Justice: Preserve Enron Papers

White House Says It Will Comply

By Susan Schmidt and Mike Allen

Washington Post Staff Writers Saturday, February 2, 2002; Page A01

The Justice Department instructed the Bush administration last night to preserve any documents related to Enron Corp., saying they may prove valuable in investigations of the bankrupt energy company and statements its executives made about the firm's financial condition. if officials made the request in letters to the White House and the departments of Commerce, Energy and Treasury. Top Commerce and Treasury officials had received calls from Kenneth L. Lay, then Enron's chairman, in late October suggesting government help for his fast-sinking company. A month earlier, he had assured Enron employees that company stock was "an incredible bargain."

Federal prosecutors are investigating whether Enron misled shareholders, market analysts and government regulators about hundreds of millions of dollars in debts it had kept off its books but was forced to recognize in October. The Justice Department letter said the documents "may contain information relevant to our investigation into the financial condition of Enron and statements made by Enron employees and agents relating to its financial condition and business interests."

The administration, which said it will comply with the request, has repeatedly stated it did nothing to aid Enron last fall as a result of Lay's calls.

The document request comes as the White House is trying to distance itself from the Enron debacle.

On Thursday, the president outlined his plans to safeguard employee retirement accounts, a key concern in the wake of severe losses suffered by thousands of Enron workers.

Lay was a major contributor to George W. Bush's campaigns for president and Texas governor, and his administration contacts included his suggestions on who should be appointed to key regulatory agencies.

The request covers e-mails, letters and notes related to Enron dating to Jan. 1, 1999 -- nearly two years before Bush took office. It does not demand that the documents be turned over.

Enron and its auditor, Arthur Andersen LLP, are being investigated for possibly destroying documents relevant to Enron's collapse.

"The White House will comply with this request as part of a continuing commitment to fully cooperate," it said in a statement last night. The White House counsel's office put out an "administrative alert" within an hour after receiving the letter, a spokesman said.

Last month, Commerce Secretary Donald L. Evans and Treasury officials, including Secretary Paul H. O'Neill, said they received calls from Lay in late October about the deteriorating condition of his company. White House officials said Bush did not know about the calls until O'Neill and Evans told him on Jan. 10, at the end of a Cabinet meeting.

Lay is slated to testify Monday before the Senate Commerce Committee.

Evans said he had a conversation with Lay on Oct. 29, when Enron was undergoing a credit-rating review by Moody's Investors Service. Evans said Lay "said to me he didn't know if there was any support that we could give them at Moody's, but if there was, he would welcome that, but left it up to my judgment."

A month earlier, on Sept. 26, Lay told his employees in an e-mail that he expected a strong third quarter and insisted the company's plummeting stock was a bargain.

O'Neill said he had received three phone calls from Lay in October, including one in which Lay suggested the Treasury staff study Enron's situation to "assure ourselves that their problems were not going to get translated into larger problems for the U.S. and the world capital markets." O'Neill said Lay did not ask for direct help.

But another top Enron official had more than half a dozen conversations with Treasury Undersecretary Peter Fisher, who was asked to call Enron's lenders about extending the firm's credit, administration officials said.

Lawrence B. Lindsey, Bush's chief economic adviser and a former paid Enron consultant, along with other White House economic aides, began a review after the phone calls to determine whether Enron's financial straits would hamper the energy, currency, equity or bond markets.

White House press secretary Ari Fleischer said last month that the review "showed that it would not have any broader impact on overall markets," and no action was taken by the administration.

A senior administration official said last night that until now, the White House had not been making any formal effort to preserve or catalogue information about Enron contacts.