- During the administration of the first President George
Bush, a new party fundraiser named Kenneth Lay was invited to spend the
night at the White House. The sleepover was an early coup for the chairman
of Enron Corp. and a harbinger of things to come.
- Over the following decade, Lay and Enron poured millions
of dollars into US politics, cultivating unequaled access and using the
entree to lobby Congress, the White House and regulatory agencies for
that was critical to the energy company's spectacular growth. With Enron's
sudden bankruptcy, public attention has turned not only to the financial
practices that brought the company down, but its far-flung political
- Some Democrats in Congress are spoiling for an
to use Lay and Enron to embarrass the Republican Party, which received
most of the company's largess over the years. They want to look into such
things as Enron's relationship with Phil Gramm, a Republican from Texas,
ranking minority member on the Senate Banking Committee and chairman of
the committee at a time when his wife, Wendy Gramm, was serving on Enron's
board. Last year, Gramm's committee approved legislation that included
a key provision exempting parts of Enron's massive energy trading operation
from federal oversight.
- ''I think the Enron story is going to turn out to be
an enormous political story,'' said Democrat Representative Henry Waxman,
ranking minority member on the House Energy and Commerce Committee. Lay's
ties to the White House and GOP leaders were so multilayered that
are likely to be reluctant to pursue them, he added.
- Enron also cultivated relationships with Democrats,
Lay played golf in Colorado with President Bill Clinton, and Enron gave
hundreds of thousands of dollars to Democratic campaign committees and
Democrats in the House and Senate, including Senator Charles Schumer and
Representative Martin Frost, the ranking minority member on the House Rules
- Advocates of campaign finance reform say the Enron case
vividly illustrates the ties between politics and big money, though it's
unclear that the company's political operations were radically different
from others for whom political contributions have become a routine cost
of doing business. ''There are aspects of (the Enron case) that remind
us of the savings and loan scandal, in the sense that a powerful
used big money to buy influence and protect itself while ordinary citizens
ended up losing their life savings,'' said Fred Wertheimer, president of
Democracy 21, a Washington interest group.
- Enron's ties to Republicans and the present Bush
were especially close. Lay raised large sums for George W. Bush's campaign.
Enron, Lay and its employees have contributed $572,350 to him over his
career, far more than any other company, according to the Center for Public
Integrity in Washington. Several top administration officials have been
Enron advisers or stockholders.
- Enron, Lay and other senior executives contributed $1.7
million in soft-money donations to politicians in the 2000 election cycle,
two-thirds of it to Republicans, according to the Center for Responsive
- What was unique about Enron was a brash and sometimes
counterproductive political style. In October 1999, for example, Jeffrey
Skilling, then Enron's president, expressed his displeasure at
Joe Barton's position on a deregulation bill pending in the energy
Barton chairs. The meeting grew ''heated and awful,'' said one person who
was present, until Barton, a Republican from Texas, a usually mild-mannered
man who keeps a Bible on his desk, exploded.
- ''Jeffrey Skilling, I may not have your millions of
but I am not an idiot,'' one witness recalled Barton saying. The meeting
ended without Enron getting the changes it wanted. ''Skilling did not get
Washington,'' the source added. ''In their lobbying, they acted like the
800-pound gorilla they were,'' said Christopher Horner, a lawyer who
directed Enron's government relations in 1997.
- ALMOST from its start in 1985 as a gas pipeline company,
Enron needed help in Washington, and it got it in a series of actions by
Congress and the Federal Energy Regulatory Commission (FERC) that
the traditional monopoly of utility companies over power plants and
- Enron lobbied for several of the initial actions that
set the stage for the era of a deregulated wholesale electricity market.
It supported the 1992 Energy Policy Act, which opened the utility
wires to electricity merchants such as Enron. It also worked with the
Futures Trading Commission - then chaired by Wendy Gramm - for a regulatory
exemption for futures trading in energy derivatives, which later became
Enron's most lucrative business. Soon after Gramm stepped down in 1993,
she was appointed to Enron's board.
- That same year, Lay served as chairman of the committee
organising the Republican National Convention in Houston. Enron made a
major contribution to a ''street fair'' in honour of Senator John Breaux,
a Democrat and a key energy policymaker, at the party's convention. Key
orders by FERC in 1996 also supported Enron's transformation into a trader
of gas, electricity and more exotic products, such as telecommunications
services and sulphur-dioxide emissions credits.
- The new rules ensured that Enron and other merchant
could buy electricity from independent power plants and sell it to distant
customers, using transmission lines borrowed from utility companies.
- Even Enron's harshest critics credit Lay with putting
new issues-such as electricity deregulation-on the Washington agenda. Lay,
a PhD in economics, became ''the ambassador'' for deregulation, one former
employee said. Enron's agenda was opposed by coal-burning utilities which
viewed the emerging wholesale electricity market as a threat to their turf.
Many of these had impressive funding and connections of their own.
- But with the explosive growth of Enron and the GOP
of Congress in 1995, the company's soft-money donations - unregulated,
unlimited gifts to political parties and organisations - went from about
$136,000 in the 1993-94 election cycle, to $687,000 in 1996 and $1.7
in 2000, according to the Center for Responsive Politics.
- But Enron often found Washington slow and unreliable.
The company placed a substantial bet on federal support for limits on the
greenhouse gases causing global warming. Enron officials hoped to exploit
a new market in industry for carbon-emissions credits. Lay joined the Union
of Concerned Scientists and environmental groups in calling for curbs on
carbon in the atmosphere. The Clinton administration was supportive, but
this year the Bush administration reneged on a pledge to impose limits
on greenhouse gas emissions from coal-burning power plants.
- A multimillion-dollar lobbying campaign in Congress to
secure legislation requiring states to institute retail electricity
fared even worse. Enron hired former NY Representative Bill Paxon to run
Americans for Affordable Electricity which commissioned studies and
business support for deregulation. But the legislation never made it out
of a congressional subcommittee.
- Enron's political pragmatism was demonstrated in the
1998 New York Senate election, when it dropped its support of the
incumbent, Alfonse D'Amato, after Democrat Schumer endorsed Enron's goal
of wholesale deregulation, sources said. Lay reciprocated by hosting
fundraisers for Schumer, and Enron's political action committee contributed
$7,500 to his campaign.
- The company's lobbying team expanded along with its
spending. It outgrew the two-person operation and began to reflect Enron's
interest in everything from pipeline safety to derivatives trading. By
last year, its lobbying expenses exceeded $2 million a year.
- The hazards of Enron's efforts to connect with both
were evident last year, when shortly before the November election, the
company picked a Clinton administration Treasury official, Linda Robertson,
to run its Washington office. DeLay, whose campaign and related funds had
received more than $100,000 from Enron and Lay, briefly ''excommunicated''
Enron, a House source said. Robertson was not invited to a series of
of electricity lobbyists held in DeLay's office last July.
- Enron had more success when Congress overwhelmingly
legislation last year containing a provision precluding the Commodity
Trading Commission (CFTC) from regulating Enron's trading in energy
These instruments are traded largely between electricity dealers and big
wholesale consumers which use them to hedge against price swings that could
adversely affect businesses. The exemption was not supported by a Clinton
administration working group.
- Since the departure of Wendy Gramm, some in the agency
had lobbied for tighter control over the exploding energy derivatives
The legislation passed through the Senate Banking Committee, then chaired
by Phil Gramm, who has received $97,350 from Enron employees and its
action committee sine 1989.
- Ironically, since Enron's fall, both FERC and Congress
seem to be moving in the direction of the deregulated markets Lay and Enron
lobbyists had pushed for.