Enron's End Run

To make a mess as big as the Enron debacle, you need some friends in high places--Texas Senator Phil Gramm and his wife, for instance

Whatever problems were escalating within the walls of Enron's far-flung enterprises, the exterior looked sleeker than ever. The corporation concentrated more and more resources into the heady stuff of derivatives trading. It invested in broadband, coal, water, pulp, paper and more. World market analysts were wowed by the new and novel initiatives into expanding economic markets.

Executive Jeff Skilling showed the brash style with personalized license plates--WLEC--for "world's largest energy company."

As that target came within Enron's sights, there were a few pesky chores to be taken care of first. Creative bookkeeping had spawned more and more sleight-of-hand subsidiaries to mask accurate numbers from corporate balance sheets. And government was trying to get in the way again, this time with the audacity of proposals to require proper accounting and oversight to the wide-open field of derivatives.

Senator Phil Gramm and Wendy Gramm, an Enron director, did their part to free Enron from federal restraints in the exotic derivatives markets.
Senator Phil Gramm and Wendy Gramm, an Enron director, did their part to free Enron from federal restraints in the exotic derivatives markets.
Ken Lay made some unlikely friends in Washington, such as ultraliberal Congress member Sheila Jackson Lee of Houston.
John Childs
Ken Lay made some unlikely friends in Washington, such as ultraliberal Congress member Sheila Jackson Lee of Houston.

Lay would soon be returning to the front to break more regulatory leashes. This time, he was better armed than ever with political largesse.

The Enron chairman had invested his massive campaign contributions wisely. While he'd made it clear that one of his goals was a GOP majority in Congress, he would put his money on Democrats when there were no viable alternatives.

Lay is conservative, but "he is not some right-wing nut," says Enron fund-raiser Sue Walden, a loyalist who stays in regular contact with Lay. "He is pragmatic in 'What do I need to do on the PR end to achieve my goals?'"

"Lay concluded early on, as any smart lobbyist does, that it doesn't do any good to support somebody that might be right ideologically but can't get elected," says former Enron lobbyist and consultant George Strong, who has known Lay for a quarter-century. "With very few exceptions, you'll find that Enron was pretty astute on making decisions on who to give money to."

As unlikely as some of those decisions seemed at the time, they paid off. Sheila Jackson Lee, arguably the most liberal member of Congress and inarguably the most vocal, became a Ken Lay "project" in her upstart 1994 race for the 18th District in Houston. As her fund-raising chairman, Lay rallied the Houston business community to join her against their common foe, incumbent Craig Washington.

"We all had to give $250 to get rid of Craig," says a Lay associate. "But she was a pain in the ass to him." The source says that after her election, Jackson Lee would call Lay "two or three times a day trying to get us to hire her cronies for big money."

Freshman Houston Congressman Ken Bentsen also knew the influence wielded by Lay and Enron. The Democrat got jolted in November 1996 when Lay unexpectedly jumped ship to endorse his Republican opponent, Dolly Madison McKenna, for the 25th Congressional District. "He was probably the senior corporate citizen in Houston," says the congressman. "And they were the go-to people. He was the go-to guy."

The Enron chairman explained to reporters at the time that he simply had allegiance to McKenna, an old family friend. That was coupled with his fears that Bentsen's substantial labor backing would inevitably drive him to the left.

After Bentsen beat McKenna, Bentsen waited for Lay to apologize for the flip-flop. He thought it was coming several months later when an Enron staffer called and asked if Lay could meet with him.

"Being the nice gentleman I am, I say, 'Sure. Come on over,'" Bentsen says with a chuckle. "So he comes in and sits down. I keep waiting for him to say, 'Oh, we had a disagreement, but you won, and we want to try and work with you.'"

According to Bentsen, Lay talked about the need for energy deregulation but never mentioned the election, as if it were some faux pas between friends unworthy of comment. In 1997, Bentsen received contributions of $1,000 each from Lay and his wife, and $500 from the Enron PAC and a Lay-hosted fund-raiser. All in all, it was an implicit apology that probably spoke more eloquently than anything Lay might have said face to face.

Enron and its leader went on to give a total of $45,000 to Bentsen in the '90s, the highest amount it contributed directly to any member of the House of Representatives.

Lay and Enron, in fact, became synonymous with political contributions and candidates, mostly Republican, who regularly made pilgrimages to Houston to fill up their campaign tanks.

Sue Walden remembers all the calls from officeholders requesting that Lay host Houston fund-raisers. "A lot of elected officials on the federal end think Houston is a cash cow because we have the oil and gas industry here and they want a way in. Especially those on oil and gas, natural resources, deregulation, those sorts of committees, would come to Enron and ask Ken to host an event.

"Ken would do it," Walden explains. "It's hard to say no to a sitting senator or congressman."

Eventually the feeding frenzy became too intense. Walden says she had to try to shield the chairman from the ceaseless demands. "I'd say, 'Ken is just overused on this right now; let's give him a break. Find someone else, and I'll get Enron to help.' We'd go that route. I'd try to protect Ken a little bit, because you can't go to the well too many times."

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