- The Washington Times - Sunday, March 3, 2002

Precisely when did Howell Raines the newly appointed, reputedly hard-charging executive editor of the New York Times turn the newspaper's front page over to the PR department at Citigroup? Hard to say, but the love affair seems to be real. One recent story in the New York Times began with the observation that Mr. Rubin, a former treasury secretary in the Clinton administration, "has not abandoned his role as globe-traveling statesman." Get it? Statesman. Having established the diplomatic bona fides of Mr. Rubin, who now collects $800,000 per week as chairman of Citigroup's executive committee, the Times then ever-so-gingerly broached the understandably touchy subject of the tactics deployed by Mr. Rubin late last year in a telephone call to the highest-ranking Democrat in the Bush administration's Treasury Department.
On Nov. 8, Mr. Rubin called Peter Fisher, undersecretary for domestic finance, on behalf of the collapsing Enron Corp, which just happened to owe Citigroup an estimated $1 billion. According to a Treasury Department statement, which Mr. Rubin has confirmed, he beseeched Mr. Fisher to intercede for Enron's benefit with the credit-rating agencies, which were poised to downgrade Enron's debt to junk status. The debt downgrade would have forced the already-teetering Enron to make an immediate payment of hundreds of millions of dollars in debt, a development that would have then forced Enron to file for bankruptcy. To his everlasting credit, Mr. Fisher rejected Mr. Rubin's strong-arm tactics, and Enron's debt was appropriately downgraded.
Once bankrupt, of course, the unsecured debt Enron owed Citigroup would become worthless. But that's not all. At the very moment Mr. Rubin made his improper telephone call, Salomon Smith Barney, Citigroup's investment banking unit, was serving as an adviser to Enron for its proposed merger with Dynergy. Salomon would have shared nearly $100 million in investment-banking fees with J.P. Morgan if the merger were consummated.
In addition to the foregone merger fees, Citigroup stood to lose another $250 million from a very controversial loan it had extended to an increasingly desperate Enron in late October. As the Wall Street Journal reported, Citigroup agreed to contribute $600 million to a $1 billion loan package for Enron if the beleagured energy-trading firm promised to use $250 million of that cash infustion to pay off an unsecured debt for that amount owed to Citigroup and coming due in early December. In most bankruptcy cases, as the Journal noted, unsecured creditors closely examine all lending activity before the filing date to determine if any unsecured loan may have been unfairly given secure standing within 90 days of the bankruptcy. If so, a court challenge would surely follow. Now, if Mr. Rubin could have convinced Mr. Fisher to lobby the credit-rating agencies to delay their expected downgrades, Enron might have survived another 60 days, which would have protected Citigroup's grab for more debt.
Meanwhile, on Oct. 29 with Enron plunging into the abyss and Citigroup bankers attempting to unfairly secure their unsecured debt Raymond Niles, Salomon's director of its integrated power/gas research and analytical team, was hawking the merits of Enron stock in an interview with the Wall Street Transcript (TWST.com). Asked if there were any companies on his buy list that he would want to highlight, Mr. Niles responded by immediately naming Enron.
The Times reports that Mr. Rubin's call "inadvertently gave comfort to the White House and to some conservative commentators, who said it was evidence that it was a prominent Democrat, not Republicans, who backed a government rescue" of Enron. "Inadvertently"?What does that mean? Only after Republican cabinet officers told Enron Chairman Ken Lay that there would be no government rescue did Mr. Rubin mysteriously and utterly unethically enter the fray.
Had any former Republican treasury secretary done what Mr. Rubin did imagine former Merrill-Lynch chairman and Reagan administration Treasury Secretary Don Regan making a comparably lobbying contact with a Republican working in the Clinton administration's Treasury Department the Times would have considered it a scandalous breach of ethics. And rightly so. In his former capacity as editor of the Times' editorial page, where he really was a hard-charging enforcer of ethics, Mr. Raines might well have leveled the Golden Boy with a scathing editorial. Instead, newly implanted as executive editor, Mr. Howell gave Mr. Rubin the most undeserved smooch of the year.

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