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Enron chief urged federal intervention

White House denies helping troubled firm

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WASHINGTON — The president of Enron Corp. asked a top Treasury official last year to intervene with bankers with whom the company was negotiating for a credit extension to avoid bankruptcy.

The disclosure today was the first indication that the energy firm had sought the direct intervention of administration officials as it faced collapse.


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The cascade of revelations about Enron's dealings with the Bush administration has raised questions about potential conflicts of interest. The Justice Department, the Securities and Exchange Commission and four congressional committees are investigating the politically connected company.

The White House has ordered federal agencies that might have had dealings with Enron to find any contacts between Enron and government officials. White House officials say they expect Enron made repeated requests of the government to help its financial situation, and they want the information out as quickly as possible to curb political fallout.

Enron President Lawrence "Greg" Whalley telephoned Treasury's undersecretary for domestic finance, Peter Fischer, six or eight times in late October and early November, Treasury spokeswoman Michelle Davis said today.

"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.

That is in addition to calls that Enron Chairman Kenneth L. Lay made to Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans about the company's financial woes. Lay told Evans that he would welcome any support in helping the company deal with a bond-rating firm that was considering downgrading Enron, administration officials said.

Enron said Lay also called Alan Greenspan, chairman of the Federal Reserve.

The administration said no government action was taken in response to the calls.

Fisher "inferred he was being asked to encourage the banks to extend credit," Davis said. "He made no such calls." She did not say exactly when the calls to Fisher were made.

White House spokesman Ari Fleischer said today the collapse of the company "needs to be fully investigated to determine if there was any criminal wrongdoing by Enron."

But he disputed suggestions that the expanding inquiries could harm the president politically. "This dog won't hunt. That's a reference to the politics of it," Fleischer said.

Enron was one of Bush's biggest political contributors.

On Thursday, Enron's auditing firm, whose work is under investigation by federal regulators, disclosed that its employees had destroyed a significant number of documents — a congressional source said it was thousands of pages — related to the company.

In another development, Attorney General John Ashcroft disqualified himself from Justice's criminal inquiry into Enron's conduct. The energy-trading company donated thousands of dollars to Ashcroft's Senate campaign in 2000. In Houston, Enron's hometown, U.S. Attorney Michael Shelby announced that his entire office disqualified itself from the investigation because he and other local prosecutors "have family relationships with individuals who are arguably affected by the Enron bankruptcy."

Bush has pledged to pursue aggressively the investigation into whether the company defrauded investors, including 401(k) plan holders, by concealing vital information about its finances.

"Ken Lay is a supporter," the president said. "But what anybody's going to find is that this administration will fully investigate issues, such as the Enron bankruptcy, to make sure we can learn from the past and make sure that workers are protected."

Treasury Secretary Paul O'Neill said today: "On first blush it looks like Enron operated within the rules and regulations with regard to how they managed their 401(k) plan, and if they did, then we need to look and see if there are appropriate changes we could make." He was interviewed on ABC's "Good Morning America."

Lay denied that he sought help from administration officials. Enron said Lay's calls to O'Neill, Evans and Greenspan were simply to give them a "heads-up" about Enron's problems.

"He felt an obligation to let them know what was going on," Enron said in a statement. "At no time did he ask for any assistance from the government, nor did he intend to leave the impression that he was asking for assistance."

Dave Skidmore, a spokesman for the Federal Reserve, said Lay contacted Greenspan on Oct. 26, and "the chairman did nothing in response to the call. It would have been inappropriate."

Lay also first reached out to Evans on Oct. 26. The two eventually spoke three days later. The first of Lay's two conversations with O'Neill was Sunday, Oct. 28.

"It is now clear the White House had knowledge that Enron was likely to collapse but did nothing to try to protect innocent employees and shareholders who ultimately lost their life savings," said Rep. Henry Waxman, D-Calif.

The bankruptcy has forced White House officials to face questions once posed to the scandal-tainted Clinton White House.

Would Bush support naming a special prosecutor to investigate? Fleischer said no. He also said he did not know any White House aides who had hired lawyers.

And there was a development reminiscent of Clinton's Whitewater: missing documents.

The big accounting firm that audited Enron's books, Arthur Andersen LLP, notified investigators that it had destroyed a "significant" number of documents related to the company. Andersen said it didn't know whether its directive to preserve documents demanded by government investigators was violated.

At the Securities and Exchange Commission, already investigating Andersen's auditing work for Enron, Enforcement Director Stephen Cutler said destruction of documents was "an extremely serious matter" but would not deter the SEC from pursuing its probe.

As for the company's contacts last fall, administration officials said Lay told Evans on Oct. 29 that he would welcome any support to help the company deal with a bond-rating firm that was considering downgrading Enron. Enron's credit rating was critical because, if lowered, $3.9 billion in debt would come due. Of that amount, $2.4 billion previously had been hidden in partnerships that were created to keep debt off Enron's books.

In one of two conversations with O'Neill, Lay discussed a past example in which the Federal Reserve pressured several large financial institutions to bail out a Connecticut hedge fund, Fleischer said.

The calls to Evans and O'Neill came after investors and the public learned of the extent of Enron's problems, when the company posted major losses Oct. 16.

Enron filed for bankruptcy Dec. 2, after months of conjecture about its finances.