Enron Sought Cabinet’s Help With Bankers

Struggling to avert a financial meltdown, Enron Corp. asked a top Treasury Department official for help in securing a much-needed loan from the company’s bankers during a series of phone calls last fall, government officials revealed Friday.

The disclosure is the strongest indication yet that Enron, one of President Bush’s biggest campaign supporters, appealed to administration officials for specific assistance before its Dec. 2 bankruptcy, and before the full extent of its problems were known. Treasury officials said they declined to intervene.

In addition to calling government officials themselves, Enron executives received an assist from one of the company’s powerful lenders, New York-based Citigroup.

Robert E. Rubin, head of Citigroup and a former Clinton administration Treasury secretary, called the same Treasury Department official, Peter Fisher, on Nov. 8 to suggest that Fisher take steps to prevent Enron’s credit rating from being downgraded, according to Treasury Department spokeswoman Michele Davis.

“Fisher responded that he didn’t think it advisable to make such a call,” Davis said. “Rubin said he thought that was a reasonable position. Fisher made no such call.”

Officials at Citigroup could not be reached for comment late Friday. It was unclear whether Rubin was concerned about his bank’s investment or about how Enron’s collapse might affect the nation’s financial markets.

Friday’s disclosures heightened the debate in Washington about whether energy giant Enron had attempted to use its political clout to ease its financial problems or was merely consulting with government leaders concerning issues that might have roiled financial markets.

Reports of Enron’s contacts with government officials had some members of Congress vowing Friday to step up their investigation into whether political relationships played any role in the government’s actions in the matter.

Since Enron’s collapse, Congress, the Justice Department and government regulators have begun looking into whether the company illegally concealed the extent of its financial problems from its investors and accountants. Enron’s bankruptcy wiped out the retirement savings of thousands of employees and cost investors billions of dollars.

Rep. Henry A. Waxman of Los Angeles called on administration officials to make public the details of all contacts with Enron representatives before the company’s bankruptcy filing last month.

Waxman, the top Democrat on the House Government Reform Committee, said in a letter Friday to administration officials that he wants to determine why the administration “apparently did nothing to mitigate the harm of the Enron bankruptcy to thousands of its employees and shareholders.”

Sen. Joseph I. Lieberman (D-Conn.), chairman of the Senate Governmental Affairs Committee, said the contacts between Enron and administration officials are a “source of concern.”

“The close ties between Enron and the administration eventually have to be a subject of inquiry,” he said in a television interview. But, he added, “it’s important that we don’t jump to conclusions.”

Earlier this week, the government disclosed that Enron Chairman Kenneth L. Lay called Treasury Secretary Paul H. O’Neill, Commerce Secretary Don Evans and Federal Reserve Chairman Alan Greenspan to inform them about Enron’s problems.

Lay told Evans, Bush’s former campaign manager, that Enron would welcome any assistance he could provide in helping Enron prevent a credit rating agency from downgrading the company’s debts.

White House Press Secretary Ari Fleischer insisted that the Enron case would have no political ramifications for the president.

“This dog won’t hunt,” he said. “The president’s approach is that people need to be helped. And this needs to be fully investigated to determine if there was any criminal wrongdoing by Enron.”

On Friday, the Treasury Department said that, after Lay called O’Neill, Enron President Lawrence “Greg” Whalley followed up with six to eight phone calls to Fisher, Treasury’s undersecretary for domestic finance, in late October and early November. On Nov. 8, Enron disclosed that its accounting practices for five years had grossly overstated profits, triggering its meltdown.

Thus, at least some of the calls were made before Enron publicly disclosed the depth of its problems.

Whalley asked Fisher to call Enron’s bankers to help secure a loan, Davis said. Fisher is a former official at the Federal Reserve Bank of New York who played a large role in the government bailout of hedge fund Long Term Capital Management in 1998.

“As Enron’s negotiations with its bankers for an extension of credit neared a decision point, the president of Enron asked Undersecretary Fisher to call the banks,” Davis said. “Undersecretary Fisher inferred he was being asked to encourage the banks to extend credit. He made no such calls.”

Enron attorney Robert S. Bennett said the calls by Enron executives to Bush administration officials were “perfectly appropriate.”

Bennett, a Washington attorney whose clients have included President Clinton, acknowledged that Whalley called Fisher to talk about “what impact Enron’s difficulties would have on [financial] markets.”

Bennett said Whalley didn’t ask Fisher for anything but acknowledged that Whalley remarked at one point: “If you can get these banks to lend us money, great. But our credit isn’t very good.”

“And he laughed. . . . He didn’t seriously think that would happen.

“There is almost an obligation to notify senior officials in the government who have responsibility for those areas,” Bennett said.

Bennett said that he spoke Thursday with Lay and that the Enron chief had “no recollection” of asking for any specific help. But he acknowledged that Lay did raise the example of Long Term Capital Management, a large investment firm that was saved by a federally orchestrated private bailout.

At the urging of the White House, other Cabinet agencies began checking their own records and phone logs Friday for potential contacts with Enron officials.

At the Energy Department, an aide to Secretary Spencer Abraham said that Abraham called Lay on Nov. 2 to ask him about the company’s financial problems. The aide called it a “very short conversation. Mr. Lay did not ask for any help from the secretary or the department. Nor did Secretary Abraham offer any.”

“It is not unusual for the Energy secretary to speak to an energy company official,” department spokeswoman Jeanne Lopatto said.

Commerce Department officials thus far have not turned up any additional phone calls from Enron or any efforts by department officials to assist the company, according to spokesman Jim Dyke.

“We’re moving as quickly as we can to find everyone in the Department of Commerce who may have talked to the company,” he said.

The department’s general counsel, Ted Kassinger, who represented Enron at a Washington law firm before joining the Bush administration, has not been contacted by the company since taking his new post, Dyke said.

Also Friday, a Senate committee issued 51 subpoenas to Enron and its auditor, the accounting firm Andersen, for documents in its investigation of the energy giant’s collapse. Sen. Carl Levin (D-Mich.), chairman of the subcommittee on permanent investigation, added to the subpoena request a demand for Andersen to include all documents related to the destruction of records related to its audit of Enron.

The Senate Governmental Affairs Committee, chaired by Lieberman, plans to hold the next series of hearings into Enron’s collapse Jan. 24.

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Times staff writers Nick Anderson, James Gerstenzang and Josh Meyer in Washington; Thomas S. Mulligan in New York; and James F. Peltz in Los Angeles contributed to this report.