Skip to main content /LAW /LAW

find law dictionary

Former regulator: Enron tried to manipulate policy

WASHINGTON (CNN) -- The former chairman of a federal regulatory agency painted a dark portrait Tuesday of Enron, saying the huge energy company had sought to manipulate energy policies to its own advantage.

"Everything they espoused to Congress and to state leaders was always what's in the best interests of Enron, never what's in the best interests of American energy companies," said Curtis Hebert Jr., a former commissioner with Federal Energy Regulatory Commission in the Clinton administration. He also served as FERC chairman in the Bush administration until the end of August.

Enron filed for bankruptcy last month, the largest such filing in American corporate history. The once-powerful energy giant finds itself the target of several investigations, including one by the Justice Department, another by the Securities and Exchange Commission and several by various congressional committees and subcommittees.

At issue is whether Enron defrauded its own employees and investors, publicly proclaiming financial health, even though top executives knew the corporation was in trouble and dumped Enron stock. Months before Enron declared bankruptcy, a top employee warned the company's top executive in a letter that she was "incredibly nervous" that Enron would "implode in a wave of accounting scandals," according to portions of a letter released by congressional investigators.

Some Democrats on Capitol Hill also want to investigate contacts Enron's top executives had with members of the Bush administration.

Two Bush Cabinet secretaries have acknowledged that Enron Chairman Kenneth Lay called them last fall, alerting them to the company's financial woes. But they said the conversations did not result in any intervention or action on the government's part.

In an interview with CNN, Hebert -- who left the FERC in August -- said Lay had wanted the agency to "mandate regional transmission organizations."

"When I told him that I didn't think it was the right thing to do and also that there was no legal basis for it under the federal Power Act, he told me that he and his company, Enron, could no longer support me as chairman," Hebert said.

Hebert said the Enron controversy carries with it a lesson: "Integrity matters."

He said Lay never succeeded in influencing him to change policy. "I never saw Ken Lay as a huge energy player," Hebert said. "I think a lot of people did. I saw him as a trading company. That's why I never really allowed him to exert any type of influence over me on what power companies or what utility companies should be doing in this energy industry."

On Capitol Hill, the House Committee on Energy and Commerce, which is investigating Enron's collapse, released portions of the seven-page letter sent by an employee to Lay.

"It sure looks to the layman on the street that we are hiding losses," wrote Sherron Watkins, a vice president who worked in the .

In another development, Sen. Ted Kennedy -- chairman of the Senate Health, Education, Labor and Pensions Committee -- Tuesday wrote Labor Secretary Elaine Chao to "express outrage on behalf of the Enron employees who have lost more than $1 billion of their retirement funds which were invested in company stock."

Kennedy's committee is looking into Enron's retirement accounts, where many employees lost their life savings after the company collapsed. He will ask Chao to testify at a hearing on subject next month.

Kennedy, D-Mass., said Enron "essentially forced its employees to invest in company stock because it issued the stock as matching contributions to its employees' 401(k) accounts." He accused Enron of restricting its employees from selling shares until they were near retirement age, "making captive investors," which, he said, limited the employees' ability to diversify their investments.




Back to the top