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White House: Enron called Cabinet members

Bush said he never talked to Enron chief about company's financial problems.
Bush said he never talked to Enron chief about company's financial problems.  

WASHINGTON (CNN) -- The White House announced Thursday for the first time that Enron Chairman and CEO Kenneth Lay called two Bush Cabinet members to warn them about the company's financial distress in the months leading up the company's Chapter 11 bankruptcy filing.

White House press secretary Ari Fleischer said there was nothing unusual about Lay's calls to Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans last October. He said the calls did not result in any government action on the company's behalf.

O'Neill told CNN that the calls were informational.

"That was the purpose of Ken's [Lay's] call to me, to let me know that we were welcome to have access to information so we could understand what they were doing and understand the possible exposure to the world's capital markets," he said.

"The second call to me was, I've forgotten exactly when, but Ken called me to tell me that they were in discussions with Dynergy and it was an information-only call," he said.

O'Neill said he did not find Lay's calls out of line.

"Enron was the biggest trader of energy in the world and I was not surprised at all that I would get a call saying, 'Hey, we've got a problem over here and you should know about it,'" he said.

Fleischer agreed. "I think it should surprise no one that people in the administration receive phone calls from people who are either in business or at unions," he said. "It happens every day."

President Bush did not know about the phone calls until Thursday morning, Fleischer said.

Lay and other Enron executives were big contributors to Bush's presidential campaign as well as to other candidates, both Democrats and Republicans, including U.S. Attorney General John Ashcroft.

Ashcroft and his top aide recused themselves from the Enron investigation Thursday. A Justice Department statement said the contributions could create the appearance of a conflict of interest.

The Bush administration has come under increasing scrutiny in recent days for its ties to Enron, which is based in Houston, Texas.

Retirement fund rules review

Bush sought to distance himself Thursday from the growing controversy, telling reporters he never discussed the company's precarious financial condition with Lay.

"I have never discussed with Mr. Lay the financial problems of the company," Bush said as he met with economic advisers in the White House.

Bush said the last time he saw Lay was last spring at an event to raise funds for literacy in Houston for which his mother played host.

He said Lay visited the White House early last year to discuss the state of the economy as part of a group of 20 business leaders.

The president said he got to know Lay when he served as head of the Governor's Business Council in Texas. Lay was appointed to the position by Ann Richards, the previous governor and a Democrat, and Bush left him in place.

"What anybody's going to find is that this administration will fully investigate issues, such as the Enron bankruptcy, to make sure we can learn from the past and make sure that workers are protected," Bush said.

The company's sudden fall ruined the retirement accounts of employees heavily invested in Enron stock as part of their retirement plans but were barred from selling the shares even as the stock plummeted.

Some Enron executives, however, sold large amounts of their own shares in the company in the months preceding the bankruptcy.

Bush said Thursday the Treasury Department would lead a review of federal regulations governing 401(k) retirement investment plans and other pension programs to see if rules need to be strengthened to require a company to notify investors when its finances take a significant turn for the worse.

Administration had six meetings with Enron

Read the exchange of letters (From FindLaw) (PDF) 
December 4 letter from Waxman to Cheney  
January 3 letter from Addington to Waxman  
January 8 letter from Waxman to Cheney 

In a January 3 letter to Rep. Henry Waxman, D-California, the White House revealed for the first time that Vice President Dick Cheney or members of the White House's energy task force met six times with representatives from Enron in the months before its bankruptcy filing.

The information about the meetings was disclosed in a letter from Cheney's counsel, David Addington.

"Your response ... raises additional questions about the extent to which Enron may have influenced the administration's energy policies or provided information about its own operations," Waxman said in a response letter to Cheney this week.

-- CNN's John King, Susan Candiotti and Kelly Wallace contributed to this report.


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