The FBI investigation into Enron has reached into the Bush administration, with federal agents interviewing friends and former colleagues of US Army Secretary Thomas White, who was 11 years an Enron executive, on possible insider trading.
Mr White has become something of an embarrassment to the White House as he is also facing questions over his use of a Pentagon aircraft for personal business, namely making a side trip to Aspen, Colorado to complete the sale of a $6.5 million (€7.38 million) holiday home.
Mr White sold 400,000 shares of Enron for $12.1 million between June and October last year, and the FBI investigation centres on whether he asked for or used inside information on the deteriorating financial situation inside the now-bankrupt energy trader.
In the 10 months from the time he became a member of President George Bush's defence team until the company crashed on December 2nd in the biggest bankruptcy in history, Mr White had 73 contacts with Enron people, most in the last four months.
According to evidence he gave to Congressional officials, Mr White said he spoke to or met several top Enron executives, including then CEO Kenneth Lay, in September and October.
In October, as the financial condition of the Houston-based firm worsened, Mr White sold half his Enron stock for $3.08 million, the Wall Street Journal reported. He unloaded almost 100,000 more shares just before Enron disclosed that the Securities and Exchange Commission (SEC) had launched an investigation.
While the FBI investigation may clear Mr White, it is an uncomfortable reminder to electors of the extraordinarily close ties between the administration and the Texas company whose collapse hurt investors and employees and all but brought down its auditors, Arthur Andersen.
Mr Lay was Mr Bush's biggest single donor during his presidential election campaign, and Enron funded hundreds of members of Congress, the majority of them Republicans.
Mr White has said he never sold stock based on what anyone told him at Enron, and that the contacts were made out of concern for his friends and former colleagues. He has denied knowledge of the partnerships set up by Enron to inflate earnings.
The partnerships are being investigated to establish if they were part of a massive securities fraud at Enron. The FBI and the SEC are both seeking evidence of criminal wrongdoing in the case of one partnership called JEDI, the New York Times reported yesterday.
Videotapes meanwhile have surfaced showing how closely Enron was linked to its auditors. Enron's chief risk officer, Mr Richard Buy, is recorded as saying in one tape that "Arthur Andersen's penetration or involvement in the company is probably different than anything I've experienced," adding, "They are kind of everywhere and in everything."
• John Hancock Financial Services has filed a lawsuit against directors of Enron and its auditor Arthur Andersen, as the life insurer looks to claw back investment losses it suffered as the energy trader collapsed. John Hancock, with about $215 million invested in Enron, mostly in private debt, has sued 27 Enron directors.
