- The Washington Times - Wednesday, April 17, 2002

The FBI would have a hard time making an insider-trading case against Army Secretary Thomas White because he sold his Enron stock in the fall under a congressional deadline, former federal prosecutors said.

Mr. White, the highest-ranking former Enron executive in the Bush administration, has come under scrutiny because he sold more than half of his 405,710 shares in October at a time when Enron Corp. was in a death spiral and he was talking and meeting frequently with company executives.

While Mr. White has said the conversations were mostly personal, he has said he discussed the company's deteriorating finances in the calls, putting him in a position where he could have learned and acted on inside information.

The conversations with Enron Chairman Kenneth L. Lay and other top Enron officers were disclosed earlier this year, but news of the federal criminal investigation into possible insider trading came out yesterday in the Wall Street Journal.

Mr. White was required to divest all of his Enron stock within 90 days under an ethics agreement with the Senate Armed Services Committee to gain confirmation in May. The initial deadline was pushed back 90 days to Oct. 30 under an extension obtained by Mr. White.

Distracted by the war in Afghanistan and hoping for a resurgence in the stock, which declined steadily last year from a high of about $90, Mr. White ended up selling the bulk of his shares Oct. 30 just ahead of the Senate deadline and one day before Enron disclosed a formal Securities and Exchange Commission investigation of its finances.

"From the little we know, it would appear to be a tough case to make criminally," said Gregory J. Wallance, a former federal prosecutor in New York.

"The congressional deadline would appear at first glance to be an enormous complication," he said.

"I'm personally not aware of any insider-trading case brought where the defendant had an obligation imposed by law to sell the stock."

The government probably is looking into Mr. White's sales to show that it is leaving no stone unturned in its investigation into wrongdoing at Enron, he said.

"Given the controversy, the government has to look at this very closely," but Mr. White should not be under any pressure to resign unless the government produces convincing evidence of questionable dealings, he said.

To make a case in court, prosecutors would have to prove that Mr. White had some control over the timing of his stock sales and obtained exclusive information from the calls that he used to his advantage, Mr. Wallance said.

"What was said in those conversations, and did that affect the timing of those sales" are at issue, he said.

Mr. White has insisted that all he knew about Enron's problems was what he read in the newspapers, and it was the company's highly publicized worries that prompted him to call his friends at Enron and inquire about their welfare.

FBI agents in Houston have interviewed some of the current and former Enron executives Mr. White called. Some have corroborated his account.

Mr. White has said he did not profit from the sales, but rather lost money by waiting too long.

By contrast, Karl Rove, President Bush's top political adviser, fared much better because he sold his Enron shares early, on June 7, when the stock was at $50. The stock had fallen to $16 by the time Mr. White dumped most of his shares, and it stands at less than $1 today.

Mr. White forfeited his Enron stock options in January because they had become worthless.

"It's hard to see where they're going with this" in light of the big losses Mr. White sustained and his obligation to sell the stock, said Frank Velie, a former federal prosecutor at Salans law firm in New York.

The congressional deadline "seems the most likely explanation for his trades," he said.

However, prosecutors might view the mere confirmation by a company insider of information Mr. White read in the newspaper such as news of the SEC's preliminary inquiry in early October as "inside information" that makes the sales suspect, Mr. Velie said.

"They would be criticized if they did not try to know more about the facts surrounding a lot of sales by a prominent public official," he said. "But it's far too early to draw any conclusions."

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