DALLAS — Texas Sen. Phil Gramm and his wife lost more than $600,000 in the bankruptcy of energy company Enron Corp, where she was a member of the board of directors, a Gramm spokesman said Wednesday.
Gramm, the ranking Republican on the powerful Senate Banking Committee, will not take part in congressional hearings on Enron's collapse because his wife, Wendy Gramm, had been on its board of directors, the spokesman said, confirming details of a report in Wednesday's Dallas Morning News.
Houston-based Enron Dec. 2 filed the largest bankruptcy in U.S. history. Last week the Justice Department launched a criminal probe of the company. The Securities and Exchange Commission and Labor Department are also investigating.
Wendy Gramm, a research scholar on regulatory matters with a doctorate in economics, was paid half her board compensation in the form of Enron shares and stock options during her first five years as a director at Enron.
Wendy Gramm, who served on the board since 1993, stopped accepting stock as compensation from Enron after 1998 because of a conflict of interest raised by her husband's interest in energy deregulation legislation urged on Congress by Enron.
Her compensation went instead into a mutual fund administered by Enron and pegged to the market price of the company's shares.
"Unfortunately, all that deferred compensation was lost when Enron declared bankruptcy," Sen. Gramm told the newspaper. "Relatively speaking—and I know there are people in Houston who lost a lot more—but that's a lot of money."
A sharp decline in Enron's share price last fall all but wiped out the savings of thousands of the fallen energy trader's employees whose 401(k) accounts were heavily invested in Enron stock.
The senator said the couple sold 10,000 Enron shares in August and September 1998 to buy a retirement property near Houston. The stock at the time was trading between $48 to $54 a share, and after deducting the cost of her options, she earned an average of $27 a share, or $276,912, according to Sen. Gramm's financial disclosure filings.
Gramm defended his wife against allegations of insider trading in lawsuits filed by several Enron shareholders seeking tens of billions of dollars in damages from Enron's board, management and accountants, Andersen.
"When all the facts are known, people will find she did nothing wrong," Gramm told the newspaper. "But this thing's going to be around for a long time."