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Enron fallout mounts as White House faces lawsuit

Congressional investigators said on Wednesday they would take unprecedented court action to try to find out what role Enron Corp. and others played in developing the White House's energy plan, as the fallout mounted from the energy giant's spectacular failure.

The San Francisco Chronicle reported on Wednesday that former Enron Chairman Kenneth Lay handed US Vice President Dick Cheney a memo last year that included suggestions resembling elements of the Bush administration's energy policy.

Amid investigations of Enron's spiral into the biggest bankruptcy in US history, investors worried about the soundness of corporate accounting practices at such companies as Tyco International Inc. following the Enron debacle.

But there was hope the once-mighty Enron could survive, albeit in a much smaller form. Interim chief executive Steve Cooper, a turnaround ace named on Tuesday to reorganize the firm, said he plans to avoid liquidation by rebuilding the failed energy giant in its old image as a regulated natural gas pipeline operator.

Cooper told reporters he envisions an Enron built on the steady revenues of its regulated power plants and pipelines.

"We will be a substantially smaller enterprise from a revenue perspective," Cooper said. "We will still be substantial in the context of the movement of natural gas and liquids through our pipelines, both domestically and around the world."

Vowing to move at "light speed," Cooper said the first step over the next few weeks would be to examine all of Enron's existing businesses and determine which ones should be considered candidates for sale. He stressed that his concern was "to preserve as many jobs as possible."

On Wednesday the lead creditor in Enron's $2.9 billion Indian power project invited bids for the stake held by foreign shareholders.

Human and financial toll

In Amityville, New York, friends and relatives gathered for the funeral of J. Clifford Baxter, 43, the former Enron vice chairman found dead of an apparent suicide last week.

Baxter, who complained about questionable financial deals at Enron before resigning in May, seven months after being promoted to vice chairman, died from a gunshot to the head near his suburban Houston home on Friday.

In another illustration of the human and financial toll of Enron's downfall, a video broadcast on Wednesday of an Enron staff meeting as the company began unraveling in October showed Lay under fire from employees, one of whom demanded to know if he was on crack.

"If so that would explain a lot. If not you may want to start because it's going to be a long time before we trust you again," was one written comment Lay read out at the Oct. 23 meeting.

The Houston-based company's bankruptcy on Dec. 2 came after allegations of insider trading and financial skullduggery destroyed investor confidence, threw thousands out of work and wiped out many workers' retirement savings.

Setting up a confrontation with the White Hose, the General Accounting Office, the investigative arm of the US Congress, told congressional leaders on Wednesday it would sue the White House to get details of how a task force headed by Vice President Dick Cheney formulated its energy plan.

"GAO will take the steps necessary to file suit in US District Court in order to obtain ... the information," GAO Comptroller General David Walker said in a letter to congressional leaders published on the agency's Web site.

The GAO did not say when it would file its suit.

White House refusal

The White House has refused to hand over the records, saying the disclosure would encroach on its ability to get candid advice from outside experts.

White House spokesman Ari Fleischer said the White House believed the GAO had overreached its legal authority and that President George W. Bush was ready to go to court to protect the principles he thought were essential to the conduct of the executive branch.

"The president believes very strongly this White House and all future White Houses should have the right to hear the thoughts of all citizens without those thoughts turning into virtual news releases," Fleischer said.

Among documents being sought are records that critics say could show the role played by Enron in crafting an energy plan favorable to its interests.

Representatives from Enron, which has made about $623,000 in contributions to Bush's campaigns since 1993, met six times last year with Cheney or staff involved in developing the energy plan. The last contact was in October, days before Enron announced a charge that contributed to its spectacular unraveling.

According to the Chronicle report, the White House, which it said acknowledged that aspects of the Lay memo resembled parts of Cheney's energy plan, would not say if the document was included in notes the vice president refuses to make public.

The memo stated why federal authorities should hold off imposing price caps or other measures sought by California officials to rein in soaring prices during the state's energy crisis last year, the paper said.

Enron was not mentioned by name in Bush's State of the Union address on Tuesday, but in calling for "stricter accounting standards and tough disclosure requirements" for US firms, the president gave a not-so-subtle nod toward the collapse of Enron, which was his biggest campaign contributor.

Investor skittishness

US stocks hit new session lows on Wednesday as skittish investors could not shake doubts about corporate accounting practices that drove the market to a three-month low on Tuesday.

"People are concerned about any negative surprises that are going to crop up from financial statements," added Nat Paull, portfolio manager at New Amsterdam Partners.

Stocks recovered in the afternoon after the Federal Reserve left interest rates unchanged in a widely expected move amid signs of strength in the nation's economy.

The blue-chip Dow Jones industrial average rallied 144.62 points, or 1.50 percent, to 9,762.86, after losing 0.9 percent earlier in the day. The broad Standard & Poor's 500 Index rose 12.93 points, or 1.17 percent, to 1,113.57.

In Mumbai, the Industrial Development Bank of India said on Wednesday it was inviting bids for the stake held by foreign shareholders in Enron's 65 percent-owned Dabhol power project.

IDBI, the lead creditor for the project, said Feb. 7 was the last date when buyers could file their expressions of interest for the 85 percent foreign stake in Dabhol.

In Washington, a member of the Federal Energy Regulatory Commission said on Wednesday the agency should investigate if Enron manipulated wholesale electricity prices in California.

Enron has been accused of raising electricity prices in long-term supply contracts negotiated with the state of California following its energy crisis last year.

Former executive's funeral

About 150 family and friends of Baxter filled the St. Martin of Tours Church in the small Long Island town of Amityville for his funeral. One of his 35 cousins, Steven Garry, gave the eulogy.

"We will always remember what a decent, hardworking, upstanding person he was, not a bad bone in his body," said Garry. "He always knew the right thing to say, he was always there, he was the go-to guy."

Baxter, who is survived by a wife and two children, was a defendant in lawsuits targeting Enron's top executives, accusing them of cashing in on insider information.

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