Washington: a city of denials, spin, and political calculations. The Nation's former DC editor David Corn spent 2002-2007 blogging on the policies, personalities and lies that spew out of the nation's capital. The complete archive appears below. Corn is now the DC editor at Mother Jones.
Army Secretary Thomas White, a former high-ranking Enron, told reporters a few days ago that "if I ever get to the point....where the Enron business represents a major and material distraction...then I wouldn't stay" at the Pentagon. In Washington, such a statement is often seen as the first step in a graceful exit strategy. Few people, after all, leave office admitting involvement in wrongdoing. They skedaddle because they have become "a distraction." Perhaps White, who was a key man at one of Enron's most shenanigan-ridden divisions, is preparing to jump before being pushed--which would assist the Bush gang's ongoing effort to maintain its distance from the Enron scandal.
Speculation about White's fate aside, what was most interesting about his hourlong session with reporters at the Pentagon--his first extensive comments on the Enron scandal--was that the most damning information about White and Enron went unaddressed. White's remarks focused on his failure to disclose he had held on to Enron stock options after he was required to sell them off and on his trip to Aspen, a stop taken while traveling on military business so he could sign papers related to the sale of his $6.5 million house there. White has drawn the wrath of Democratic Senator Carl Levin and Republican Senator John Warner for not revealing the full extent of his Enron holdings. He has also been criticized for not forthrightly acknowledging all the contacts he and his wife had with his former Enron colleagues after he took office in May, which included discussions at the time Enron was collapsing and White was selling off Enron stock.
These matters are fair game. But they don't hit White where he is most vulnerable: his past at Enron, which White refused to discuss at the press conference. From 1998 to 2001, White was vice-chairman of Enron Energy Services, which sold energy to large enterprises and also traded energy. (In 2001, he made $31 million from Enron.) This division has been accused of overstating its profits by hundreds of millions of dollars through the use of funny-numbers accounting that sometimes involved Enron's now-infamous secret partnerships. EES was Enron at its most Enronish.
But White's line has been that he saw nobody fooling around at the orgy. For instance, regarding the secret partnerships, White said, "When I read about it in the newspaper, I was appalled as anyone else."
His denials are undone by a Dow Jones Newswires story written by Jason Leopold, Mark Golden and Bryan Lee two weeks ago. The trio located and interviewed several former Enron employees who all said that White personally helped mislead analysts and investors about Enron Energy Services. Steve Barth, former vice president for special projects for EES, maintained that White "signed off" on the unusual contracts EES used to boost its paper profits. Another executive said that White "knew we were losing money, and we all agreed, Tom included, that we needed to do whatever we could to make EES look like it was making a profit." Lance Dohman, who was a salesman at EES, claimed White encouraged the unit's sale force to tell people the company was more successful than it was. And several former EES employees said White was part of a 1998 scheme to fool financial analysts into believing EES was a hot property. When analysts visited Enron's HQ in Houston, Dohman and two other sources said, White was present (with Enron chairman Kenneth Lay and Enron chief executive Jeffrey Skilling), as the company asked dozens of secretaries and employees to pretend to be traders buying and selling energy on a trading floor still under construction. The point was to impress the analysts, and at least one prominent analyst says the trick caused him to recommend Enron stock too strongly. (White denied he was present during the analysts' tour.)
Enron Energy Services was a mess. Right before White left, the company restated its 2000 revenues to $1.8 billion from $4.6 billion. Whoops--only off by nearly $3 billion. In essence, White's unit was a fraud. As the Dow Jones story noted, "The unit's former employees have said that its declared profits surprised them in early 2000 because the report contradicted what they were seeing daily: little volume and mostly losses on contracts that had been signed."
So one of the guys in command while this chicanery occurs gets to be in charge of the United States Army? Welcome to George W. Bush's America. White's failure to divest quickly enough, his trip to Aspen, his calls to former Enron pals--that's small change compared to what he oversaw at Enron. And it seems there is no shortage of witnesses who can finger White a chief culprit. His I-didn't-do-the-numbers defense does not hold up. (On March 13, The Washington Post reported that "White has not been implicated in any wrongdoing." The Dow Jones article suggests otherwise.)
The Justice Department has been investigating accounting malfeasance at Enron, but White has not yet been tainted by that inquiry. And there is no sign that White's conduct at Enron is in the crosshairs of any congressional committee. He is not on the list of past and present Enron officials being subpoenaed by Senator Joe Lieberman's government affairs committee; those subpoenas are only hitting members of the company's board. But in addition to worrying about White's stock sales and his post-employment contacts with Enron, legislators should wonder if the secretary of the army not too long ago knowingly managed a fraudulent enterprise. (Be all that you can fake?) Imagine what Republican legislators would have done if a senior Clinton appointee had been connected to this sort of activity.
It is not yet clear whether White is in jeopardy of losing--or abandoning--his position. But he is becoming the administration's most prominent Enron liability. Officials in the Bush White House may believe they have dodged the bullet on Enron, since the matter--especially the political dimensions of the affair--has receded from public and media attention. But, as the Dow Jones article indicates, White is a soft target. The question is, will anyone take aim?