Enron and corporate cronyism

Thursday, January 31, 2002

You think that this Bush administration was cozy with Enron? During the 1990s, when Enron was putting together the overseas deals that contributed to its collapse, the corporation had no better friend than Bill Clinton.

Clinton and Enron CEO Kenneth Lay first met in August 1993 in Vail, Colo., when Mack McLarty, Clinton's chief of staff, invited Lay to play golf with the president. McLarty had worked in the Texas energy industry, and he knew Lay well.

At that time, Enron had already begun efforts to build a $2.8 billion power plant in the state of Maharashtra in India, which would be the company's largest overseas project. During the next 18 months, Enron secured a $400 million loan from the U.S. government-subsidized Export-Import Bank, and when final negotiations with the state of Maharashtra stalled in January 1995, Commerce Secretary Ron Brown went to India with Lay to secure the contract. Clinton's energy secretary, Hazel O'Leary, directly contacted Prime Minister P.V. Narasimha Rao on Enron's behalf, according to a 1995 report in the New York Times.

Soon afterward, India awarded Enron the contract without soliciting other bids. The uproar from Maharashtra citizens was so great that they ousted the party that had approved the deal and voted in the Hindu nationalist Bharatiya Janata Party, which had run on an anti-Enron platform. The BJP had promised to investigate the alleged kickbacks to government officials, the environmental impact of the power plant and the artificially high prices the party said Enron would charge for electricity.

True to its word, BJP immediately stopped construction of the plant, putting Enron's enormous investment in jeopardy.

On Nov. 22, 1995, according to White House documents reviewed by Time magazine, Clinton scrawled an FYI note to McLarty, enclosing a newspaper article on Enron's problems with the India project.

"McLarty then reached out to Enron's chairman, Ken Lay, and over the next nine months closely monitored the project with the U.S. ambassador to New Delhi, keeping Lay informed of the administration's efforts," Time wrote.

BJP soon dropped its objections to the power plant. In June 1996, four days before India granted final approval, Enron gave $100,000 to the Democratic Party.

This was the same week that an Enron executive accompanied then-Commerce Secretary Mickey Kantor on a trade mission to Bosnia and Croatia. With Kantor's help in Croatia, Enron signed a memorandum of understanding to construct a $100 million power plant.

(McLarty later became a paid adviser to Enron, following in the footsteps of several officials who had served in the elder Bush's administration.)

The Clinton administration helped Enron in Mozambique, too. In 1995, Enron was negotiating for a joint venture with Mozambique's state-owned energy company. Clinton's national security adviser, Anthony Lake, wrote a letter to the Mozambique government on Enron's behalf, and the White House encouraged American diplomats there to help as well.

"Elements of the embassy did a bit of lobbying for the company, which I find a bit strange because this is a commercial agreement," Mozambique's minister of energy resources told the New York Times at the time. He said he was "told that other aid to Mozambique might be in jeopardy if this agreement was not signed."

A Clinton administration official told the Times, "It was a bit more nuanced than that."

During Clinton's first term in office, Enron and other companies given coveted seats on the Clinton administration's overseas trade missions collectively contributed $15 million to Democratic Party committees.

Clearly, the Bush administration was breaking no new ground in its back-scratching relationship with corporations that make large political donations. Virtually every president and member of Congress, regardless of party affiliation, comes into office with long lists of IOUs.

It's the way the system works.

So, I offer again these three little words: campaign-finance reform.

Joan Ryan writes a weekly column for Pilot-Tribune readers. She can be reached by e-mail at joanryan@sfgate.com.