INVESTIGATION: As the US Justice Department opened a criminal investigation into the Enron bankruptcy yesterday, the White House disclosed that the head of the giant Texas energy firm, Mr Kenneth Lay, telephoned two senior Bush administration officials and gave them advance warning before the company collapsed last November.
Last night US Attorney General Mr John Ashcroft announced that he was distancing himself from the criminal investigation by his own department as he had received $25,000 (€28,008) from Mr Lay during his last election campaign.
The telephone calls to the White House raise questions about whether the officials to whom Mr Lay spoke, Treasury Secretary Mr Paul O'Neill and Commerce Secretary Mr Don Evans, properly handled sensitive inside information, as Enron's stock was plummeting and shareholders and creditors faced huge losses.
Mr Bush, whose presidential campaign was heavily financed by Mr Lay, took steps yesterday to distance himself from the investigation, which will centre on charges of accounting fraud.
The President told reporters yesterday he had ordered Mr O'Neill and Mr Evans to set up a working group to recommend reform of a system that allowed people "to lose their life savings" through bankruptcy. "One of the things that we're deeply concerned about is that there has been a wave of bankruptcies that have caused many workers to lose their pensions," he said.
Most of the 20,000 Enron workers lost everything after they were prevented from cashing in personal shareholdings in Enron or in company stock underpinning their pension funds, while top company officials were unloading hundreds of millions worth of stock, knowing that profits were being exaggerated.
Mr Bush said he had never discussed Enron's financial problems with Mr Lay and that he last saw the Enron chief executive in Houston, Texas in the spring.
White House press secretary Mr Ari Fleischer refused to answer questions yesterday about whether Mr Bush was briefed on the distress calls Mr Lay made to the White House or if he took part in any administration debate on whether to help out Enron.
Mr O'Neill and Mr Evans jointly decided they could not help the company, the spokesman said, adding that Congress should avoid "partisan witch hunts, endless investigations or fishing expeditions" into Republican Party ties to Enron, which also "gave thousands of dollars to Democrats".
Mr Lay and his wife Linda gave $883,000 in political contributions since 1989, of which 90 per cent went to Republicans, according to the unaligned Centre for Responsive Politics. The Centre for Public Integrity said that, of the 29 Enron executives named in a shareholder lawsuit, 24 made contributions totalling $800,000 to Mr Bush in the last two years.
When Mr Bush was governor of Texas, his close relationship with Mr Lay became the subject of controversy after Enron plants were exempted from a new state law requiring the installation of pollution-control technology.
The Enron boss also successfully lobbied Mr Bush for deregulation of Texas's electricity markets in 1999.
Mr Bush said the Enron head was among a group of 20 business leaders who came to the White House early in his administration to discuss the state of the economy. He added, "We did not meet personally." Vice-President Mr Dick Cheney revealed on Wednesday that he and his officials had held six meetings with Mr Lay last year to discuss energy policy.
Enron, the seventh-biggest US company before its bankruptcy, faces separate investigations by the US Labor Department and the Securities and Exchange Commission and by congressional committees.
