Ashcroft recuses himself from Enron probe

Bush says he has "never discussed" Enron's troubles with its chairman, Kenneth Lay.

WASHINGTON (CNN) -- Attorney General John Ashcroft and a top aide recused themselves Thursday from the Justice Department's criminal investigation of Enron Corp., the energy giant that filed the largest bankruptcy case in U.S. history last month and whose executives were prominent political contributors.

Ashcroft's recusal came as the controversy surrounding Enron's collapse continued to grow, with a major accounting firm saying it destroyed or deleted an undetermined number of electronic and paper documents related to the company's financial straits.

In a press release Thursday, the Arthur Andersen accounting firm said it has notified the Securities and Exchange Commission and the Justice Department about the development.

It also said it has suspended its records management policy immediately. The firm said it had retrieved some of the deleted electronic files and was trying to more off them.

In a statement, Stephen M. Cutler, the SEC enforcement chief, said the investigation of Enron would proceed.

"We are of course aware of the matters included in Arthur Andersen's statement," Cutler said. "Destruction of documents is obviously an extremely serious matter; documents are an essential ingredient in our investigations.

"The destruction of documents by Arthur Andersen will not deter us from pursuit of our investigation and will be included within the scope of our investigation."

In addition to the Justice Department and SEC investigations, the Labor Department and several congressional committees also are investigating.

Justice Department officials said Ashcroft was advised to step away from the investigation -- announced just a day earlier -- because of contributions he received from the company's executives during his campaign for the Senate.

According to the Center for Public Integrity, Ashcroft received nearly $61,000 from Enron executives and the company's political action committee, including $25,000 from Lay.

In a statement, the department said Ashcroft and his chief of staff, David Ayres, recused themselves "in all matters arising out of allegations of misconduct by Enron Corporation due to the totality of the circumstances of the relationship between Enron and the attorney general."

The statement continued: "The attorney general has not been involved in any aspect of initiating or conducting any investigation involving Enron. Any and all responsibilities that would be exercised by the attorney general with regard to any such matters will be handled by the deputy attorney general."

Meanwhile, the White House announced for the first time that Enron Chairman and CEO Kenneth Lay called two Cabinet secretaries in the Bush administration in the fall to express concerns about his company's financial straits.

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 in October. He said the calls did not result in any government action on the company's behalf.

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

"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," Fleischer said. "It happens every day."

Fleischer emphasized that the government did not intervene in the case. "What took place here was, they received phone calls and took no action," he said.

Furthermore, he said, Bush did not know about the phone calls until Thursday morning.

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

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 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.

Bush distances himself

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.

Major political contributors

Before the company's collapse, Enron executives were major players on the national political scene.

According to the nonpartisan Center for Public Integrity, Enron executives poured more than $2.2 million to campaign committees and federal candidates from both the Democratic and Republican parties during the 2000 political cycle.

Bush's campaign received more than $74,000 from Enron executives. Among the company's directors, Lay and his wife were the biggest contributors.

The Lays have given more than $87,000 to political campaigns since 1999 -- half of that going to the Bush campaign.

Administration had six meetings with Enron

EXTRA INFORMATION 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.

Waxman has been pressing the administration to turn over information about its meetings with Enron and to reveal whether the company discussed its "precarious financial position" in any contacts with the White House.

Though Waxman this week praised Cheney for releasing information about contacts between Enron and the White House, he called for Cheney to offer a "full accounting" of the contacts.

"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 the letter.

The congressman noted how the last meeting between the administration and Enron on October 10 was just six days before Enron announced the "$1.2 billion reduction in shareholder equity that precipitated Enron's collapse."

Addington said in his letter to Waxman, "Enron did not communicate information about its financial position in any of the meetings with the vice president or with the National Energy Policy Development Group's support staff."

Addington said Cheney disclosed in an interview in May 2001 that he met with Lay on April 17 for about a half-hour about energy policy issues. The two did not discuss Enron's financial situation, Addington said.

The five other meetings between Enron and the White House also included no discussion of Enron's financial position, Addington said.

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