president wants to make certain that all agencies are monitoring events and will take action as their criteria warrant,” White House spokesman Ari Fleischer said earlier this month.

“In the [White House’s] mind, he got in trouble, tough,” the GOP lobbyist said. “It’s the nature of politics: Sorry, but you’re radioactive and you got yourself this way.”

Campaign Checks Being Sent Back

Nor have Enron’s generous campaign contributions to lawmakers slowed the bipartisan calls for congressional hearings.

Indeed, some of Enron’s checks are being sent back--the National Republican Senatorial Committee said Friday that it is returning a $100,000 contribution from the company.

And Enron recently fired most of its high-profile Washington lobbyists, sharply curtailing the company’s renowned clout.

Over the last year, Lay has gone from partying with the president at the inauguration to skirting congressional hearings.

“His star has certainly fallen,” said Rep. Ken Bentsen (D-Texas).

Sen. Byron L.. Dorgan (D-N.D.) said, “When things were going well, the Enron executives were all over. . . . When things have collapsed, they’re not to be seen anywhere.”

Robert S. Bennett, a Washington attorney who represented President Clinton in the Paula Jones case and who was retained by Enron this week, said Friday that no one should rush to judgment.

“Everybody should keep their powder dry,” he said.

Bennett said he is confident that Lay will appear at a future hearing.

Many members of Congress are stewing after Lay said he could not appear at a House Financial Services Committee hearing on the mess this week because he had to attend a bankruptcy hearing.

“There are a lot of unanswered questions about the actions that management took. . . . I don’t think you’re going to find people stepping up and defending Enron or defending Enron’s management . . . as long as those questions are there,” said Sen. Jeff Bingaman (D-N.M.), chairman of the Senate Energy and Natural Resources Committee, which is among those planning to hold hearings.

Lawmakers Promise Impartiality

Enron’s relentless pursuit of political influence--the company has invested freely in prominent lobbyists and contributed heavily to both parties, especially the GOP--could make its fall the most explosive financial scandal in Washington since the collapse of the savings and loan empire led by Charles Keating more than a decade ago.

The political fallout in the Keating matter was widespread, tarring five key senators for their roles in trying to aid Keating.

The investigations into Enron are just getting started.

Next week, congressional investigators expect to receive 35 boxes of documents they have requested from Enron.

A Senate panel is scheduled to hold the next hearing Tuesday. In the House, GOP committee chairmen are promising to show no fear or favor in their probes.

“We’re going to take this investigation wherever the facts lead us,” said Ken Johnson, spokesman for Rep. W.J. “Billy” Tauzin (R-La.), chairman of the House Energy and Commerce Committee.

“We’re not going to shill for anyone, and we’re not going to shield anyone,” Johnson said.

Rep. Richard H. Baker (R-La.), chairman of the House Financial Services subcommittee on capital markets, made it clear Friday that Lay will voluntarily appear before his committee early next year or face a subpoena. “People’s lives have been ruined, fortunes lost,” Baker said.

“‘When you’re riding high, you’re everybody’s friend,” said Rep. Joe Barton (R-Texas), a longtime Lay friend and chairman of a House energy subcommittee. “When you win an election, everybody voted for you. When you lose an election, a lot of people look the other way and don’t return your calls.”

The controversy is certain to test the bounds of the relationships Lay has forged in Washington, according to former Commerce Secretary Robert Mosbacher, an old friend of Lay’s who served on Enron’s board in the 1980s.

“It’s a tough time and a time when you need your friends,” Mosbacher said. “Real friends won’t [abandon him].”

At the moment, two factors may be limiting the situation’s immediate political fallout. One is the attention focused on the war in Afghanistan and the search for Osama bin Laden. Another is a lack of evidence that federal regulators were influenced by Enron’s ties to the White House.

But Democrats, sensing a vulnerability, already are urging Congress to explore the full range of Enron contacts with the administration and whether the government was sufficiently vigilant as the company imploded.

“I’m afraid the Bush administration would like to downplay its intimate relationship with Ken Lay and Enron executives,” said Rep. Henry A. Waxman (D-Los Angeles).

Waxman has been pressing the White House for months to reveal details of Lay’s contacts with top administration officials during drafting of the White House energy policy.

Some observers found Lay’s no-show at the hearing this week bitterly ironic: In the Bush administration’s first months, Lay appeared to be everywhere in Washington.

In the weeks after Bush’s victory, he served on a transition team advising the incoming administration on energy policy. He joined a small group of business executives who met with Bush for lunch at the White House soon after he took office.

When Vice President Dick Cheney was heading the administration’s energy task force, he provided Lay and other Enron executives a private 30-minute meeting--a privilege apparently afforded to no other energy company.

“As best as I can tell, Ken Lay has had unlimited access to the . . . administration,” Waxman said.

Lay Took Interest in FERC Members

Lay took a particular interest in the composition of the Federal Energy Regulatory Commission, the agency that regulates electrical utilities. After Bush took office, Lay met with White House personnel director Clay Johnson to discuss vacancies on the commission, according to several published reports.

Just weeks after Bush took office, Lay spoke directly to Curtis L. Hebert Jr., the FERC commissioner Bush had appointed as board chairman Jan. 22.

In a measure of Lay’s influence, Hebert asked the energy executive to support his retaining the chairman’s position, according to accounts of the conversation both men later provided to the congressional General Accounting Office.

Lay suggested he would support Hebert’s continuing in the job only if the chairman switched his position on an issue in which he disagreed with Enron: a matter relating to access to the electricity transmission grid, according to the GAO report.

Lay denied that he had linked his endorsement to a shift on the issue. But two top Hebert aides told the GAO that after the conversation, the chairman said to them that “he would not get Mr. Lay’s support unless he changed his position.”

Last summer, Hebert resigned after Bush made clear his intention to replace him as chairman with Patrick H. Wood III, a Texan supported by Enron and others.

White House officials are downplaying Lay’s role in shaping their energy plan last spring.

“He did not have a consultative role in the energy plan,” said Mary Matalin, Cheney’s counselor. “He’s obviously a longtime friend of the administration and in the business, and his meeting [with Cheney] was more courtesy than substance.”

While cultivating ties with the administration, Lay did not neglect Congress.

In all this, Lay was supported by a small army of lobbyists and consultants.

According to congressional disclosure forms, Enron’s Washington lobbyists included Marc Racicot, the incoming chairman of the Republican National Committee; Ed Gillespie, a former communications director at the RNC and a top communications advisor to Bush during the campaign; Jack Quinn, a former White House counsel under President Clinton; and eight Enron staff lobbyists at a Washington office led by Linda Robertson, a former Clinton Treasury Department official.

Enron also invested heavily in campaign contributions.

Since 1989, the company has contributed nearly $5.8 million to candidates, parties and political action committees, according to the Center for Responsive Politics. Seventy-three percent of the money went to Republicans.

Lay was a so-called pioneer in Bush’s presidential campaign, which meant he committed to raising at least $100,000.

Lay also personally contributed more than $275,000 to the Republican National Committee during the 2000 election cycle, part of overall donations from the company to the RNC that exceeded $1.1 million.

Enron gave $100,000 to help pay for Bush’s inaugural and repeatedly provided Bush with company jets to use during the campaign. Lay also made a personal contribution for $100,000 toward the inauguration.

At the same time, Enron gave $530,000 to the Democratic National Committee during the 2000 election. Lay made no personal contributions the DNC.

Beyond these financial and lobbying resources and Lay’s personal connection to President Bush, the company had ties to other senior administration officials, including top White House economic advisor Lawrence B. Lindsey, a former Enron consultant; and U.S. Trade Representative Robert B. Zoellick, a former member of an Enron advisory board.

As a result, the company was widely viewed by other energy lobbyists as the most powerful industry player in the capitol.

Connections May Hurt Now

“It appears they weren’t given the scrutiny that everyone else was,” said Dwight Evans, lobbyist at energy firm Southern Co., an Enron rival based in Atlanta.

Another top energy lobbyist who asked not to be identified said, “They were preeminent, almost predominant with this administration. Power is the appearance of power, and, boy, did they have the appearance of power.”

Now it has all come crashing down. When named as RNC chairman recently, Racicot said he would continue his lobbying practice--but pointedly noted that he would not do more work for Enron. Racicot did not return phone calls.

The company recently terminated its contracts with Quinn and Gillespie and all of its other outside Washington lobbyists.

The prominent energy lobbyist said that as those investigations proceed, Enron’s connections may come back to haunt it.

It’s likely, the lobbyist predicted, that members of Congress will have to be doubly tough on Enron to prove their independence from a company that had wielded so much influence in the capitol.

“I think the Republicans are going to have to jump on Enron to prove that they are not part of the Enron cabal,” one lobbyist said. “It’s going to be worse than it would be if they never had the influence.”