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Bush and Ken Lay: Slip Slidin' Away

By Sam Parry
February 6, 2002

George W. Bush is trying to rewrite the history of his and his family’s relationship with Enron Corp.’s disgraced former Chairman Kenneth Lay. So far, Bush has enjoyed fairly good success as the U.S. news media has largely accepted the White House spin.

But the reality, as established by a wealth of historical record and recent disclosures, is that Lay and Enron were instrumental in Bush’s rise to power – and Bush played an important behind-the-scenes role in advancing Enron’s aggressive deregulation agenda, which helped the energy trader ascend to its lofty perch as the seventh-biggest U.S. company.

The Bush-Lay coziness earned the Enron chief a nickname from Bush as "Kenny Boy." But more importantly for Enron, Bush pitched in as governor and president whenever the energy trader wanted easier regulations within the U.S. or to have U.S. taxpayers foot the bill for loan guarantees or risk insurance for Enron's overseas ventures.

The Bush-Lay relationship helped Enron extend its reach across the globe, with the appearance of a successful company, as it pulled in billions of dollars in investment money from tens of thousands of unwary investors.

Now, in trying to insulate Bush from the spreading Enron scandal, White House aides have emphasized that administration officials rebuffed Lay and other Enron executives who sought a federal bailout to save their corporate skin. But the documentary record paints a different picture, showing that the administration did what it could last year to help Enron, until the Houston energy trader's collapse was so far advanced that its deceptive bookkeeping could no longer be kept out of public view.

Last year, Vice President Dick Cheney and his energy task force held six secret meetings with Lay and other Enron officials while developing an administration program that contained special favors for Enron. Bush named Lay’s allies to key regulatory positions, such as the Federal Energy Regulatory Commission, which pushed for other pet Enron projects.

Under the direction of Bush’s National Security Council staff, the U.S. government also strong-armed India to acquiesce to Enron’s demands over its troubled Dabhol power plant, which Enron was hoping to sell for $2.3 billion. The NSC’s extraordinary pressure on India continued even after Sept. 11 when Washington needed New Delhi’s support in the war on terrorism and wanted the Indians to quiet their border dispute with neighboring Pakistan.

Internal administration documents suggest that Bush and his NSC staff put Enron's interests on par with or ahead of U.S. national security interests. The extraordinary NSC-led campaign around the Dabhol plant ended only on Nov. 8, the day the Securities and Exchange Commission delivered subpoenas to Enron about its questionable accounting. The same day, the company admitted that it had overstated its profits by $586 million since 1997, by improperly shifting debt into affiliated partnerships. [Washington Post, Jan. 19 & 25, 2002; Bloomberg News, Jan. 18, 2002] 

Kenny Boy Who?

With Enron’s ignominious collapse over deceptive accounting, Bush began to act as if he barely knew Lay. On Jan. 11, Bush told reporters that Lay "was a supporter of Ann Richards in my run in 1994." Bush implied that he had gotten to know Lay as a Richards holdover appointee to a Texas business council. The impression Bush sought to create was untrue.

The Bush-Lay relationship can be traced back at least a half decade before the 1994 race. It grew out of the Houston social circle where oil tycoons have long rubbed shoulders with political players – and where Ken and Linda Lay had grown close to George H.W. and Barbara Bush in the 1980s. Since 1988, when Lay backed the elder George Bush in his run for the White House, Enron and its executives have written big checks for one Bush initiative after another.

Besides the political financing, Lay has supported private and charitable activities of the Bush family. Lay joined one of Barbara Bush's charities to promote literacy as he served as the honorary chairman of the Celebration of Reading at Houston Wortham Theatre Center. [The Guardian, Jan. 30, 2002]

A trustee of the George Bush Presidential Library Foundation, Lay has donated $50,000 as a patron as well, the New York Daily News reported. In 1999, the Lays chipped in $100,000 for the Andersen Cancer Center at Texas A&M University in a fundraising drive led by then-Gov. George W. Bush and his wife, Laura.

During the Republican presidential primaries in 2000, Enron corporate jets were made available eight times to Bush's campaign staff and his parents, with the future president sometimes personally arranging the flights. [New York Daily News, Feb. 3, 2002]

Yet, when Enron collapsed, George W. Bush distanced himself from Lay. As Enron slid toward bankruptcy, its stock lost $26 billion in market value, devastating retirement plans for Enron employees and other Americans. About 5,000 people lost their jobs, including about 4,000 at Enron's Houston headquarters.

The once-high-flying Enron became synonymous with corporate corruption.

Oil-Field Alliance

The origins of the Bush-Lay relationship can be found in the intertwining connections among oil companies, Texas politicians and international commerce. [More on the Bush family 'Oiligarchy']

In 1985, Lay created Enron by merging his company, Houston Natural Gas, with one of the largest pipeline companies in the world, Nebraska-based InterNorth. Lay named the new company, Enron, and set its sights high. Political allies would be critical to Enron’s growth.

In his first major venture into politics, Lay went to work raising money and organizing support for then-Vice President George H.W. Bush’s campaign for the Presidency. Bush, who built his own fortune in the Texas oil fields, was appreciative as he battled through a tough Republican primary and then defeated Democratic nominee Michael Dukakis.

In the weeks after the 1988 election, Lay may have gotten his first dividend on his investment in the Bush family. Enron had joined the bidding for a contract to build a $300 million pipeline in Argentina. The government appeared close to choosing between two other companies -- one from Italy, Ente Nazionale Idrocarburi, and the other a partnership between Argentine firm Pérez and America’s Dow Chemical.

Argentina’s Minister of Public Works, Rodolfo Terragno, later told Mother Jones that he considered Enron’s one-page project outline "laughable." He also noted that Enron "wasn't well established in Argentina." [Mother Jones, March/April 2000]

But Enron apparently was getting well established in the power corridors of the U.S. A few weeks after the 1988 elections, Terragno said the president-elect’s eldest son, George W. Bush, called to check up on "the slow pace of the Enron project."

Terragno recalled that the younger George Bush said that giving Enron the project "would be very favorable for Argentina and its relations with the United States." Terragno didn’t know whether this message was from the White House or whether Bush was working a business deal on his own.

But the public works minister, who was forced to flee Argentina after the 1976 military coup, didn’t succumb to what he viewed as political pressure. He said he told Bush that the deal would be awarded based on Argentine law.

Terragno, however, would not have the chance to make the decision. National elections in Argentina tossed his left-of-center party out of office and ushered in the administration of right-wing Peronist Carlos Menem.

Bush has denied the conversation took place. While Terragno says he still believes it was the younger George Bush who called, he has acknowledged the possibility that the call could have come from another Bush brother. Still, other news accounts have traced Lay's ties to George W. Bush back to about that time. An investigation by the New York Daily News concluded that "Lay began to cultivate their friendship in 1989." [Feb. 3, 2002]

Presidential Help

Falling gas prices caused Enron to back away from the pipeline contract in Argentina. But in 1990, President George H.W. Bush traveled to the South American country to plant seeds for U.S. business interests. One of those seeds was for Enron.

According to Mother Jones, several days after Bush’s visit, the U.S. Ambassador to Argentina, Terence Todman, wrote Menem a letter saying Enron and seven other U.S. companies were prepared to pull the plug on investments in Argentina if the Menem administration didn’t stop favoring Argentine businesses in awarding contracts.

Todman’s letter said Enron was "poised to invest $250 million" if Argentina would lower tariffs and value-added taxes that punished U.S. businesses. Menem accepted the Bush administration’s entreaties and signed a presidential decree that waived these duties on Enron investments. [Mother Jones, March/April 2000]

Menem’s decision caused a political furor in Argentina, but the deal was done. In the years since, Enron has emerged as a fixture in the Argentine business landscape.

Back in the United States, Lay was one of 273 people invited by Bush to spend a night at the White House during his four-year term. [Houston Chronicle, Feb. 27, 1997]

In 1990, Bush picked Lay to co-chair the Houston Economic Summit of the G-8 Industrial Nations, a prestigious forum that gave the Enron chairman access to the leaders of the world’s wealthiest countries. Lay also enjoyed Bush’s backing to deregulate the nation’s energy market to open public utilities to private competition, Enron’s core business.

In 1992, Lay served as chairman of the host committee for the Republican National Convention in Houston. That year, however, Bush lost the White House to Bill Clinton. Cushioning the fall for some of Bush's top aides, Enron hired as consultants Bush's Secretary of State James Baker and Commerce Secretary Robert Mosbacher. [Business Week, Feb. 12, 2001]

Page 2: The Governor's Race