Enron, D.C.

The Senate Governmental Affairs Committee opens its inquiry tomorrow on the Enron affair; the House Energy and Commerce Committee resumes its inquiry begun last month. Eventually, at least seven and perhaps as many as 10 congressional committees may look into how the nation’s largest bankruptcy occurred, how it seemed to hurt everyone but the corporate executives who caused it and how the system of safeguards designed to protect investors and employees so utterly failed.

This daunting task is made even more difficult by the degree to which Enron bought Washington. Since 1989, the company gave nearly $6 million to the two parties, it wrote campaign checks to three-fourths of current senators and to nearly half of the House, it put congressional spouses and former staffers on its generous payroll. Although it may be months before the full inventory of what Enron got for its investment is known, it is painfully clear that a lack of oversight was paid for and delivered – the company staged a determined campaign the last five years to exempt its energy-trading activities from federal regulation and in that it was extraordinarily successful.

The nutshell version of what happened when Enron was allowed to operate in the dark is that the fast-growing company rang up enormous debt and hid it in more than a thousand shell companies, thus making its own financial condition look good when, in fact, it was bad. Top executives cashed in their stock options – more than $1 billion worth – while deceived investors and employees lost more than $60 billion. Independent auditors are supposed to keep companies honest; in this case, Arthur Andersen looked the other way. The Securities and Exchange Commission, headed by a former Andersen lawyer, is the federal agency charged with keeping the market on the level and should have been alarmed at the massive stock sales by executives but wasn’t. Even the Internal Revenue Service, theoretically the ultimate independent auditor, saw nothing amiss when one of capitalism’s great success stories paid no income taxes four of the last five years.

Attorney General John Ashcroft has recused himself from the criminal investigation because as a senator he accepted more than $57,000 of Enron’s money. Nearly the entire United States attorney’s office in Houston, Enron’s hometown, has removed itself from the case due to similar connections. These are proper actions, given the Justice Department’s responsibility to prosecute crime.

Congress, however, does not prosecute crime; it conducts hearings, it compels testimony under oath, it makes its inquiries open to the public. The call for massive recusals among Congress is understandable but unnecessary and possibly counterproductive. Members of Congress who say campaign contributions do not buy legislation must not now be relieved of the responsibility to prove it in public through tough questioning and decisive action. Republicans worried that the Senate hearings will become a forum in which to make the Enron scandal their president’s scandal should be especially wary of widespread recusal; the deregulation of Enron took place, after all, under a Democratic administration and the Democratic lawmakers who were part of it should not sit out the day of reckoning.

The errors of the previous administration do not, however, absolve the current one. It is not nearly enough for President Bush and his team to say they flatly rejected Enron’s request for help, as if its role in preventing this financial calamity were limited to a couple of polite but firm refusals on the telephone. If anyone in the administration knew of the ongoing deception that allowed Enron executives to get rich while investors and employees got soaked, the president must hold those who knew accountable. Likewise, the president must drop his objections to making public Enron’s role in the development of his energy policy – any promises of confidentiality to participants in the Cheney task force become null and void when those participants are revealed as frauds.

The hearings, and all the peripheral speeches and press conferences, will be intensely partisan. That’s understandable. The very foundation of our free market system – the presumption of honesty toward investors – has been weakened and no empty promises of bipartisan cooperation will fix it. Enron bought what the legislative and executive branches of government willingly sold. Now it’s payback time.