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Report: Rubin Didn’t Break Law for Enron

January 4, 2003

WASHINGTON (AP) _ Former Treasury Secretary Robert Rubin did not violate the law by seeking government intervention on Enron’s behalf as the company tumbled toward bankruptcy, a staff report by a Senate committee says.

A phone call to a Bush treasury official by Rubin, the former Clinton treasury chief who is a top executive of financial giant Citigroup, became a political issue a year ago as the White House worked to control fallout from a widening inquiry into Enron’s collapse.

Based on a staff investigation, ``it does not appear that Rubin violated any laws or regulations in ... proposing that the Treasury Department contact a credit-rating agency in connection with Enron’s rating,″ said the bipartisan report released Friday by the Senate Governmental Affairs Committee.

Houston-based Enron had ties to many top Bush administration officials, and its former chairman Kenneth Lay was one of President Bush’s biggest political contributors. The White House was buffeted by the disclosure last January that Lay had called Treasury Secretary Paul O’Neill, Commerce Secretary Donald Evans and Federal Reserve Chairman Alan Greenspan in the days leading up to what was then the biggest bankruptcy filing in U.S. history on Dec. 2, 2001.

Enron’s failure, which decimated the retirement savings of thousands of employees and hurt individual investors and pension funds nationwide, became the first in a series of big company scandals that shook public confidence in the stock market and the integrity of corporate America.

Several Republican lawmakers last summer asked the staff of the Senate committee to investigate Rubin’s Nov. 8, 2001, call to treasury’s undersecretary for domestic finance, Peter Fisher. The committee is headed by a Democrat, Sen. Joseph Lieberman of Connecticut, who is a likely presidential candidate in 2004 and has subpoenaed Bush White House records on contacts with Enron officials. The panel’s senior Republican, Sen. Fred Thompson of Tennessee, also approved the report.

At the time of Rubin’s call, Wall Street credit-rating agencies were poised to downgrade their assessments of Enron’s financial status.

Citigroup, the nation’s largest financial institution, was among a group of investment banks that had loaned hundreds of millions of dollars to Enron, hoping to keep it going so earlier loans would be repaid. Citigroup was said to be owed about $1 billion.

Citigroup investment banking executive Michael Carpenter asked Rubin to make the call, according to the report. It said Rubin suggested to Fisher that the Treasury Department ask Moody’s Investors Service, one of the rating agencies, to delay its downgrade of Enron.

If Treasury had done so _ Fisher never made such a call, telling Rubin he didn’t think it advisable _ that wouldn’t have violated any laws, the report said.

Rubin said previously through a spokesman that he had told Fisher that his rejection of the idea was reasonable. Rubin said he himself had prefaced the call to Fisher by saying, ``This may not be the best idea.″

Rubin spokeswoman Leah Johnson said Friday: ``This bipartisan report concludes there was nothing improper about this call and should put the matter to rest.″

Citigroup has been criticized by the Senate committee’s investigative panel, which said in a report released Thursday that it and another big investment bank, J.P. Morgan Chase, were active participants in Enron’s deceptive accounting _ helping it disguise loans as revenue-producing sales of assets.

The two banks have insisted that their executives believed they were engaging in lawful deals with Enron. Both, however, have said they would not engage in the same sort of transactions today.


On the Net:

The report is available on the committee’s Web site at http://www.senate.gov/(tilde)gov_affairs/010203enroncr.htm

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