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Ashcroft Recuses Himself From Enron Investigation

Aired January 10, 2002 - 14:30   ET


JUDY WOODRUFF, CNN ANCHOR: Some fast-moving developments now, with regard to the Bush administration connection to the Enron corporation, a large energy company that has just announced a bankruptcy filing in recent weeks. For the very latest, let's go to the White House, to our own John King -- John.

JOHN KING, CNN SR. WHITE HOUSE CORRESPONDENT: Judy, two significant new developments to report. One, and most significant, the Attorney General John Ashcroft has now recused himself from any involvement at all in a just-beginning criminal investigation into whether the Enron corporation defrauded its shareholders and its employees by not disclosing information about the company's deteriorating finances.

Many investors lost thousands, some millions of dollars, when the company went bankrupt last December. The attorney general and his chief of staff, David Ayres, saying in a statement released by the Justice Department just moments ago, that they will recuse themselves from any involvement at all in this investigation, which began about two weeks ago.

Now, why would the attorney general do that in such a high- profile case? Enron and its CEO, Ken Lay, are prolific contributors to political campaigns in the country. And among those contributions, as $25,000 contribution in the last election cycle to a political action committee run by then-Senator John Ashcroft of Missouri. He is now the attorney general, but he was a senator then, seeking reelection. He lost that campaign, $25,000 came into his political action committee from Enron.

So, the attorney general removing himself, as well as his chief of staff, who was involved in the Ashcroft political campaigns, from any decisions at all as the criminal investigation into whether Enron defrauded its shareholders and employees continues. That investigation being run here at the Justice Department in Washington.

Also, another new development. The administration disclosed for the first time this morning that Ken Lay, the Enron CEO, called two Bush Cabinet secretaries late last year, the treasury secretary, Paul O'Neill, and the commerce secretary, Don Evans, and told them he was worried that the company would fail to meet its obligations and it was headed for bankruptcy. These conversations, we were told this morning, before the company made its public announcement of the bankruptcy. As of this morning, the administration did not have the dates of those conversations. We are told by sources, in fact, there were two conversations now, between Ken Lay, the CEO of Enron, and the Treasury Secretary Paul O'Neill. Those conversations, the first one was on the 28th of October. The second one, on the 8th of November. It was December 2nd that Enron filed for bankruptcy.

But the company did make a public comment in mid-October on the 16th. That was the first indication that its finances were deteriorating in a significant way. So it was just after that October 16th filing, on the 28th of October, the first conversation between Ken Lay and the treasury secretary. A second on November 8.

As result of those conversations, Secretary O'Neill and Secretary Evans at the Commerce Department debated whether the government had any obligation or any responsibility to step in and help bail out Enron. Both decided there was no such obligation and the government should not do that. And the White House said today neither Secretary O'Neill nor Secretary Evans passed on the substance of those conversations in any way with the president, who himself is among those who have benefited from the political contributions of Enron and its top executives -- Judy.

WOODRUFF: John, to put this in perspective, what would it have represented at that late stage of Enron's problems, for the federal government to have stepped in, in one form or another?

KING: We are told in those conversations that Ken Lay made comparisons to a company called Long Term Capital, that the government -- ti was actually the Federal Reserve, but with the cooperation of the Treasury Department some years ago -- did step in and bail out, because it believed if that company collapsed, there would be broad ramifications throughout the economy.

In this case, we are told, Ken Lay, at least in the conversations with Secretary O'Neill, I am told, never specifically asked for direct help or any bailout. Perhaps he was, some officials say, hinting that he would accept such help or a bailout. But we are told Secretaries O'Neill and Evans reviewed this. They believed that, as big as a problem this was for Enron, that it was limited to the company itself. It would not have dramatic ramifications in the overall economy. So both decided the government should not intervene, should not offer any bailout help.

And at that point, the administration said the conversations shut down and were never passed on to the president or any other senior officials here at the White House. That is one question Democrats will ask more questions about, as the many investigations into the collapse of Enron, what happened to its shareholders, especially what happened to employees, who could not -- remember, as the company was shutting down, many top executives sold stock, millions of dollars of stock, at a time the stock was still quite high. Employees who had much of their life savings in the 401(k)s were prohibited, because of the rules and regulations from selling their stock -- much of it now almost worthless. WOODRUFF: John, you started out by talking about the contribution to the Ashcroft campaign when he was a running for the Senate. What about the -- what about the contributions from Ken Lay or other Enron top officials, to George W. Bush, either early on in this campaign or in his previous campaign?

KING: Enron, if you back and look from when George W. Bush first ran for Congress, then as governor of Texas, now as president of the United States -- Enron is the single-largest, Enron and its top officials -- the single-largest contributor to George W. Bush's political career. There may be a time down the road when we face a decision, if the Justice Department were to -- and we need to be careful here. This investigation is just beginning. There could come a question down the road, should the president recuse himself in any way.

But the White House says the president will have no direct involvement in any of these decisions, that he trusts his cabinet agencies to make these decisions. So if a recommendation for, say, any criminal charges, were made by the Justice Department, one can assume, based on the conversations today, that the president would have no part in that because of this relationship. But we should also be very careful. These investigations are just beginning.

And one reason the president announced separate government reviews today by the Treasury Department, by other agencies, of the whole process, what are the government rules for this is that, one official says, if it turns out there was no criminal activity, then the government would come to the conclusion that the disclosure laws need to be strengthened, because those shareholders and those employees should have been told earlier that the company's finances were going south.

WOODRUFF: All right, John King at the White House with the news. This announcement out of the Justice Department just moments ago, that the attorney general will now recuse himself from any involvement in the investigation into Enron, the giant energy company that has had to declare bankruptcy in the last few weeks.




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