Enron's Lay Touted
Shares To Employees


WASHINGTON (Reuters) - Enron Corp. Chairman Kenneth Lay told employees the company's stock was "an incredible bargain" just weeks before the energy trader imploded, Reuters learned on Friday, as Democrats attempted to tar Republicans with guilt by association with Enron in an election year.
"My personal belief is that Enron stock is an incredible bargain at current prices and we will look back a couple of years from now and see the great opportunity that we currently have," Lay wrote on Sept. 26 on Enron's "ethink" intranet chat site, according to a transcript obtained by Reuters.
Enron filed for the biggest bankruptcy in U.S. history on Dec. 2, wiping out 5,000 jobs and leaving investors -- including many Enron employees persuaded to stock up on Enron stock for their pension funds -- holding nearly worthless shares in the once-giant energy trader.
Adding to the potentially damaging political revelations, the White House disclosed on Friday that Vice President Dick Cheney intervened with Indian officials last year as part of an effort to salvage a troubled Enron power project in India.
The administration said Cheney's outreach on behalf of Enron, President Bush's biggest political patron, was justified since the $2.9 billion Dabhol power project was financed in part through the U.S. government's Overseas Private Investment Corporation (OPIC).
OPIC provides "political risk" insurance and loans to help U.S. companies invest in developing nations.
Also on Friday, a former Enron executive resigned as chairman of the Texas Public Utility Commission amid concerns his ties to the scandal-tainted company could hurt Republican Gov. Rick Perry. Max Yzaguirre, who held various positions at Enron including head of its Mexican operations, said he was stepping down because of "politically inspired" attacks.
Democrats are using close ties between Bush administration officials and Enron in an election-year attempt to charge then with guilt by association in the Enron scandal, but Republican operatives say the accusations will not stand up.
"People are trying to make that connection," Jack Oliver, deputy chairman of the Republican national committee, told reporters at the party's winter meeting in Austin. "Enron is not a political issue. Enron is an issue of trying to solve problems so they never happen again in the future."
Democrats are seeking to portray the collapse of Enron as representative of an irresponsible corporate culture closely tied to Republicans and emblematic of poor financial management echoed in a vanishing federal budget surplus.
Underscoring the appearance of close ties to Enron, Marc Racicot, a former Montana governor who lobbied for Enron last year, took over on Friday as chairman of the Republican National Committee, the national party organization.
The Enron debacle, "gives Democrats an important rhetorical tool," said Democratic party spokeswoman Jennifer Palmieri.
"Enron is shorthand for what's wrong with the way Republicans run fiscal policy. They run fiscal policy like they (Enron) ran their business," she said. "The Bush administration cooks their books (and) and they don't worry enough about the human side of the ledger."
The debate may be a key issue in the battle for control of the U.S. Congress in November elections. Democrats hope to win the six seats needed to capture the House of Representatives and protect their slim 50-49 hold over the Senate, which has one independent member.
In a succession of statements in the "ethink" transcript, Lay reassured Enron workers the Houston-based company was safe and sound, even as it teetered on the brink of collapse.
The transcript was provided to Reuters by Eli Gottesdiener, who heads a Washington law firm that is suing Enron on behalf of Enron employees who had 401(k) retirement accounts. He said obtained the transcript from a fired Enron manager who is now a client and involved in the Enron legal action.
"How he could do this in good conscience is anybody's guess. This is unconscionable," said Gottesdiener. Ethink was a no-holds-barred internal Enron site where employees could ask top executives questions, said Eric Thode, an Enron spokesman in Houston. Thode said the transcript was authentic, but declined comment on Lay's remarks.
In one passage of the ethink transcript, an Enron employee asked Lay about the company's heavy use of special-purpose vehicles (SPVs), or outside partnerships, in its finances and the role of the company's long-time auditor, the Big Five accounting firm Arthur Andersen, in reviewing the vehicles.
Lay replied: "In many cases, not only has the local Arthur Andersen office approved these vehicles, but they have also been approved at Arthur Andersen's headquarter office from some of the world's leading experts on these types of financing."
On Thursday, Enron fired Andersen as its auditor. The firing came two days after Andersen said it had fired the lead partner in charge of its Enron audits, whom it said ordered audit-related documents to be destroyed after learning that they were being sought by federal agents.
Eight congressional committees, the Justice Department, the Securities and Exchange Commission and the Labor Department are investigating Enron and combing mountains of documents.
The White House on Friday estimated OPIC's exposure to the Indian power project at $160 million in loans and $180 million in risk insurance. Separately, the U.S. Export-Import Bank made $300 million in direct loans to the plant.
White House spokesman Ari Fleischer said interventions such as Cheney's were commonplace and noted former President Bill Clinton's commerce secretaries had made similar appeals on behalf of Dabhol during various phases of its development.
In each case, "It was done because they thought it was in America's national interest to do it," Fleischer said.
Lay has close ties with Bush and the Republican party. The company has been a major supporter of Bush's political career, making about $623,000 in contributions to his campaigns since 1993. It has made some $5.8 million in campaign donations since 1989, 73 percent to Republicans.
Enron officials had six meetings last year with Vice President Dick Cheney or his energy policy staff. Bush's top economic adviser, Lawrence Lindsy, has served as a consultant and adviser to Enron, and Enron officials sought help from the administration as the company's financial problems mounted.
But the administration rejected Enron's appeals, which supporters cite as its strongest defense.

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