Ken Lay : Bush's best friend

Enron's Kenneth Lay, just indicted for fraud and conspiracy, was George W. Bush's biggest supporter over the years. I've gathered a lot of stuff about Bush, Lay, and Enron here.

AP, today July 1, 2004:

US President George W. Bush walks away from a briefing with the media, refusing to answer questions after he was asked about Enron and the reported indictment of former CEO Kenneth Lay, who was a close adviser and fund-raiser for Bush and his father, earning him the presidential nickname of 'Kenny Boy.'

Who's Ken Lay? Bush barely even knew him:

White House Downplays Bush-Enron Ties
White House Downplays Bush Relationship With Indicted Ex-Enron Chief Kenneth Lay
ABCNEWS, July 8, 2004, The Associated Press

WASHINGTON July 8, 2004 - The White House is trying to put at least an arm's length between President Bush and indicted Enron executive Kenneth Lay, a campaign benefactor Bush nicknamed "Kenny Boy" when the two were up-and-comers in Texas.
It has been "quite some time" since Bush and Lay talked with each other, White House press secretary Scott McClellan said Thursday, brushing off questions about whether the two were friends.

"He was a supporter in the past and he's someone that I would also point out has certainly supported Democrats and Republicans in the past," McClellan said.

Lay clearly favored the GOP. He and his wife, Linda, donated $882,580 to federal candidates from 1989-2001, according to the Center for Responsive Politics. All but $86,470 went to Republicans.

McClellan declined to discuss the federal indictment charging Lay with a wide-ranging scheme to deceive the public, company shareholders and government regulators about the energy company that he founded and led to industry prominence before its collapse.

Instead, McClellan answered questions about Lay by talking about Bush's desire to curb corporate fraud.

"This president has worked to go after those wrongdoers and directed his administration to pursue those who are dishonest in the boardroom," McClellan said.

"The president has made it very clear that we will not tolerate dishonesty in the boardroom. This administration worked to uncover abuses and scandals in the corporate arena. And certainly the president's concern is with those workers and other people who have been harmed by corporate wrongdoing," McClellan said.

Democrat John Kerry's campaign had a different view, accusing the administration of dragging its feet on Enron. "It was three years too late," Kerry spokeswoman Stephanie Cutter said of the Lay indictment.

Lay's relationship with the Bush family dates from at least 1990 when he was co-chairman of former President Bush's economic summit for industrialized nations, which was held in Houston. Lay also was co-chairman of the host committee for the Republican National Convention when it was held in Houston in 1992.

The Center for Public Integrity, a Washington-based nonprofit group, said the Lays had given $139,500 to George W. Bush's political campaigns over the years.

Those donations were part of $602,000 that Enron employees gave to Bush's various campaigns, making Enron the leading political patron for Bush at the time of the company's bankruptcy in 2001.

In addition to Lay's political campaign donations, he and his wife contributed $100,000 to Bush's 2001 inauguration. Lay also was a fund-raiser for Bush, bringing in at least $100,000 for the president's 2002 campaign. That put Lay in "Pioneer" status as one of the president's top money-raisers.
--------------------------------------------------------------

A video exists of both Bushes at a wild Enron party:

Feds Want To See Enron Videotape
President Bush Also Takes Part In Skit
Click2Houston.com
POSTED: 10:21 a.m. CST December 16, 2002
UPDATED: 5:42 p.m. CST December 17, 2002

LINK

HOUSTON -- Skits and jokes by a few former Enron Corp. executives at a party six years ago were funny then, but now border on bad taste in light of the events of the past year.

Feds Want To See Controversial Enron Videotape

A videotape of a January 1997 going-away party for former Enron President Rich Kinder features nearly half an hour of absurd skits, songs and testimonials by company executives and prominent Houstonians, the Houston Chronicle reported in its Monday editions.

The collection is all meant in good fun, but some of the comments are ironic in the current climate of corporate scandal.

In one skit, former Administrative Executive Peggy Menchaca played the part of Kinder as he received a budget report from then-President Jeff Skilling, who played himself, and Financial Planning Executive Tod Lindholm.

When the pretend Kinder expressed doubt that Skilling could pull off 600 percent revenue growth for the coming year, Skilling revealed how it could be done.

"We're going to move from mark-to-market accounting to something I call HFV, or hypothetical future value accounting," Skilling joked as he read from a script. "If we do that, we can add a kazillion dollars to the bottom line."

Richard Causey, the former chief accounting officer who was embroiled in many of the business deals named in the indictments of other Enron executives, made an unfortunate joke later on the tape.

"I've been on the job for a week managing earnings, and it's easier than I thought it would be," Causey said, referring to a practice that is frowned upon by securities regulators. "I can't even count fast enough with the earnings rolling in."

Joe Sutton and Rebecca Mark, the two executives credited with leading Enron on an international buying spree, did a painfully awkward rap for Kinder, while former Enron Broadband Services President Ken Rice recounted a basketball game where employees from Enron Capital & Trade beat Kinder's Enron Corp. team, 98-50.

"I know you never forget a number, Rich," Rice said.

President George W. Bush, who then was governor of Texas, also took part in the skit, as did his father.

At the party, the younger Bush pleaded with Kinder: "Don't leave Texas. You're too good a man."

The governor's father also offered a send-off to Kinder, thanking him for helping his son reach the governor's mansion.

"You have been fantastic to the Bush family," the elder Bush said. "I don't think anybody did more than you did to support George."

Federal investigators told News2Houston Tuesday that they want to take a closer look at the tape.

Investigators with the House committee on government reform are in the process of obtaining a copy of the tape, according to News2Houston.

Former federal prosecutor Phil Hilder said that what was a joke could become evidence for federal investigators.

"There's matters on there that a prosecutor may want to introduce as evidence should it become relevant," Hilder said.

Former employees were shocked to see the tape.

"It's too close to the truth, very close to the truth," said Debra Johnson, a former Enron employee. "I think there's some inside truth to the jokes that they portrayed."

Background On Enron, Government Probe
The Justice Department is conducting a criminal investigation of Enron Corporation, the energy-trading giant whose swift descent into bankruptcy has raised numerous questions.

What happened to the company, which is closely tied to President George W. Bush and other administration officials, and what are the investigations focusing on?

Some questions and answers:

Q: What happened to Enron?

A: The Houston-based company, formed in 1985, grew into the nation's seventh-biggest company in revenue by buying electricity from generators and selling it to consumers. It was admired on Wall Street as a technological innovator. But it used complex partnerships to keep some $500 million in debt off its books and mask its financial problems so it could continue to get cash and credit to run its trading business.

Enron officials have acknowledged that the company has overstated its profits by more than $580 million since 1997.

In a six-week downward spiral last fall, Enron disclosed a stunning $638 million third-quarter loss, the Securities and Exchange Commission opened an investigation into the partnerships, and the company's main rival backed out of an $8.4 billion merger deal.

Enron filed for protection from creditors on Dec. 2 in the biggest corporate bankruptcy in U.S. history. Its stock, worth more than $80 about a year ago, has tumbled to less than $1 a share.

Enron's collapse left investors burned and thousands of employees out of work with lost retirement savings.

Q: Why is the Justice Department investigating?

A: Prosecutors are probably looking at whether fraud was involved in the reliance on off-balance-sheet partnerships and whether Enron defrauded investors by concealing information about its finances.

Q: What about other federal agencies and Congress?

A: Four congressional committees are investigating. In one inquiry, Senate investigators are issuing 51 subpoenas for documents from Enron's current and former directors and senior managers and from its auditing firm, Arthur Andersen. The auditing firm said Thursday that a "significant but undetermined" number of documents related to the company had been destroyed.

Also, the Labor Department is examining the way Enron handled its employees' retirement benefit plans. On Thursday, Bush ordered his economic team to review pension rules that could put other companies' workers and retirees at risk.

Q: What happened to the Enron employees?

A: Enron, which had 20,000 employees, barred them from selling Enron shares from their retirement accounts last fall as the stock price plunged, saying the accounts were being switched to a new plan administrator. Many longtime employees, including those who worked for energy and utility companies that Enron acquired, had their life savings wiped out.

Testifying at a Senate hearing, several employees disputed a company assertion that they were locked out of their Enron-heavy 401(k) accounts for 10 business days, saying it was much longer.

Q: Are there any protections under law for those employees?

A: Apparently not, since pension benefit protections under the federal Employee Retirement Income and Security Act do not apply to 401(k) retirement investment plans.

Many Enron employees and retirees have joined in lawsuits against current and former company executives and directors and against auditor Andersen.

Q: What about the company executives and directors? Did they also lose money from their Enron stock?

A: Top Enron executives cashed out more than $1 billion in company stock when it was near its peak, lawmakers have noted. In addition, nearly 600 employees deemed critical to Enron's operations received more than $100 million in bonuses in November.

Q: What did Bush administration officials know about Enron's financial situation?

A: The White House disclosed that Enron Chairman Kenneth Lay telephoned Treasury Secretary Paul O'Neill before the company's collapse "to advise him about his concern about the obligations of Enron and whether they would be able to meet those obligations." Lay also told O'Neill that Enron "was heading to bankruptcy."

In a separate phone call to Commerce Secretary Don Evans, Lay similarly worried that the company might have to default on its obligations "and he was worried about its impact on the energy sector."

Q: Where did Enron's political clout come from?

A: In its heyday, the company lavished contributions on politicians. Enron and its employees have been the single biggest group of contributors to Bush's campaigns.

The company's headquarters in downtown Houston was a new $200 million, 40-story glass tower, and it agreed in 1999 to spend $100 million over 30 years to put its name on Houston's major league ballpark. Now a share of Enron stock costs a lot less than a $4 hot dog at Enron Field.

Background Of Resigned Enron CEO Kenneth Lay
NAME: Kenneth L. Lay

BIRTH DATE: April 15, 1942.

EDUCATION: Bachelor's and master's degree, University of Missouri; Ph.D. in economics, University of Houston.

EXPERIENCE: Worked as economist at Exxon beginning in 1965. Later served as president of Continental Resources Company. Became chairman and chief executive of Houston Natural Gas, 1984. Was named chairman and CEO of Enron Corp. in 1986 following the merger of Houston Natural Gas and InterNorth Inc. Lay was CEO until he resigned that position in Feb. 2001 but continued as chairman. Jeffrey Skilling took the position of CEO on Feb. 12, 2001. When Skillling resigned in August 2001, Lay reassumed the position until resigning as CEO and chairman amid scandal on Jan. 23, 2002.
FAMILY: Wife, Linda; five children, six grandchildren

QUOTE: "I want to see Enron survive, and for that to happen we need someone at the helm who can focus 100 percent of his efforts on reorganizing the company and preserving value for our creditors and hard-working employees."

E-LAW Documents at Document Repository: ENRON, WORLDCOM, ENCOMPASS

United States Bankruptcy Court, Southern District of New York: ENRON, WORLDCOM

Press Room

Bankruptcy Documents:

Confirmation Order (Including Debtors' Supplemental Modified Fifth Amended Chapter 11 Plan) and Related Documents

On July 15, 2004, the United States Bankruptcy Court for the Southern District of New York entered an order (the "Confirmation Order") confirming the Supplemental Modified Fifth Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the United States Bankruptcy Code (the "Plan"). The Plan is attached to the Confirmation Order as an exhibit. The Bankruptcy Court also entered its Findings of Fact and Conclusions of Law Confirming Supplemental Modified Fifth Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the United States Bankruptcy Code, and Related Relief (the "Findings and Conclusions").

Click on either the Confirmation Order link or the Findings and Conclusions link below to view these documents. The documents are in PDF format. You can download and install the free Adobe Acrobat reader here.

Pursuant to the terms of the Plan, the Debtors have filed a schedule of executory contracts and unexpired leases to be assumed, which has been amended from time to time (as amended, the "Assumption Schedule"). Click on the Assumption Schedule link below to access these documents.

On March 9, 2004, the Debtors filed the Plan Supplement, which contains, among other things, forms of the various agreements discussed in the Plan and corporate organizational documents for PGE, CrossCountry and Prisma. Click on the Plan Supplement link below to view these documents.

The Disclosure Statement filed in connection with the Fifth Amended Joint Plan of Affiliated Debtors Pursuant to Chapter 11 of the United States Bankruptcy Code and other documents related thereto are accessible by clicking on the Archived Chapter 11 Documents link below. Prior versions of the Plan contained therein should not be relied upon. The Bankruptcy Court-approved version of the Plan is attached as an exhibit to the Confirmation Order and can be accessed by clicking on the Confirmation Order link below.

PLEASE TAKE NOTICE THAT this website has been established and is provided and maintained by Enron Corp. and certain of its subsidiaries as a courtesy to creditors, equity interest holders and other parties in interest. While every attempt has been made to assure the accuracy and completeness of the information contained on this site, this website does not contain nor does it constitute the official court records.

view the Confirmation Order and the Final Supplemental Modified Fifth Amended Plan (pdf)

view the Findings and Conclusions (pdf)

view the Plan Supplement to the Fifth Amended Joint Plan of Affiliated Debtors

view the Assumption Schedules

view the archived Chapter 11 Documents

Supporting Documentation for Disclosure Statement

Fifth Amended Chapter 11 Joint Plan

Disclosure Statement For Fifth Amended Joint Plan

Blacklines of Fifth Amended Debtors' Chapter 11 Plan, Disclosure Statement and Related Documents

Securities and Exchange Commission
Labor Department

Facsimiles of the Bush-Lay correspondence:

While the White House has repeatedly described former Enron chairman Kenneth Lay as simply a "supporter" of George W. Bush, extensive correspondence between the two men paints a far cozier picture of their relationship, according to copies of letters obtained this afternoon (2/15) by The Smoking Gun.

The pages of correspondence, exchanged during the years Bush served as governor of Texas, were released today in Austin by the state archives in response to Freedom of Information requests filed by TSG and other news organizations.

The Bush-Lay material touches on both personal matters (birthday greetings and Bush's knee surgery) and public concerns of Lay and Enron, such as energy legislation and tort reform, and reflects the kind of jocular relationship that reportedly saw the nickname-happy Bush call the Enron boss "Kenny Boy." The Houston-based energy firm, Bush's leading career political contributor, is now bankrupt and the target of a multitude of criminal and congressional probes.

We've arranged the Bush-Lay letters into several batches and, where applicable, have followed an original letter with the recipent's reply. TSG will upload the correspondence as quickly as we can scan the documents. You'll find the first 15 letters below along with links that will get you to the additional pages.

Pages 1-15

Forbes: Lay is doomed.

Forbes: Lay fights back.

The Enron people seemed to enjoy burning "Grandma Millie".

ENRON'S INTERNAL MEMOS
The Federal Energy Regulatory Commission released two Enron memos describing company plans to inflate energy prices during California's energy crisis of 2000.
The practices were considered so outrageous, that an attorney with the California Public Utilities Commission dubbed them a "smoking gun memo."

Enron memo, Dec. 6, 2000 .pdf file

Enron memo, Dec. 8, 2000

Enron Tapes Anger Lawmakers

Anger Over Enron Tapes
CBS Evening News, June 1, 2004
(CBS) When a forest fire shut down a major transmission line into California, cutting power supplies and raising prices, Enron energy traders celebrated, CBS News Correspondent Vince Gonzales reports.

"Burn, baby, burn. That's a beautiful thing," a trader sang about the massive fire.

Four years after California's disastrous experiment with energy deregulation, Enron energy traders can be heard – on audiotapes obtained by CBS News – gloating and praising each other as they helped bring on, and cash-in on, the Western power crisis.

"He just f---s California," says one Enron employee. "He steals money from California to the tune of about a million."

"Will you rephrase that?" asks a second employee.

"OK, he, um, he arbitrages the California market to the tune of a million bucks or two a day," replies the first.

The tapes, from Enron's West Coast trading desk, also confirm what CBS reported years ago: that in secret deals with power producers, traders deliberately drove up prices by ordering power plants shut down.

"If you took down the steamer, how long would it take to get it back up?" an Enron worker is heard saying.

"Oh, it's not something you want to just be turning on and off every hour. Let's put it that way," another says.

"Well, why don't you just go ahead and shut her down."

Officials with the Snohomish Public Utility District near Seattle received the tapes from the Justice Department.

"This is the evidence we've all been waiting for. This proves they manipulated the market," said Eric Christensen, a spokesman for the utility.

That utility, like many others, is trying to get its money back from Enron.

"They're f------g taking all the money back from you guys?" complains an Enron employee on the tapes. "All the money you guys stole from those poor grandmothers in California?"

"Yeah, grandma Millie, man"

"Yeah, now she wants her f------g money back for all the power you've charged right up, jammed right up her a------ for f------g $250 a megawatt hour."

And the tapes appear to link top Enron officials Ken Lay and Jeffrey Skilling to schemes that fueled the crisis.

"Government Affairs has to prove how valuable it is to Ken Lay and Jeff Skilling," says one trader.

"Ok."

"Do you know when you started over-scheduling load and making buckets of money on that?

Before the 2000 election, Enron employees pondered the possibilities of a Bush win.

"It'd be great. I'd love to see Ken Lay Secretary of Energy," says one Enron worker.

That didn't happen, but they were sure President Bush would fight any limits on sky-high energy prices.

"When this election comes Bush will f------g whack this s--t, man. He won't play this price-cap b------t."

Crude, but true.

"We will not take any action that makes California's problems worse and that's why I oppose price caps," said Mr. Bush on May 29, 2001.

Both the Justice Department and Enron tried to prevent the release of these tapes. Enron's lawyers argued they merely prove "that people at Enron sometimes talked like Barnacle Bill the Sailor."

CBS Evening News June 2, 2004
(CBS) During California's rolling blackouts, when streets were lit only by head lights and families were trapped in elevators, Enron Energy traders laughed, reports CBS News Correspondent Vince Gonzales.

One trader is heard on tapes obtained by CBS News saying, "Just cut 'em off. They're so f----d. They should just bring back f-----g horses and carriages, f-----g lamps, f-----g kerosene lamps."

And when describing his reaction when a business owner complained about high energy prices, another trader is heard on tape saying, "I just looked at him. I said, 'Move.' (laughter) The guy was like horrified. I go, 'Look, don't take it the wrong way. Move. It isn't getting fixed anytime soon."

California's attempt to deregulate energy markets became a disaster for consumers when companies like Enron manipulated the West Cost power market and even shut down plants so they could drive up prices.

There was quick reaction in Washington to the Enron audiotapes first aired by CBS News last night, and the tapes have become part of the debate over the President's massive energy bill.

"People were talking about market manipulation. People were talking about schemes, people were making jokes," said U.S. Sen. Maria Cantwell, D-Wash.

"While the president would like to have an energy bill, I'd like to have an energy bill that protects consumers," said Cantwell.

Consumers like Grandma Millie, mentioned in one exchange recorded between two Enron employees.

Employee 1: "All the money you guys stole from those poor grandmothers in California?

Employee 2: "Yeah, Grandma Millie man.

Employee 1: "Yeah, now she wants her f-----g money back for all the power you've charged right up, jammed right up her a-for f-----g $250 a megawatt hour."

It's clear from the tapes that Enron employees knew what they were doing was wrong, and now lawmakers are responding.

"I will offer an amendment to compel the Bush administration t oget off the dime and get back this money that has been stolen," said Rep. Jay Inslee, D-Wash.

Another taped exchange between different employees regarding a possible newspaper interview goes like this:

Employee 3: "This guy from the Wall Street Journal calls me up a little bit ago..."

Employee 4: "I wouldn't do it, because first of all you'd have to tell 'em a lot of lies because if you told the truth..."

Employee 3: "I'd get in trouble."

Employee 4: "You'd get in trouble."

Eventually, the lies unraveled and traders scrambled.

"I'm just -- f--k -- I'm just trying to be an honest camper so I only go to jail once," says one employee.

Two Enron traders, from the office where the tapes were made, have admitted manipulating energy prices and pled guilty in court. Another goes on trial in October. Former Enron chief Ken Lay is the only top company official who has never been charged with any crime.

Part 2 of this story