- The Washington Times - Saturday, January 4, 2003

A Senate committee that this week accused Citigroup of complicity in Enron Corp.'s fraud on the public yesterday leveled no such charge at Citigroup's Vice Chairman, former Clinton administration Treasury Secretary Robert E. Rubin, who was exonerated of any wrongdoing for seeking government help in staving off Enron's bankruptcy.

The Senate Governmental Affairs Committee, headed by Sen. Joseph I. Lieberman of Connecticut, a likely Democratic presidential contender in 2004, concluded on Thursday that Citigroup as one of Enron's top lenders helped the energy giant hide its debts from investors.

Several Enron executives face criminal fraud charges for their part in the accounting deception, and various individuals at the bank are under investigation.

Yet yesterday, a committee staff report concluded that Mr. Rubin did not violate any laws in placing a November 2001 call to a top Treasury Department official asking him to delay a devastating downgrade of Enron by Moody's Investors Service that was pending because of concern about Enron's mounting debts.

The committee has criticized the credit agencies for not downgrading Enron sooner, thus helping the company perpetuate its deception of investors. But it said Moody's acted correctly at the time of Mr. Rubin's intervention about two weeks before a downgrade to "junk" status by Moody's precipitated Enron's collapse.

"This bipartisan report concludes there was nothing improper about this call and should put the matter to rest," Mr. Rubin's spokeswoman, Leah Johnson, told the Associated Press yesterday.

Republican lawmakers last summer asked for the report, which was released with the approval yesterday of the panel's senior Republican, Sen. Fred Thompson of Tennessee.

Mr. Rubin was never called to testify in the committee's extensive hearings on the Enron scandal although Mr. Lieberman and Sen. Carl Levin, chairman of the permanent subcommittee on investigations, subpoenaed many Bush aides and Republicans with ties to Enron. Mr. Lieberman said Mr. Rubin was not involved in the bank's decision-making on Enron.

In interviews with committee staffers, however, Citigroup officials said Mr. Rubin was kept informed about Enron's unfolding financial troubles during the fall of 2001 when he asked for Treasury's intervention, as was Citigroup Chairman Sanford Weill.

While not divulging how much he knew about Enron's debt problems and Citigroup's $1 billion of loans and other dealings with Enron, Mr. Rubin conceded that at the time he made the call to Treasury he knew what he was proposing was "a bad idea."

He said he was concerned, as a former Treasury chief, about the potential adverse reaction in the financial markets to Enron's collapse, and he doesn't regret making the call.

Mr. Rubin before becoming a top Citigroup executive had worked with Peter Fisher, Treasury undersecretary for domestic finance, in arranging a bailout of Long Term Capital Management, a hedge fund whose failure in 1998 caused severe turmoil in the financial markets.

The committee staff's investigation confirmed that Citigroup officials, with hundreds of millions of dollars in loans on the line, were hoping for a similar bailout of Enron. It found, for example, that they also lobbied the Federal Reserve's New York bank president, William McDonough, who helped engineer the Long Term Capital Management bailout.

Mr. Fisher said both his "head" and his "heart" told him to reject Mr. Rubin's suggestion, which he thought inappropriate and "extraordinary" enough to send a memo to Treasury's general counsel advising him of Mr. Rubin's call.

While Mr. Fisher said he did not feel pressured by the call, because he viewed himself as Mr. Rubin's "equal," he said he would have viewed a call to a more subordinate official at Treasury as inappropriate pressure.

Citigroup investment banking executive Michael Carpenter, who placed several calls to Mr. McDonough about Enron, asked Mr. Rubin to make the call, the report said.

While Mr. Fisher decided not to respond, the report concluded that even if he had done so, that would not have violated any laws prohibiting lobbying contacts by former government officials for one to two years after they leave office. Mr. Rubin left Treasury in 1999.

Houston-based Enron had ties to many top Bush officials. Former Chairman Kenneth Lay was one of President Bush's biggest political contributors. Mr. Lay also had numerous contacts with Mr. Rubin before and after he left government.

Mr. Rubin told the committee that his interest was "piqued" by Mr. Lay's offer to join Enron's board when he left Treasury, since Enron was the nation's foremost energy trader and Mr. Rubin once was a trader at Goldman Sachs & Co.

But Mr. Rubin had received 30 to 40 such offers and never seriously considered joining Enron, Mr. Rubin said. Mr. Lay later again asked him to join the board when Enron was failing in fall 2001, and Mr. Rubin again declined.

The White House was buffeted by the disclosure in January that Mr. Lay had called Treasury Secretary Paul H. O'Neill, Commerce Secretary Donald L. Evans and Federal Reserve Chairman Alan Greenspan in the days leading up to what was then the biggest bankruptcy filing in U.S. history on Dec. 2, 2001.

All the top government officials contacted refused to intervene, saying that would be inappropriate. Mr. Fisher said the administration determined that no widespread disruption of the financial or energy markets was likely if Enron suddenly collapsed.

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