DukeEmployees.com - Duke Energy Employee Advocate
Washington - Page 15
while average employees have a more restrictive set of rules..." - Rep. George Miller
The "Kenny Boy Exception"New York Times – by R. Berke, A. Mitchell – February 13, 2002
WASHINGTON, Feb. 11 — The White House is working through the Republican Party to scuttle campaign finance legislation before the House this week while protecting President Bush from any political fallout, advisers to Mr. Bush said today.
With White House consent, the Republican National Committee is lobbying to defeat the Shays-Meehan bill, the campaign finance overhaul measure that would ban the large unlimited political donations known as soft money.
An internal "target list" compiled by the Republican Party identifies 33 Republicans who had previously voted for the bill when it was unlikely to become law. These members are seen as undecided about how to vote this time — and potentially available to back amendments that would ultimately weaken the legislation or kill it outright.
"We need to ask them what they need for cover," the internal document states, "and try to support our amendments." The party's effort came as the House Republican leadership mounted a similar drive to amend the bill.
Republican Party officials sent the target list to lobbyists, hoping that they could try to persuade wavering lawmakers to oppose the legislation.
The White House's deliberations were just part of the intense maneuverings today by all sides as the House prepared for the campaign finance debate that is set to start on Tuesday and end Wednesday or Thursday. Legislation to ban soft-money contributions passed the Senate last year in a 59-to-41 vote, prodded by Senator John McCain, Republican of Arizona, who put the bill at the center of his losing presidential primary run against Mr. Bush in 2000.
Now its supporters are trying to pass the same legislation in the House, where it is sponsored by Representatives Christopher Shays, Republican of Connecticut, and Martin T. Meehan, Democrat of Massachusetts. The two should have an advantage because an earlier version of the bill passed the House by comfortable margins in 1998 and 1999.
As part of the lobbying against it, Marc Racicot, the Republican national chairman, today sent a memorandum to Republican members of Congress, declaring that the "various reform proposals are of vital concern to Republican candidates."
Mr. Racicot included a list of principles that Mr. Bush outlined last year of what he would like a campaign finance bill to contain.
Mr. Racicot did not specifically tell members how to vote, but in the memorandum he wrote, "As you consider each amendment, I recommend that you ask yourself whether what is being proposed reflects President Bush's principles and makes our campaign finance system more fair, even-handed and balanced."
Advisers to Mr. Bush said the White House was working through the Republican Party to protect the president. After the Enron Corporation debacle, particularly, aides said they did not want Mr. Bush to take a visible role lest it appear as though he was interfering with efforts to tighten campaign finance laws.
Party officials involved in the move said that they had the strong support of Karl Rove, the president's chief political adviser, but that Mr. Rove hardly needed to convince them. "I'm not sure Karl's had to encourage them much," a Bush adviser said. "At the R.N.C., they're like drug addicts. The party thinks it would be a great idea to kick the habit, but not right now."
Dan Bartlett, the White House communications director, said he was aware of Mr. Racicot's memorandum but insisted it was "absolutely not true" that the White House was working through the party, even though the White House effectively controls it.
"There are no phone banks, no calls being made to members from the president," Mr. Bartlett said. "We've told people consistently that opponents of campaign finance legislation should not count on a veto from the president."
Mr. Bush has told Republican lawmakers who want him to work against the bill that he has no intention to inject himself in the fight, and his advisers said it was likely that he would sign campaign finance legislation should it reach his desk.
Still, at the White House, Mr. Bush's advisers said, the hope is that the bill does not get that far.
Beyond Enron, Mr. Bush's advisers said, the president was reluctant to speak out because White House officials were split concerning whether the bill would truly hurt Republicans. "It's not clear that everyone at the White House thinks this bill will be awful for the Republican Party," one adviser said.
Another adviser said there was also a sense in the White House that if the legislation was going to pass anyway, there was no political advantage for Mr. Bush to get involved in a losing cause.
Former Representative Bill Paxon, a New York Republican who is close to the White House, said officials there were not bluffing when they told House members not to count on Mr. Bush's vetoing a campaign finance bill.
Asked if the Enron concern it even more politically disadvantageous for Mr. Bush to take part in the campaign finance battle, Mr. Paxon said, "There's no doubt it does."
Mr. Shays and Mr. Meehan said the collapse of Enron, and how the company had showered contributions on politicians, should help them.
"I believe the Enron scandal has galvanized public support," Mr. Meehan said today.
The measure would also rein in some issue advertising by outside groups in the periods just before elections.
Republican leaders in the House fiercely oppose the measure and are planning strategy to kill it or substantially change it.
J. Dennis Hastert, the Republican of Illinois who as the House speaker commands great loyalty from Republicans, told his party's House members last week in a closed-door meeting that the end of soft money could cause Republicans to lose control of the House.
Republicans said that Representative Dick Armey of Texas, the majority leader, would put forward a new Republican campaign finance bill on Tuesday.
Republicans were also devising amendments to the Shays-Meehan bill to make it different from the Senate version. That would send the bill to a House-Senate conference, where there would be another chance to weaken or kill it.
No one was sure what would happen in the next two days, but Mr. Shays said, "I'd rather be us than them. We should win it. I think our cause is just."
Under the rules for debate, the Shays-Meehan bill will be pitted against two rival bills; whichever bill emerges will then be subject to amendment.
One competing measure sponsored by Representatives Robert Ney, Republican of Ohio, and Albert Wynn, Democrat of Maryland, would cap soft-money donations to each of the national political committees at $75,000 a year.
It would also allow unlimited soft- money contributions to continue to state political parties. But Republican vote-counters said that they did not expect the measure to get enough votes and that they were looking for other ways to defeat the Shays-Meehan bill.
Mr. Armey, aides said, planned to take advantage of his right under the rules to submit a bill of his own.
Mr. Bush has backed banning soft- money contributions from unions and corporations but not individuals. Advocates of a wider ban argue that would be a hard position to endorse in the face of the Enron debacle.
One strategist working with Mr. Shays and Mr. Meehan called the idea the "Kenny Boy exception" — using Mr. Bush's nickname for Kenneth L. Lay, the former Enron chairman — because it would still allow figures like Mr. Lay to make six- figure contributions to the parties.
The Enron Lobbying MatrixThe Washington Post – by Joe Stephens – February 11, 2002
They called it "the matrix" -- a computer program that brought a scientific dimension to Enron's effort to seduce politicians and sway bureaucrats.
With each proposed change in federal regulations, lobbyists punched details into a computer, allowing Enron economists in Houston to calculate just how much a rule change would cost. If the final figure was too high, executives used it as the cue to stoke their vast influence machine, mobilizing lobbyists and dialing up politicians who had accepted some of Enron's millions in campaign contributions.
"It was a new thing to be able to quantify the regulatory risk," said economist Gia Maisashvili, who helped Enron develop the system. "We were the pioneers."
The matrix illustrates the brash, calculating methods that Enron managers used to play Washington politics. The company that made headlines by erasing rules and ignoring convention in the business world applied the same principles in Congress, state capitals and the administration, bragging that its shrewd political tactics blew past customary constraints.
Enron's lobbying techniques grew so aggressive that a key member of Congress reportedly exploded in anger when the company's chief executive pressed him on deregulation matters. They began, however, with a vigorous application of the most time-proven method: lavishing campaign money on politicians.
At Enron, it was understood that executives receiving astronomical salaries would turn part of the money back to the company's smooth political operation. Executives raised vast sums through tactics that some considered subtle coercion; the cash went to the campaigns of Republican nominee George W. Bush and a slew of Republican and Democratic lawmakers willing to help Enron bulldoze regulatory barriers.
Other strategies were more imaginative. As one participant described it, Enron "collected visible people" by gathering up pundits, journalists and politicians and placing them on lucrative retainers. For a couple days spent chatting about current events with executives at Enron's Houston headquarters, advisers could walk away with five-figure payments.
In Washington, Enron relied on high technology while planning its attacks on Capitol Hill and executive agencies.
To gauge a particular bill's effect on the company's bottom line, Washington staffers spent hours filling in boxes in the matrix. Maisashvili and his fellow economists projected the costs of any rule change into the future, adjusting for inflation and growth. "I would tell [senior executives], 'This is your exposure. You decide whether it is worth it to use the lobbying machinery,' " Maisashvili said.
But Enron's tenacious approach ultimately backfired with many key figures inside and outside corporate headquarters, according to interviews with more than two dozen former and current Enron executives and with Capitol Hill staffers. The rise and collapse of Enron's political machine parallels the arc of the corporation's financial fortunes.
Maisashvili blames Enron's political arrogance for his decision to leave the company last year. "They could have cared less if that was a good thing [for the public] or not. They cared only if this was good for Enron," he said.
The Key Is Cash
Sally Ison didn't realize the presidential race had begun until April 1999, when a letter arrived bearing the signature of Enron Corp. Chairman Kenneth L. Lay. The letter asked for contributions to the Bush campaign and included what she recalls as a menacing reference to her husband Jerry's compensation as a highly paid vice president.
"We didn't even know if we liked this guy," she said of Bush. "I didn't know if I was going to vote Republican."
Yet there was no debate. Nearing 50, Jerry Ison felt vulnerable in Enron's crushingly competitive culture. The Isons gave $2,000.
More than 100 other Enron executives, and many spouses, also gave "hard money" contributions to Bush, much of it during the campaign's critical early money phase. Some acknowledged in interviews that they gave solely because they got Lay's pointed letter.
An Enron spokesman said there was nothing unethical in the solicitations. Fred Wertheimer, head of a nonpartisan watchdog group, Democracy 21, disagreed, saying such a pitch left workers and their spouses little choice.
"It is symbolic of the incredibly aggressive approach that Enron and Ken Lay took to playing the political money game -- and to building influence," Wertheimer said. "It is wrong. You are crossing the line from voluntary contributions to implicit coercion."
The contributions helped Lay fulfill his commitment as a Bush "Pioneer," the campaign's term for its top rainmakers. Bush collected nearly $114,000 in individual and political action committee contributions from Enron in 1999-2000, according to an analysis by the nonpartisan Center for Responsive Politics.
At Enron, senior managers understood that "donations mean access," acknowledged one former Enron executive who contributed to Bush. Said another: "Everybody knows that's what you make contributions for."
Lay had cultivated access since founding the company in 1985. He was a top fundraiser for President George H.W. Bush and chairman of the Houston host committee for the GOP convention where Bush was nominated for reelection.
When Bill Clinton bested Bush, Lay began working on a new friendship and the company greased the way with political contributions to Democrats. Lay was a longtime pal of Clinton's first chief of staff, Thomas F. "Mack" McLarty, according to former Clinton administration officials. Seven months after the inauguration, Lay had found a place in the commander-in-chief's golf foursome (along with golf legend Jack Nicklaus and former president Gerald R. Ford) in Vail, Colo., where Clinton first vacationed as president.
To raise campaign cash, Enron relied not just on individual contributions but also on a well-funded political action committee that distributed money to candidates from both parties. The committee supported candidates who vowed to champion deregulation and leaned toward incumbents and conservatives, insiders said. Since 1990, Enron's political committees have given federal candidates and parties more than $1 million.
"It was more or less required that you participate in the political action committee if you were an officer," said former Enron executive Alberto Gude Jr.
"You would do it, period."
Pundits for a Fee
Lay's strategy of bringing influential public figures into the company's fold was resisted by some of the company's own executives, who feared it could backfire and lead to public embarrassment.
To earn their $50,000 annual retainers, the company's clutch of pundits and commentators only had to make two brief visits a year to Houston, an arrangement that some Enron officials privately suggested did not pass the smell test. Among those agreeing to the arrangement were pundits William Kristol, editor of the Weekly Standard, and Paul Krugman, now a New York Times columnist.
Lay called the group his advisory council, and he and then-chief executive Jeffrey K. Skilling attended their gatherings, held in a boardroom adjacent to Lay's office on Enron's 50th floor. "These are exciting times, and we need all the ideas we can get," Lay wrote to council members in December 2000.
Commentator Larry Kudlow of CNBC and the National Review said he attended one council session as a guest, and received a $15,000 payment, in addition to a $20,000 consulting fee to his firm. The company hired Republican pollster Frank Luntz after an executive saw him on MSNBC and thought he looked smart, according to a former Enron consultant.
Ralph Reed, the former Christian Coalition executive director and now chairman of the Georgia Republican Party, worked for the company for about 18 months, spread out between 1997 and 2001. He was brought into the Enron fold on the advice of Bush strategist Karl Rove, an Enron stockholder. Most of Reed's work -- in Pennsylvania and two or more other states -- was for direct mail and telephone banks to promote greater choice in electricity service, a source said. Lawrence B. Lindsey, Bush's chief economic adviser, also was a paid consultant.
Enron approached James Carville, the Democratic strategist, in 1997, after his Cajun shrewdness had helped return Clinton to the White House. But Carville was interested in campaigns and Enron wanted him to lobby for electricity deregulation in Pennsylvania, where he had masterminded an upset Senate victory. Carville rejected the job.
Less well known is that Enron, which has at times sparred with environmentalists, extended a retainer to the head of a Washington think tank that focuses on energy and the environment.
Paul Portney, president of Resources for the Future, said he attended five council sessions. Also participating, he said, was the foundation's vice chairman, Robert Grady, a senior aide to the first President Bush and a drafter of the 1990 Clean Air Act amendments.
In June 2001, Grady wrote a column for Time magazine that endorsed the trading of greenhouse gas emissions rights, a business from which Enron hoped to profit. Grady did not respond to requests for an interview.
Enron gave Resources for the Future annual gifts of up to $45,000, and Lay's family foundation pledged $2 million to endow a research chair.
Portney called the stipend granted to advisers a "dream," but said the money did not influence his views -- or his foundation's decision in April 2000 to name Lay to its governing board. "I am pretty cantankerous; I say what I want," Portney said.
The advisory panel fed Lay's ego and was "consistent with the idea that you buy your way to success," said a former Enron political operative. "It was clumsy and the joke was these people took the money and ran. They accomplished little."
Kristol said he saw no conflict in collecting $100,000 from Enron, likening it to pocketing a "regular and generous" honorarium for speaking before a trade association.
"Enron senior executives wanted to broaden their horizons and hear about interesting trends," Kristol said. "In late 1999, I explained how [Sen. John] McCain had a real shot at beating Bush. I think Ken Lay winced a little bit at that."
A council meeting scheduled for October 2001 was to include an expense-paid trip to London. But as the date drew near, Enron reported a third-quarter loss of $618 million and the Securities and Exchange Commission opened an inquiry.
The advisers' free tickets never arrived.
'I Am Not an Idiot'
Enron's tough approach to Washington evolved as Skilling and his lieutenants ascended, insiders said. It was during Skilling's tenure that the matrix was devised. Known for his abrasive style, Skilling and those around him stepped up lobbying and sought out creative strategies.
Historically, Enron operated with a lean Washington staff. It had two full-time senior employees in the capital for years and used relatively few outside consultants. That changed in the late 1990s, and by last spring Enron's directory listed more than 150 staffers working on state and federal government affairs.
In recent years major decisions -- including which public figures to approach and hire -- were made in Houston without direct input from the Washington office, former executives said.
"I don't think anybody in Washington came in contact with these advisory boards," said Tom Briggs, a former Enron staffer in Washington. "Ken Lay often came to town, and we didn't even know it."
Instead, he said, the Washington office dealt with Capitol Hill staffers, dissecting the finer points of energy regulation.
Tales of dust-ups with lawmakers and their aides have circulated since Enron's collapse. Most notably, during an October 1999 meeting on an energy deregulation bill, Rep. Joe Barton (R-Tex.) reportedly exploded in anger at Skilling, saying, "I may not have your millions of dollars, but I am not an idiot."
"They were sophisticated enough to hire good people but then not disciplined enough to hide their disdain for policymakers who did not agree with them from the beginning," one lobbyist said. "When Enron executives were advocating a certain policy and a member of Congress tried to explain the votes weren't there, they became very frustrated that he wasn't smart enough to understand the wisdom of their policy."
Enron staffers in Texas pushed the Washington office to abandon its Beltway manners in favor of a more creative style. One former executive recalls being chided to adopt a "South Park attitude," in reference to Comedy Central's animated series populated with profane and irreverent third-graders. The idea, the executive said, was to push hard and not worry about making friends.
"The ingrained philosophy was, me first, money counts and the government should eliminate my taxes," said another former manager. "That's all they cared about -- what impacted them personally."
Staff writer Mike Allen, database editor Sarah Cohen and researcher Lucy Shackelford contributed to this report.
'First Step' in Enron Cover-Up?CNN.com – Paula Zahn with John Dean – February 10, 2002
The General Accounting Office (GAO), the investigative arm of Congress, announced recently its intention to file suit against the White House to force it to release notes involving an energy task force headed by Vice President Dick Cheney. The fight for the notes began when the GAO requested them last summer and has heated up with the financial collapse of Enron.
The White House maintains that turning over the notes would erode the ability of the executive branch to get advice in private and to deliberate matters.
In a recent article former Nixon White House counsel John Dean wrote, "Not since Richard Nixon stiffed the Congress during Watergate has a White House so openly and arrogantly defied Congress' investigative authority. Nor has any activity by the Bush administration more strongly suggested they are hiding incriminating information about their relationship with the now-moribund Enron, or other heavy-hitting campaign contributors from the energy business."
Dean spoke with CNN anchor Paula Zahn about the battle being waged between the Bush administration and the GAO.
ZAHN: So what do you know that congressional investigators don't know about any culpability on the Bush administration's part?
DEAN: I don't know anything they don't know. What I do know and what's evident to me as somebody who's been there, done that, if you will, is the way this is being handled by the White House right now on requests for very simple and non detailed information at all about Vice President Cheney's energy group. I don't understand, frankly, why he's taken this hard-line stance that he has. It's very difficult for me to accept that it's a matter of principle, because he will take a lot of heat for the position he's in, and he's ultimately, I think, going to lose in court, and people are going to say, hey, what is going on here?
ZAHN: As you know, the vice president has made it abundantly clear that he feels these requests erode executive privilege. Why don't you think that principle should be preserved?
DEAN: Well, Paula, with all due respect to the vice president, what GAO is asking for is not the unvarnished statements of anybody to the president or the vice president. They're merely asking for who met with that committee and where they met and their names, and the name, ranks and serial number. It's not the content of the conversations even involved. So there's even a misrepresentation going on as to what's requested. Not only that, but they're denying that the GAO has authority they've had for 80 years to request this kind of information. This raises questions in my mind.
ZAHN: Do you have a problem with Vice President Cheney and members of his staff having met with people from the energy business?
DEAN: Not at all. They certainly have a right to do that. What they don't have a right to do is, one, is to do it in a illegal fashion, if you will, and that illegal fashion is, if indeed the industry was involved in his task force, then there's a law that applies. It's called the Federal Advisory Committee Act. It's been in commission since 1972, and it's there so outsiders can see what kind of advice is going into making a policy. It's a very fundamental law, and it's one that we can't even tell if it was honored or not, although the vice president's office said it was not. It intentionally set up the committee not to have that kind of law apply. And we don't know, because no one will answer any questions as to who did what and when.
ZAHN: Would you be satisfied if the White House just eventually offers this list of names, or do you want to know about the individual testimony of these players at these meetings?
DEAN: Well, I don't want to know any of this. I'm a spectator, but what I saying is somebody who has sat on both sides of Capitol Hill, if you will, or both ends of Pennsylvania Avenue, the Congress does have a right to this kind of information. They asked for something that is non-invasive, if you will. So it really raises a lot of questions as to why the gauntlets had been thrown at this point when it really doesn't make sense to do so. The vice president has already told the Congress that he did indeed meet with Enron, or his staff did, on at least six occasions. This is what's being asked for across the board. So why he can't give it for the others is a mystery.
ZAHN: All right. What you're saying, though, is the vice president is entitled, as is the president, to executive privilege. But you're saying the GAO is not asking to violate that, they just want the names of people who participated in these hearings.
DEAN: That's right.
ZAHN: And you respect the right to the administration's right to executive privilege?
DEAN: I do, but only the president has the right to executive privilege, not the vice president. It's never gone that far. It's really a uniquely presidential privilege, and the president himself must invoke it, and there has be no invocation of executive privilege here. What they've said is, we challenge GAO's authority to even ask for this information. That's different than executive privilege. What this appears, Paula, to me to be is the first step of a cover-up. This is the way you start it. You stall, you stall, you stall. You try to get something like this to go on until it is no longer an issue, until something intervenes and replaces it, or the issue becomes moot for some other reason. That's the early signal here.
ZAHN: That's a strong indictment. What suggestion is there that anything is being covered up here?
DEAN: Not an indictment at all. All I'm doing is saying if you look at the facts, and the practice, that's the way it was done in the past. Certainly the way we did during Watergate was to try to stall everything, and this is a stalling action.
Congressman Confirms Money RulesWashington Post – by E. J. Dionne – February 10, 2002
We know that money is the mother's milk of politics and all that, but rarely are politicians as up-front as House Speaker Dennis Hastert was this week.
Hastert told his Republican colleagues that if Congress passed a ban on unlimited campaign contributions by corporate groups and others -- the unregulated cash known as "soft money" -- their party could lose its majority in the House.
It was a clarifying moment. With the House facing a crucial vote on campaign finance legislation next week, the airwaves and op-ed pages will be filled with seemingly high-minded arguments against reform. We'll hear that new limits on campaign contributions would violate free speech rights, that they'd prevent political parties from strengthening themselves at the "grass roots," that they'd get in the way of mobilizing voters.
Hastert has ripped through this decent drapery to reveal that this is really a vote about how power is wielded. It is the first test of whether Congress wants to respond to the corporatization of American politics exemplified by the Enron scandal.
The problem with most arguments against campaign reform is that they bear no relationship to how campaigns are run, how political money is spent, or what courts have said about Congress's right to curb corruption by limiting the role of money in politics.
In an effort to encourage Congress and the courts to look at campaigns as they are, the Brennan Center for Justice at the New York University School of Law this week issued a definitive study of the role of television and money in the 2000 election. "Buying Time 2000," by Craig Holman and Luke McLoughlin, is based on a study of more than 3,500 political advertisements aired more than 940,000 times during the last national election.
The results constitute a devastating point-by-point rebuttal of the standard arguments against reform. For example, soft-money advocates say that the unregulated cash is about building political parties and their organizations. But the largest single use of soft money -- 37.8 percent -- is for media advertising. By contrast, only 8.5 percent of soft money went to mobilizing voters. Much of the rest went to administration and fundraising.
Ah, but when the parties advertise, aren't they building support for themselves and the idea of a party system? Nope, say Holman and McLoughlin: "Almost 92 percent of party ads never even identified the name of a political party, let alone encouraged voters to register with the party, to volunteer with the local party organization, or to support the party." The report confirmed what everyone who works in political campaigns already knows: The so-called "party" ads are just regular political ads in disguise.
Many opponents of campaign reform take sharp exception to a provision that would limit what is politely called "issue advertising." The ban, which has been pushed by Sens. Olympia Snowe, a Maine Republican, and Jim Jeffords, the Vermont independent, applies only in the 60 days before an election and only to ads that mention the name of a candidate.
Opponents of reform say the ban on issue advertising would get in the way of legitimate debate on public matters. The Brennan report explodes the foundation of this claim by showing that the overwhelming majority of the ads run by outside groups in the two months before Election Day were designed not to make a case about an issue but to elect or defeat a particular candidate: "Approximately 86 percent of group-sponsored ads aired within 60 days of the 2000 election were electioneering issue ads rather than genuine issue ads." They were another way of undermining the election law.
The one big difference between regular political ads run by candidates and the sham issue ads: The ads by outside groups were far more negative than the ones run by candidates, presumably because candidates can be held to account for what they put on television. And almost none of the legitimate issue ads would be banned by Snowe-Jeffords.
When Congress began trying to clean up the election system after the Watergate scandal in the 1970s, the reformers' animating concern was straightforward: If money plays too big a role in the election process, money's influence will begin corrupting the way we govern ourselves. In one decision after another, the Supreme Court has held that because reducing corruption is a legitimate public goal, Congress has a right to regulate political contributions.
But the current system, as the Brennan report shows, has subverted these efforts. The reform bill being pushed by Reps. Chris Shays, a Republican, and Marty Meehan, a Democrat, is a modest effort to restore some limits on money's power. If the House rejects this bill or amends it to death, it is sending only one message: Money rules.
Enron Preached DeregulationNew York Times – by Leslie Wayne – February 10, 2002
WASHINGTON, Feb. 8 — When it came to lobbying, the Enron Corporation, and Kenneth L. Lay, its former chairman, were about as persistent as anyone had ever seen in California — or Texas, Tennessee, Oregon and Pennsylvania.
With lavish campaign contributions, a fleet of lobbyists, personal pitches by top Enron executives and even a phone call from George W. Bush, then governor of Texas, to Tom Ridge, then governor of Pennsylvania, Enron was the biggest player in the state legislatures in the late 1990's, pushing its version of energy deregulation.
Recent attention in the Enron scandal has focused on the company's efforts to influence Congress and the White House. But Enron had been conducting a similar campaign on the state level, with far less visibility and with considerable success.
The objective was to break up monopoly control of energy markets by local utilities and change the rules so energy would be deregulated. To a large extent that goal was reached — from 1997 to 2000, 24 states adopted some form of energy deregulation, allowing energy companies like Enron to find new markets.
"Enron was the only company out there lobbying and they were everywhere," said Paul Joskow, director of the Massachusetts Institute of Technology Center for Energy and Environmental Policy Research. "They not only carried a lot of water for themselves. But they carried water for the rest of the industry."
So determined was Enron that it frequently dispatched top executives like Mr. Lay and Jeffrey K. Skilling, its former chief executive, to meet with utilities commissioners, testify before statehouse committees and call on local politicians.
This lobbying was backed by hefty campaign contributions, $1.9 million to more than 700 candidates in 28 states since 1997, according to the National Institute on Money in State Politics, a nonprofit group.
In the 2000 election cycle alone, Enron gave $1.1 million to local candidates: as little as $250 to $500 in hundreds of districts, as much as $10,000 to influential state legislators in California and other big states. Unlike utilities or consumer groups that lobbied for deregulation in one state or a few, Enron took on the issue nationally. Its unique strategy combined a promise of lower electrical costs by ending utility monopolies with old-fashioned statehouse power politics.
"In 4 years, energy deregulation passed in 24 states," said Ed Bender, executive director of the National Institute on Money in State Politics. "That's amazing. I don't think you can call it a coincidence. They were trying to make something happen."
In the mid to late 1990's, contributions streamed to elected officials — Gov. Gray Davis of California, for instance, received $97,500 of Enron's $438,155 in contributions to California politicians. Gov. Rick Perry of Texas, then lieutenant governor, received $212,000; Gov. George E. Pataki of New York got $9,000.
As seven Midwestern states considered a deregulation plan, Enron gave money to state house candidates in four of those states, including $21,350 to legislators in Michigan and $19,805 to legislators in Iowa.
"They were smart — they went after people who they knew would make a difference," said Mary Kenkel, former manager for federal affairs at the Edison Electrical Institute, a utility lobbying group.
Enron officials said that the company was proud of the role it played in energy deregulation, though in the aftermath of its bankruptcy filing and the sudden end of the California energy crisis, it is now doing very little business in the states it once lobbied. Some states where Enron does business are questioning whether to suspend Enron contracts.
"It's no secret we were very active," said Mark Palmer, an Enron spokesman. "We helped open markets that needed to be opened. And there continue to be markets that need to be opened."
When Pennsylvania was considering a deregulation bill in 1997, Mr. Lay prevailed on Governor Bush to call Governor Ridge to vouch for Enron. "I said it would be very helpful to Enron," Mr. Lay said last year. Pennsylvania wound up enacting deregulation, in a plan that included some elements Enron favored and some it did not.
In a number of state capitals, Enron took on some powerful interests, including local electrical monopolies, which are often the biggest campaign donors on the state level. Enron representatives often came in cold, without any contacts in government or the lobbying community. To compensate, they lined up experts to testify, hired local lobbyists and joined with consumer groups and some local utilities to present a united front for deregulation.
"They were basically strangers in these state capitals," said John Hanger, president of Citizens for Pennsylvania's Future, an environmental group. "They spent money to buy friends quickly and present their case quickly because they were up against utilities that had decades of local political relationships."
Lobbying the Pennsylvania legislature was also the stated reason that Karl Rove, Mr. Bush's political adviser, recommended that Enron give Ralph Reed, a Republican strategist with ties to religious conservatives, a consulting contract, which it did. Mr. Reed never had to lobby in Pennsylvania — his hiring came after a deregulation bill was passed.
In California, Enron spent more than $345,000 on lobbying, hiring former legislators and former utilities commission officials. As early as 1994, Mr. Skilling, the former Enron chief executive who then headed an Enron energy subsidiary, testified to utility commissioners that deregulation could save the state $8.9 billion.
"You can triple the number of police officers in Los Angeles, San Francisco, Oakland and San Diego," he said. "The stakes are huge and every minute that we delay bringing competitive markets to California allows the meter to keep ticking."
Texas' deregulation plan — the culmination of a legislative battle that began in 1995 — went into effect last month. While Enron did not get all it wanted, it scored a partial victory. Texans for Public Justice, a watchdog group, estimates that Enron's statehouse lobbying cost $535,000 to $945,000.
Enron hired 83 lobbyists in Texas, bought advertisements in local papers and gave to local charities, including Laura Bush's book fair.
"Enron was unique because of the sophistication of their play," said Tom Smith, Texas director of Public Citizen, a consumer group. "It was all Enron, all the time. They helped craft the legislation. They gave to high-profile charities. They gave to both sides of the aisle. They'd hold fund-raisers for those they wanted to re-elect. And they had the good ol' boy lobbyists go out after hours boozing and schmoozing."
In New York, where deregulation was enacted in 1996 but revisited for years, Enron made contributions to the state Republican party in addition to Mr. Pataki and hired a former state energy official, Howard Fromer, to lobby for it.
Just last year, Mr. Lay called Governor Jeb Bush of Florida to pitch deregulation there. Florida ultimately did not pass energy deregulation, but lawmakers debated it for two legislative sessions.
Elsewhere, Enron's aggressiveness backfired. Its style did not play well in Oregon, where Enron bought Portland General Electric, a utility it is now trying to sell, and where partial deregulation was enacted in 1999.
"They came in like a house of fire and we cooled their jets," said Fred Heutte, energy coordinator for the Oregon Sierra Club. "Once they realized they wouldn't be allowed to do what they wanted, they lost interest. They came in with a blatant attempt to roll the legislature and impress everyone with how important they were compared to podunk Oregon. We didn't like it."
The legacy of Enron's efforts is that consumer electrical markets have been made more competitive — even though the company has backed off from conducting business in many of those markets.
"For all of Enron's problems, they played an important role in opening up markets that were among the most fossilized in the country," said Robert Michaels, an economics professor at the University of California at Fullerton. "Whatever Enron did wrong, it spent a lot of money to achieve this."
The Enron Smoking GunTribune Media Services – by Bill Press – February 10, 2002
WASHINGTON -- "Who cares if there were a hundred meetings?" sniffed Mary Matalin, chief spokesperson for Vice President Dick Cheney.
In one phrase, she summed up the White House arrogance: It's a financial scandal, not a political one. It has nothing to do with the Bush administration. It doesn't matter how much money Enron gave George W. Bush, how many former Enron officials work in the White House, or how many secret meetings Cheney held with Enron executives in putting together his energy plan. Because there's no proof that Enron ever got anything for its money or access.
Wrong. Maybe there was no proof before, but there is now; a secret memo -- personally handed to Cheney by Ken Lay, which helps explain why the White House is so skittish about Enron and why Cheney and Bush stubbornly refuse to release the records of those energy task force meetings.
The memo was obtained by the San Francisco Chronicle and reported exclusively there last week. This is the Enron smoking gun.
The Enron memo, which Lay gave Cheney during their one-on-one meeting in April of 2001, makes eight energy-policy recommendations. Some are technical, dealing with such issues as equal access to transmission grids. Others relate specifically to California's energy problem.
Seven out of eight recommendations were adopted in the administration's final energy plan. And Lay's request that Bush and Cheney reject California's plea for federal assistance became White House policy.
Most of us have forgotten last year's energy crisis. Californians can't. For weeks, they experienced rolling blackouts caused by soaring wholesale prices for electricity. As a result of deregulation, approved by the state legislature the year before, California's utilities had sold their generating capacity to Enron and other out-of-state energy companies, which then proceeded to jack up prices.
Gov. Gray Davis, initially slow to react, blamed California's problems on Enron and other energy "cowboys" for engineering "a massive transfer of wealth" from California to Texas. He asked President Bush for relief in the form of federal price caps on electricity, vowing: "Never again can we allow out-of-state profiteers to hold Californians hostage."
Davis was more correct than he realized. Not only was Enron responsible for California's energy crisis, it had the support and cooperation of the Bush White House.
On California, Lay made three arguments: It was too early to tell whether deregulation was working; imposing even temporary price caps would be harmful to energy companies; and Californians were responsible for creating their own problems and deserved no federal assistance. All of which became talking points for Bush and Cheney.
"We think that's a mistake," Cheney said when asked about California's request for federal price controls. He then proceeded to lay the blame on California: "When the problem became obvious last year, over a year ago, they didn't respond. I don't call that a sterling record of leadership, I would guess, on their part." Ken Lay could not have said it any better.
The purpose here is not to reargue the California energy crisis. It's to point out that when President Bush and other administration officials insist that Enron had little access and what access it did have never paid off, they are simply not telling the truth. The Ken Lay memo is the latest proof of just the opposite.
We know that many former Enron officials were given top jobs in the Bush administration. We know that Ken Lay got to interview candidates for the Federal Energy Regulatory Commission and recommend its new Chairman.
We know that Enron executives held six secret meetings with Dick Cheney. We know that 17 recommendations of Enron were included in Cheney's final report. And now we know that Ken Lay sought to dictate administration policy toward California.
One week before Enron's collapse, last November, Lay called Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans seeking a last-minute federal bailout and was turned down. That's the only time Enron heard the word "no" from their friends in Washington.
Up until the very end, when it was too late to help, everything Enron asked for from the Bush White House, Enron got.
Party-Line Split Over PensionsNew York Times – by Robin Toner – February 9, 2002
WASHINGTON, Feb. 7 — A new partisan fault line is opening over one of the most durable domestic political issues: how to protect the pensions of working Americans.
Republicans, mindful of the danger of the issue, are not ceding the moral high ground without a fight. Nearly everybody in both parties is rallying around "retirement security" these days.
Democratic strategists give the Bush administration credit for trying to defuse the issue by announcing last week, in advance of the Enron hearings, a proposal to protect workers' 401(k) investments.
Senator Trent Lott of Mississippi, the Republican leader, announced a "pension plan protection act" today that incorporated the administration's proposals and declared, "Obviously, we are all disturbed greatly by what we have seen happen with Enron."
Democratic strategists increasingly see the Enron case as an opportunity to make a classic political appeal for a midterm election year, that the party that created Social Security — and is fighting off efforts to privatize it partly — is the party best able to protect retirement security in a post- Enron world.
The other part of the Democratic argument, of course, is that Republicans are more concerned with an unfettered free market and the desires of corporate managers than they are with average working Americans.
Or, as Representative Charles B. Rangel of New York, ranking Democrat on the Ways and Means Committee, put it this week, "The silence of the Republican leadership, the silence of the leadership on the Ways and Means Committee," is deafening.
Democratic lawmakers quickly dismissed the administration's effort as a minimalist approach. In an opening statement today, at hearings that featured the testimony of several Enron workers who lost their retirement savings, Senator Edward M. Kennedy, Democrat of Massachusetts, called for a "top-to-bottom review" of 401(k) plans and argued that President Bush's proposal "only addresses the tip of the iceberg" in protecting retirement plans.
Mr. Kennedy later issued a broader critique of Mr. Bush's proposal, saying it "won't protect American workers." Throughout, Mr. Kennedy's comments were laced with the time-honored Democratic statements about "people who work hard all their lives" suddenly facing "poverty in retirement."
Mr. Bush's plan would let workers sell company stock that their employers contribute to their 401(k) plans after three years. Some businesses, including Enron, require employees to hold the shares much longer.
The president's plan would also require notice to workers at least 30 days before any period in which they were not allowed to change investments. Employers would be required to give workers quarterly statements of the accounts, the value of their assets and advice on the importance of diversifying their holdings.
Democrats and their allies generally said the plan would not provide enough protection. In particular, they said, the three-year holding period was too long.
Several other plans are being offered.
Representative George Miller, Democrat of California, said of Mr. Bush's proposal: "It gives them cover on the issue. But the system that's been exposed by the Enron scandal goes to the very core of the underlying philosophy that every retiree is responsible for their own retirement."
Mr. Miller added that the concerns over 401(k) accounts were widespread and that people approached him in supermarkets, "their voices shaking," dismayed at what could happen to their retirement savings. Democratic pollsters see Enron as part of the broader fears.
"There have been two important events that changed the way people think about their Social Security retirement money," said Geoffrey Garin, a pollster for Congressional Democrats. "One is the decline of 401(k) values, and the other is the collapse of Enron.
"Both of these events have made people much more focused on maintaining Social Security as the one solid and stable part of their retirement security that they can always count on."
Which leads to the broader fight over Social Security, Democrats and other advocates of the traditional government program say. Although no major legislation is expected to move this year to create the private Social Security accounts that Mr. Bush has endorsed, many Democrats are widely expected to raise the issue in the fall campaign.
The message of Enron is, beware, said Max Richtman, executive vice president of the National Committee to Preserve Social Security and Medicare.
"It highlights the tradeoffs in a privatized system," Mr. Richtman said.
The tradeoff between the benefits and risks of the private market and the security of a government insurance program is a matter of intense philosophical disagreement.
At the news conference today with Mr. Lott, Senator Kay Bailey Hutchison, Republican of Texas, said she had no qualms about pushing forward with private Social Security accounts after the Enron experience.
Mr. Lott said his mother in Mississippi, "bless her heart," would have been far better off had she been able to invest in the stock market rather than rely solely on Social Security.
But Mr. Miller argued in an interview that the notion of an ever-rising stock market fueling ever-growing retirement accounts was "the narcotic of the 90's." The idea of sending an average worker with his retirement money into a "casino system" was, he added, wearing very thin.