Recently Released Treasury Documents Chronicle Enron’s Influence in Washington
April 28, 2003
Recently Released Treasury Documents Chronicle Enron’s Influence in Washington
Documents Reveal Extensive, Secretive Lobbying Efforts; Public Citizen Requests More Complete Release of Redacted Documents
WASHINGTON, D.C. – An examination of thousands of documents released by the U.S. Department of Treasury since March 2002 highlight a lobbying operation run by Enron that covered a range of issues: regulation of energy trading; valuation of futures contracts in the event of bankruptcy; regulatory responses to the West Coast energy crisis; and government assistance to the company’s problematic overseas investments.
The documents were heavily redacted, making the full extent of Enron’s influence difficult to assess. Public Citizen has filed additional Freedom of Information Act requests for a more complete release of information concerning Enron’s lobbying of Treasury.
“These documents help explain how Enron used its money and connections to distort government policies in a way that gave it a free rein to cheat consumers,” said Tyson Slocum, research director with Public Citizen’s Critical Mass Energy and Environment Program.
But from those few communications that Treasury more fully released, it is clear that Enron had enormous influence over government officials. Personal letters between then-Treasury Secretary Larry Summers and then-Enron CEO Kenneth Lay in 1999, as well as numerous e-mails and meetings between Treasury officials and Enron executives, demonstrate that Enron used its influence over political appointees to override concerns of career civil service experts.
The documents suggest that Enron, with the assistance of the lobbying firm Cadwalader, Wickersham and Taft, successfully persuaded Treasury not to oppose the company’s efforts to deregulate energy trading. With Treasury no longer voicing its opposition to the deregulation plans, it was far easier for then-Sen. Phil Gramm (R-Texas) to help push through Congress deregulation legislation that allowed Enron to gouge billions of dollars from West Coast consumers and taxpayers by manipulating energy markets.
During the time Enron successfully lobbied the Treasury Department to change the agency’s position on the regulation of over-the-counter (OTC) derivatives, the company was a major financial contributor to the Democratic Party. In just nine months — from March 1999 (when communications between Enron lobbyists and Treasury began) to December 1999 (weeks after Summers assured Lay that Treasury wouldn’t interfere with the company’s efforts to deregulate the OTC market) — Enron gave more than $147,000 to the Democratic National Committee, the Democratic Congressional Campaign Committee and the Democratic Senatorial Campaign Committee.
Although Treasury employees expressed disapproval of Enron’s legislative proposals to deregulate OTC derivative markets, Enron still got its way. The Working Group on Financial Markets staff condemned Enron’s proposals as “too broad.” “We do not support the major provisions in the Enron/Cadwalader proposal,” reads a June 1999 memo by Norman Carleton, at the time a federal finance policy analyst with Treasury, “because they undo a difficult balancing of competing objectives which the Working Group worked hard over two years to achieve.”
Enron executives clearly were not happy with the Treasury staff’s conclusion. Just a few months later, Lay went over their heads and wrote in a letter to Summers that Enron was “troubled by the notion that financial regulators may be considering any regulation of OTC dealers.” In his response to Lay a few weeks later, Summers wrote, “The Working Group is not recommending legislative action with respect to derivatives dealers” such as Enron.
Summers’ letter marked a departure from previous Working Group consensus and indicated a sea change in the Clinton administration’s policy, suggesting the administration would not oppose Enron in its pursuit of legislation to further deregulate the energy trading business. Following passage of the Commodity Futures Modernization Act of 2000, sponsored by Gramm and not opposed by the Clinton administration, Enron and other energy traders were allowed to operate unregulated power auctions that greatly enhanced their ability to manipulate deregulated electricity and natural gas markets.
To view the Treasury documents on Public Citizen’s Web site and a more complete description of each subject, please click here. Public Citizen will post more documents as they become available.
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