The Democrats were dragged into the growing Enron scandal yesterday as it emerged that Robert Rubin, Bill Clinton's Treasury Secretary, contacted a top official at his old department to find out if the Bush administration could step in to help the energy group.
Mr Rubin made his call last November to Peter Fisher, head of the Treasury's domestic finance section, in his current capacity as chairman of Citigroup, one of the main creditors of Enron. A month later the company went bankrupt in the biggest financial collapse in modern US history.
Mr Rubin was one of the most admired members of the Clinton team, and his involvement will dent Democratic efforts to turn the affair into a new Whitewater. "This could be a flu shot for Bush," one observer said. "This could inoculate him from the worst of the scandal."
The debacle of what was once the seventh largest US corporation has caused great embarrassment for the White House because of the close ties of Enron's chief, Kenneth Lay, with President George Bush.
Since 1994, the company donated almost $600,000 (£430,000) to the president's various campaigns, and helped to cover the costs of both the recount battle and his inauguration gala. In return the company has had a major influence on the Bush energy strategy, successfully pressing for greater deregulation.
But though three quarters of Enron's $5.8m of political donations since 1990 went to Republicans, Democrats too were beneficiaries. The investment paid off when Congress exempted Enron's key energy trading activities from a bill overhauling federal oversight of commodity markets.
In his call to the Treasury, Mr Rubin asked Mr Fisher about the possibility of pressing the bond-rating agencies not to lower their estimate of Enron bonds – and thus provoke a crisis of confidence in the group. According to the Treasury Department yesterday, Mr Fisher opposed the idea. Subsequently, agencies did indeed slash their assessment of Enron's creditworthiness, triggering its demise.
The latest disclosure capped three days of turmoil. First, details emerged of numerous calls by Mr Lay to senior Bush officials last autumn, telling them of Enron's growing problems. Hours later John Ashcroft, Attorney General and thus head of the Justice Department, which is now conducting a criminal probe of Enron, formally took himself out of the case, admitting he had taken $60,000 of Enron donations in his failed 2000 campaign to retain his Senate seat.
But the biggest bombshell was the confession by the Arthur Andersen accounting firm, which audits Enron, that it had destroyed many documents relating to the audit. Andersen was already under fierce criticism for failing to detect the private partnerships into which Enron executives had shunted millions of dollars of debt to keep them off the main balance sheet.Reuse content