Officials Defend Not Sounding Alarm on Enron

Senior Bush administration officials defended themselves Sunday for not alerting the president and the public that thousands of employees and investors were likely to lose large amounts of money in the failing Enron Corp., arguing that the giant energy company already was doomed by the time its executives began to seek help from Washington last fall.

In addition, Treasury Secretary Paul H. O’Neill said that “in the broad scheme of things,” he was not necessarily surprised that Enron sought U.S. Bankruptcy Court protection Dec. 2.

“Companies come and go,” he said on “Fox News Sunday.” “Part of the genius of capitalism is people get to make good decisions, or bad decisions, and they get to pay the consequence or to enjoy the fruits of their decisions. That’s the way the system works.”

O’Neill and Commerce Secretary Don Evans said that when Enron executives began to contact them for help in October, the company’s shareholders already knew that the stock was falling and could have made their own decisions to sell their shares at that time.

Shareholders did not need the federal government to advise them how to safeguard their investments, the officials said.

That, O’Neill said, was a key reason he did not immediately alert President Bush or suggest that the administration do something to stave off the financial ruin of the Houston-based company, once the world’s leading energy trader.

“I didn’t think there was any reason for me to talk to anybody else,” O’Neill said.

“It was not new news. . . . You all had been reporting for weeks that Enron had problems, that they were in trouble.”

McCain: Agencies Must Be Held Accountable

The secretary added that he likewise did not think it important to tell Bush that Enron Chairman Kenneth L. Lay had called him with concerns about the company’s well-being.

“You know,” O’Neill said, “I have been involved in big-league events for, I don’t know, most of the last 40 years. I didn’t think this was worthy of me running across the street telling the president. I don’t go across the street and tell the president every time somebody calls me.”

O’Neill’s argument that the government should stay out of affairs in the business sector, even when officials fear that such a large number of people stand to lose, drew fire from some leaders in Congress.

“I understand what Mr. O’Neill is saying, that capitalism is a risk business,” said Sen. John McCain (R-Ariz.), ranking member on the Senate Commerce Committee.

But McCain suggested that something should have been done to help the 21,000 Enron employees and thousands of other stockholders who saw their retirement packages and other investments disappear. Because of a change in plan administrators, Enron employees were blocked from selling company shares in their retirement accounts for a four-week period in October and November, when the stock took its most precipitous plunge.

“We care about our citizens, and the regulatory agencies and oversight agencies must be held accountable,” McCain said on CBS’ “Face the Nation.” “The government does have a role to protect innocent people.”

Evans, speaking on NBC’s “Meet the Press,” said he also believed at the time that shareholders were well aware of Enron’s continuing problems.

“I didn’t know anything they didn’t know,” he said of shareholders.

“Ken didn’t tell me anything that wasn’t already in the public domain and publicly disclosed,” Evans said, referring to Lay. “ . . . Everything he told me was already in the public domain. The public knew about it. The shareholders knew about it. Wall Street knew about it.”

Evans further argued that it would have been wrong for him to step in as Commerce secretary and seek to have the company saved if it was going to declare bankruptcy anyway a month or so later.

“What do I say to the lady who bought the stock that day, that put her life savings into the stock that day?” if the government had intervened, Evans said. And if the company then went under, he asked, “what do I say to her” then?

The Senate Commerce Committee is among several congressional panels and government agencies investigating aspects of the Enron bankruptcy.

“With all respect to Secretary O’Neill, those statements [about capitalism] are outrageous,” said Sen. Joseph I. Lieberman (D-Conn.), chairman of the Governmental Affairs Committee, which also is probing the company’s collapse. “They sound more coldblooded than he means to be.”

Lieberman, also speaking on “Face the Nation,” said that capitalism aside, Enron executives could have saved the investments of employees and shareholders at the same time they were watching out for themselves.

“We know that they were saying things to the public, to shareholders, the retirees . . . about how the stock was going to go up, and at the same time, they were selling their stock right then,” he said.

The senator added: “This was not a natural death. . . . This was not capitalism as we want it to be.”