Senator Phil Gramm's Wife
Gets Enron Subpoena

By Mark Benjamin and Nicholas M. Horrock

WASHINGTON (UPI) - A Senate panel probing energy conglomerate Enron Corp.'s sudden collapse sent a subpoena Friday to Texas Republican Sen. Phil Gramm's wife, Wendy Gramm, panel sources confirmed, while a new contact with a Bush administration official -- by a prominent Democrat -- was disclosed by the Treasury Department.

Wendy Gramm has been a member of Enron's board of directors for eight years and of the crucial Audit and Compliance Committee as the giant company's financial condition was deteriorating.

Her subpoena is among 51 issued by the Senate Permanent Subcommittee on Investigations chaired by Sen. Carl Levin, D-Mich., seeking documents from Enron, the Arthur Andersen LLP accounting firm, and current and former officers, employees and board members of Enron.

Of the 51 subpoenas, 49 went to individuals, one to Enron Corp. and one to the Andersen firm seeking documents as far back as January 1999.

Phil Gramm is the second-largest recipient in the Senate of financial contributions from Enron, receiving $97,350 from the company between 1989 and 2001, according to data provided by The Center for Responsive Politics. The senator receiving the largest contribution from Enron is Sen. Kay Bailey Hutchinson, R-Texas, who received $99,500.

The subpoenas came as government and congressional scrutiny of the collapse intensified.

Friday evening, the Treasury Department disclosed that Clinton administration Treasury Secretary Robert Rubin contacted a department under secretary in early November to suggest he call ratings agencies who were poised to downgrade Enron's credit rating.

A Treasury spokesperson said Rubin, now chairman of the executive committee of a banking conglomerate with hundreds of millions of dollars of exposure to the Enron collapse, Citigroup, called Under Secretary for Domestic Finance Peter Fisher to ask what he thought of Fisher contacting the ratings agencies to encourage them to "worth with" Citibank and other Enron banks.

The spokesperson said Fisher responded negatively, saying he did not think such a call was appropriate and Rubin responded that he thought that was a reasonable position. "Fisher made no such call," the Treasury spokesperson said.

It was Fisher to whom Enron President Lawrence Whalley made six to eight calls in late October and early November, calls a Treasury spokesperson earlier Friday said Fisher took to be suggestions he call Enron's banks.

Then too, the department maintains, Fisher decided not to do anything.

Over Thursday and Friday, it was disclosed that Enron's chairman, Kenneth Lay, contacted top Bush Treasury Secretary Paul O'Neill, Commerce Secretary Don Evans and Alan Greenspan, chairman of the Federal Reserve, in October about Enron's financial difficulties.

Secretary of Commerce Evans said Lay sought assistance from the federal government, but Lay said in a statement late Thursday that he only sought to alert top financial leaders that his mammoth firm was having difficulties. O'Neill said he agreed with Evans that nothing was to be done.

President Bush, who has received political and financial support from Enron and Lay in all his political races, said the Enron chief did not contact him.

Several prominent Democrats have attempted to use the various Enron entreaties as evidence of a close association with the Bush administration but no one has accused White House officials of wrongdoing.

When Enron received no outside financial assistance and as the ratings agencies ultimately downgraded its credit standing, the company reported to stockholders that it had $500 million of previously unreported debt. The subsequent selloff of Enron stock was swift and dramatic -- and left many of the company's 21,000 employees with life savings that diminished to near nothing as the stock fell below a dollar a share.

As several employees later told a congressional hearing, they were prohibited from selling their Enron stock from their 401K retirement plans even though top executives sold $1 billion in shares while they still retained their value.

The company sought protection under Chapter 11 of the U.S. Bankruptcy Code on Dec. 2.

Arthur Andersen, the company's auditing firm, reported in testimony in December that it told Enron officials that some of their financial transactions might be illegal. Joseph Berardino, Andersen chairman, also testified that Enron withheld financial information from Andersen. He admitted that his firm's accountants may also have made some mistakes.

Then Thursday, Andersen disclosed that a "significant" number of correspondence, electronic files and other data may have been destroyed, some of it after investigations had begun.

Well before the Enron debacle began gathering steam, on Sept. 5, Sen. Gramm announced that he would not seek re-election after serving 18 years in the Senate. During his retirement announcement, Gramm said that he had achieved his goals as a senator and would move on to another career.

Gramm's spokesman, Larry Neal, declined comment on the subpoenas, but said Enron had nothing to do with Gramm's decision not to seek another term.

"He outlined in detail in his retirement announcement his reasons for leaving, and those were his only reasons," Neal said.

The House Energy and Commerce Committee, run by Republican Rep. Billy Tauzin, R-La., also wants to talk to Wendy Gramm. Tauzin requested the interview with Wendy Gramm by name in a Dec. 10 letter to Enron.

The spectacular financial collapse of Houston-based Enron has drawn broad scrutiny from a host of federal agencies and congressional committees.

On Wednesday, it was revealed that the Justice Department had opened a criminal investigation into the Enron matter.

On Thursday both U.S. Attorney General John Ashcroft in Washington and U.S. Attorney Michael T. Shelby in Houston recused themselves from the investigation. Selby's office announced that he and several other attorneys had relatives who were employed by Enron.

Ashcroft received a $25,000 contribution from Enron during his run for re-election to the Senate from Missouri and in an unsuccessful attempt to win the Republican presidential nomination.

The Securities and Exchange Commission also has opened a probe into whether Enron officers were capitalizing on their knowledge of the firm's financial condition when they sold millions of dollars in stock prior to its nosedive.

The agency also wants to determine whether Enron financial claims to investors were misleading and whether Arthur Andersen's audit of those statements was proper.

The House Energy and Commerce Committee led by Tauzin and Ranking Minority Member John Dingell, D-Mich., Friday announced that it was demanding a host of financial records -- including some that Arthur Anderson says were destroyed -- as well as interviews with Enron's financial oversight officials.

That request covers 43 areas of Enron's finances and corporate behavior including all earnings-related documents and memos, details about the finances and discussions related to several outside investment vehicles operated outside the company's normal procedures.

In the Senate, a Commerce Committee subcommittee -- led by North Dakota Democrat Byron Dorgan -- already has held a hearing on the loss of pension funds when the stock price collapsed. At that hearing, a top Arthur Andersen official said he thought there was a possibility that criminal acts had been committed by the company.

Dorgan plans more hearings into the loss of the retirement funds but so far has been unsuccessful in getting Lay to appear before the committee.

The Senate Government Affairs Committee also announced an investigation on Jan. 2 into the collapse, choosing to focus on whether government agencies failed to detect, or ignored, signs of the impending collapse. The committee plans a hearing on Jan. 24, according to Chairman Joe Lieberman, D-Conn.

The House Government Reform Committee has been slower to formally step into the fray, but its ranking member, California Democrat Henry Waxman, has been vocal about the possibility that Enron used undue influence on administration officials to avoid additional scrutiny of its finances and practices before the collapse. Waxman also has been engaged in a fight with the Bush administration over releasing details of meetings between Enron officials and high-ranking Bush administration officials, when the White House was preparing a national energy policy.

On Jan. 3 the vice president's office provided Waxman with a list of contacts between the vice president or his staff and Enron officials. The letter, from David S. Addington, the vice president's counsel, said that neither the vice president nor his staff had ever discussed Enron's financial status with the company's representatives.

(Mark Benjamin is UPI's chief congressional correspondent, and Nicholas M. Horrock is UPI's chief White House correspondent.)

Copyright © 2002 United Press International. All rights reserved.

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