It’s been a week of wild revelations for Enron Corp. watchers — the Department of Justice on Wednesday launched a nationwide criminal task force into management practices, and President Bush announced on Thursday another task force to reform the pension fund system. Meanwhile, the Bush administration admitted for the first time that CEO Kenneth Lay, one of Bush’s leading fundraisers, called at least two Cabinet members as the company fell apart last year. And at midday Thursday, Andersen, Enron’s auditor and subject to several investigations and lawsuits, admitted destroying an “undetermined” number of documents that may have been pertinent to the impending investigations.

The Justice Department usually reserves nationwide probes for entire industries, but in launching the official investigation late Wednesday, one source told The New York Times that “this is a case of national scope and national significance that is going to require coordination and manpower, and the task force is a way of achieving that.” Because of the allegations against the company, which involve far-reaching entities across the country, the task force also may be one way to consolidate information. It also may consider allegations that Enron manipulated energy markets in California that led to billions of dollars in overcharges to the state and its consumers.

Enron attorney Robert S. Bennett acknowledged that the criminal investigation has been launched, and in a statement, the company’s counsel said, “It has been the posture of the company to fully cooperate with government investigations.” Bennett, of Skadden, Arps, Slate, Meagher & Flom, does not represent any Enron executives. Bennett told several media outlets that he was “pleased” that the criminal investigation had been announced because Justice was “centralizing” its focus, unlike the far-reaching probes announced by several Congressional committees, the Securities and Exchange Commission and the Department of Labor. Enron’s executives have retained counsel in New York City, Washington, DC, and Texas.

Reportedly, the Justice Department’s team will include lawyers in the criminal division and prosecutors in several cities, including Houston, San Francisco and New York City. The Justice Department probe is only one of many now under way that is scrutinizing the company, but is the first criminal investigation launched. Not available for comment Thursday morning, sources indicate that the first criminal subpoenas to be served on Enron are from the San Francisco investigators.

When asked again Thursday morning about his relationship and prior discussions with Enron executives, Bush said, “I have never discussed with Mr. Lay the financial problems of the company.” Bush said the last time he saw Lay was at a public charity function. The president was expected later in the day to announce the Treasury Department, along with other government agencies, will conduct a full-scale investigation of pension fund rules and oversight in reaction to the substantial retirement fund losses incurred by Enron employees.

“This administration is deeply concerned about [Enron’s bankruptcy’s] effects on the economy,” Bush told reporters. “We’re also deeply concerned about its effects on the lives of our citizenry.”

As much as Bush and his staff would like to distance themselves from one of the largest bankruptcies in U.S. history, the ties to Enron go back many years, and Bush has had a long personal and political relationship with both Enron and top executives. Lay was one of Bush’s leading fundraisers during the 2000 presidential campaign, and Enron was one of the leading contributors.

“Ken Lay is a supporter,” Bush told reporters. “What anybody is going to find is that this administration is going to fully investigate issues such as the Enron bankruptcy to make sure we learn from the past.”

The Center for Public Integrity, a nonpartisan watchdog agency, estimates that Enron executives contributed almost $800,000 to Bush, members of Congress and two national political parties from 1999 to 2001. Also receiving at least $57,000 from Enron — including $25,000 from Lay — is Attorney General John Ashcroft, who was expected to head the criminal investigation into the company.

However, by midday, Ashcroft said he would remove himself from the investigation and the Department of Justice said, “any and all responsibilities” that would have been handled by Ashcroft in the case would be handled instead by Deputy Attorney General Larry Thompson.

White House press secretary Ari Fleischer, in a media briefing Thursday, warned Congress against “partisan witch hunts, endless investigations or fishing expeditions” into Republican ties to Enron. He noted that “Enron gave thousands of dollars to Democrats” as well in the last campaign for president.

Apparently, Lay contacted Treasury Secretary Paul O’Neill first on Oct. 28, 2001, four days after CFO Andrew Fastow had been fired. Lay called O’Neill again on Nov. 8, 2001, the day before Enron restated its earnings and admitted it had lost close to $569 million over four years. Commerce Secretary Don Evans also was contacted last fall to discuss Enron’s financial situation and bond ratings, Fleischer said. However, he said O’Neill and Evans declined to do anything.

Fleischer said Lay had proposed a government bailout for Enron, modeled on one done by the Federal Reserve in 1998 for Long Term Capital Management, a hedge fund, which benefited from a private bailout by the New York Federal Reserve in September 1998. As part of the pension plan overhaul announced Thursday, Bush said O’Neill will be part of a team that will review laws and regulations to determine if they can be updated to protect future worker pension plans.

As if the news could not seem any more discouraging for Enron, chief accountant Andersen — which for Enron alone last year earned $25 million in accounting fees another $27 million in consulting fees — notified the SEC and Justice Department “that in recent months individuals in the firm involved with the Enron engagement disposed of a significant but undetermined number of electronic and paper documents and correspondence relating to the Enron engagement.” Andersen said it is also “notifying congressional committees and other agencies investigating the Enron collapse.”

Andersen also has asked former U.S. Sen. John Danforth to conduct an “immediate and comprehensive review of Andersen’s records management policy and to recommend improvements.” Danforth served in the Senate for almost 20 years, from 1976 to 1995. He also is the former attorney general of Missouri and is now a partner with the law firm of Bryan Cave LLP.

In its written statement, Andersen said, “The firm has assured the SEC, the Justice Department, congressional committees and other agencies that it will continue to cooperate fully with their investigations. After government agencies have had a full opportunity to consider these matters, Danforth also will advise the firm to ensure that all appropriate remedial and disciplinary actions have been taken.

“Andersen’s suspended document policy required in certain circumstances the destruction of certain types of documents. In recent months, documents, including electronic files related to the Enron engagement, were disposed of or deleted. Millions of documents related to Enron still exist, and the firm has successfully retrieved some of the deleted electronic files. The firm is continuing retrieval efforts through electronic backup files, and is continuing in its efforts to fully learn and understand all the facts related to this issue.”

Rep. Billy Tauzin, (R-LA), whose House Energy and Commerce Committee is among those agencies investigating, called the documents’ destruction “a deeply troubling development.” He said, “anyone who destroyed records simply out of stupidity should be fired. Anyone who destroyed records to try and subvert our investigation should be prosecuted.”

SEC’s enforcement chief also expressed alarm. “Destruction of documents is obviously an extremely serious matter. Documents are an essential ingredient in our investigations,” said Stephen Cutler, SEC’s director of enforcement, in a statement. “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.”

Arthur Bowman, editor of the newsletter Bowman’s Accounting Report, told Reuters Thursday that Andersen’s disclosure was “pretty damning.” Calling the ramifications “huge,” Bowman said, “you can just imagine the litigation industry lining up to feast on Andersen’s bones.” He said most accounting firms keep their audit records for at least three to four years, adding it was the first time he had seen such a disclosure in the 22 years he has covered the industry.

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