Oct. 7, 2002
Revolving Door Continues: Sen. Gramm Accepts Post-Retirement Job at Banking Firm that Acquired Enron’s Trading Operation
WASHINGTON, D.C. — Public Citizen today criticized U.S. Sen. Phil Gramm, former head of the Senate Banking Committee, for accepting a potentially lucrative job with UBS Warburg, a Swiss-based investment banking firm that earlier this year acquired the energy trading operations of Texas-based Enron Corp.
“Senator Gramm is the darling of the banks, the oil industry and Enron,” said Public Citizen President Joan Claybrook. “In the Senate, he did the bidding of the banking industry and took its money. He did the bidding of the oil industry and took its money. He did the bidding of energy traders and took their money. Now, he’s going to get paid directly from the company that took over Enron’s fraudulent energy trading operation, a business Gramm helped create through a law that deregulated such trading.”
UBS Warburg in January acquired Enron Corp’s disgraced energy trading operation, which generated about 90 percent of Enron’s $101 billion in revenue in 2000. UBS Warburg has said it paid nothing up front for the unit but will pay Enron one-third of the pre-tax profits from its operation. UBS will assume control of EnronOnline and use Enron’s energy trading software, trading floors and office equipment.
Since 1989, Gramm has been Congress’ second-largest recipient of campaign money from Enron, taking $101,350. In addition, Gramm is married to Dr. Wendy Gramm, who served on Enron’s board of directors from 1993 to June 6, 2002. In that capacity, Dr. Gramm earned between $915,000 and $1.8 million in salary, director’s fees and Enron stock.
“Senator Gramm was Enron’s biggest booster in Congress,” said Tyson Slocum, research director for Public Citizen’s Critical Mass Energy and Environment Program. “He sponsored federal electricity deregulation legislation at Enron’s behest and he was the primary sponsor of the Commodity Futures Modernization Act of 2000. Enron lobbied Gramm successfully for the passage of this bill, which removed nearly all government oversight from Enron’s energy trading operations — the same trading operations that UBS now controls.
“As a result of Gramm’s coddling of Enron and the complete failure of energy deregulation, Gramm has helped commit many Americans to higher energy bills,” Slocum said. “Now, his actions will be rewarded with a lucrative job earning him a salary that’s likely many times that of most Americans, who have to pay higher utility bills because of Gramm’s legislation.”
After UBS acquired Enron’s trading operations, the company paid $80,000 in the first half of 2002 to the Washington, D.C., firm Sullivan & Cromwell to lobby Congress (and presumably Gramm) and federal regulators on the “regulation of energy derivative contracts” and “oversight of the Gramm-Leach-Bliley Act.” Gramm was the principal author of the law, which repealed the Depression-era Glass Steagall Act separating investment banking from commercial banks. Passage in 1999 paved the way for UBS Warburg to acquire the brokerage PaineWebber shortly thereafter.
In Enron’s aftermath, every major energy trader in America has come under scrutiny from federal regulators for fraudulent trading practices. In response, U.S. Sen. Dianne Feinstein (D-Calif.) has introduced legislation to re-regulate energy trading. Several news reports have credited Gramm with blocking or organizing opposition to this important legislation.
“This job is payback for Senator Gramm’s years of advocacy inside the Senate on behalf of the banking and energy industries,” Claybrook said. “He had the gall to call himself the ‘only consumer advocate of any significance in Washington.’ In truth, consumers are better off without him.”