FTN - 2/10/02

BOB SCHIEFFER, Chief Washington Correspondent: Today on Face the Nation, the Enron scandal.

Enron chairman Ken Lay is scheduled to testify before Congress this week. The big question, will he take the Fifth, as some of the other executives before him have done?

Or will he tell us what he knew about the demise of the company? Is it time for a special counsel to look into the matter?

We'll ask Democratic Senator Fritz Hollings, chairman of the Commerce Committee, which is holding hearings; and two Republicans leading the investigation in the House, Congressmen Billy Tauzin and Jim Greenwood.

Gloria Borger will be here, and I'll have a final word on volunteers. But first, the Enron scandal on Face the Nation.

And good morning again. We begin in Washington with Senator Hollings.

Senator Hollings, that's the big question. Is Ken Lay going to talk, or is he going to take the Fifth? Do you have any advance formation?

SEN. ERNEST HOLLINGS, D-S.C.: We don't have any advance information at the committee, but Lay has got a good lawyer. He didn't let him testify last Monday. And I can't see, with things having gotten worse all week long, him testifying now this Tuesday morning when he is due to come. And they say he is still coming, but I don't believe it.

SCHIEFFER: Senator Hollings, do you think -- you've watched these hearings going on on your side of the Senate and in the House of Representatives. Do you think criminal acts have been committed here?

HOLLINGS: I don't know. And the main thing to do is to have an objective, one with integrity, kind of investigation like Archibald Cox put on.

And for one thing, over there at the Justice Department, you've got the attorney general. He got some $38,000 in his campaign, I think it was, out there in Missouri.

So, John Ashcroft has recused himself, his chief of staff has, and given it to Larry Thompson. But it so happens we know Mr. Thompson. He is an outstanding individual, but he's in charge of the counter terrorism program there at Justice. He's got his hands filled. And to give him this particular assignment, when he served in the law firm that represented both Enron and Andersen, the auditor, I think, is a mistake because then anything he does then later on after months comes out, they'll say, "Well, that's the only reason he didn't find this or didn't do that."

SCHIEFFER: I think we should point out the Republicans say that, while it was his law firm that represented Enron, that he had no connection to the case himself.

HOLLINGS: It's just a tent, but it shouldn't even have just a tent.

SCHIEFFER: What you seem to be saying, and what you've called for, is an independent counsel. Do you think that's the only way you can do this? Do you think the Justice Department is, in fact, incapable of doing this?

HOLLINGS: Oh, it's not about the capabilities. It's the capability of us to beieve it, to have that report, you know, have credibility when it's given, that's all.

I'm not for crime or against crime. I'm for the report itself being done right and being accepted by everybody.

GLORIA BORGER, U.S. News & World Report: Last week you also said some things that Republicans challenged quite strongly. You said that the Office of Management and Budget Director Mitch Daniels and the Treasury Secretary Paul O'Neill had been on the Enron payroll. They said that's not true.

And the White House press secretary said, and let me read you this quote, Ari Fleischer said, quote, "It's not helpful if a U.S. senator simply makes things up."

How do you respond to that?

HOLLINGS: No, what happened was with Mitch Daniels, now he worked for Eli Lilly. And who was on the Eli Lilly board? Ken Lay. He worked for years with Ken Lay. And I meant to say that Mitch Daniels was on the Ken Lay payroll rather than the Enron payroll.

BORGER: What about the secretary of the treasury?

HOLLINGS: I don't remember saying that about the secretary of treasury, because I don't remember his connection at all. I had notes, and they're pretty accurate, but I don't remember that one.

BORGER: Well, are you saying then that the Republican Party has much more of a tie to this, and that this is then a political scandal rather than a business scandal?

HOLLINGS: Well, it's a big political scandal. And I look on it as an opportunity to finally get on top of this corruption of money in politics. Go right to the point.

Ken Lay is the poster child for cash-and-carry government. Where is the cash? He gave all of this money to President Reagan--of course he gave to 186 house members and 71 senators and $3,500 to this senator. But he was the biggest contributor, some $700,000 to the presidential race. He gave money for the inaugural, money for the campaign, money for the recount down in Florida. So there's money galore, the cash there.

Where is the carry? President Bush let Ken Lay handpick the chairman of the Federal Election Regulatory Commission. This fellow, Lay, propositioned the then-chairman, Curtis Aber was his name. And he said, look, if you'll go along with these Enron policies on energy, then we'll keep you in there, and Mr. Aber said no.

So, they handpicked then Mr. Pat Wood, who was, incidentally, Ken Lay's handpicked choice down in the Texas Utilities Commission.

And what does Pat Wood do? Let's see what he's doing now. He is investigating, for example, the price caps, whether or not there was gouging out there in California during that energy crisis. And who's against price caps? Vice President Cheney.

Yes, Ken Lay called the vice president. The next day, the vice president calls the Los Angeles Times and says I'm against those price caps. You can bet your boots Mr. Woods is not going to find any price caps.

And go further, he could get into Vice President Cheney, Ke Lay could, because he had given all this money. How about the senator from California?

She called three times for a meeting with the vice president, couldn't get one. Tell Dianne Feinstein, next time, send a contribution.

SCHIEFFER: Just to correct the record, you misspoke. You said the federal election regulatory.

HOLLINGS: I meant Federal Energy Regulatory Commission, I'm sorry.

BORGER: But when Ken Lay called and asked for help from Secretary O'Neill and Secretary Evans at the Commerce Department, the White House would respond to and say he did not get what he wanted.

HOLLINGS: May not have then but when he called, for example, Daniels, who had worked for him, he called him on the stimulus bill. And the next thing you know, he wanted to do away with the corporate minimum tax. And the stimulus bill comes out, and it's done away with retroactively, giving a windfall of $254 million to the Enron.

And not only that, we've got Enron auditing practices now and budget practices. When Mr. Daniels appeared before the Budget Committee, he testified -- "Wait a minute now," he says, "the president's got $106 billion deficit in this budget he's submitting." I said, "No, no, Mr. Daniels, look on page 417. The deficit in the president's budget is $367 billion." He said, "Oh, yes, we hid it, but you found it."

Now you've got Enron accounting in the thing. And you could go to the many other things that...

SCHIEFFER: Well, let me just ask you this.

HOLLINGS: Yes.

SCHIEFFER: You say the administration got something for -- that Enron got something from the administration from their contributions. Did they get anything from Democrats? Because they contributed to a lot of Democrats.

HOLLINGS: I would imagine so. I don't know, but I tell you right now, this is in the public domain. And if we can find out about the Democrats, fine business. But we can certainly find out, now that the investigations are going on, what they got with respect to the secretary of the Army. He's hastening the contracts for the Army to go to privatization.

We got, with respect to Arthur Levitt, he tried to cut out the conflicts. Who's in charge now of the conflicts? The fellow who opposed Arthur Levitt, Harvey Pitt, as appointed by President Bush, is the chairman of the Securities Commission. And already Business Week, it says: Pitt is soft on reform, weak on reform, I think it was, and still has conflicts of interest.

SCHIEFFER: You heard Jeffrey Skilling testify before the House committee last week. He was the CEO. He said he didn't see anything improper, that, while he was there, he doesn't know of anything that went wrong. Do you think he was telling the truth?

HOLLINGS: No. No, nobody does think he was telling the truth. I don't believe he thinks so. No, you can't come there with all that -- they were out selling everything that they had done. Now they're sellng everything that they can't remember. Come on.

BORGER: Do you think at some point, in order to get to the bottom of this, Senator, that you are going to have to offer someone high up in Enron some immunity?

HOLLINGS: It could be. I hope we don't grant any immunity at the congressional side and they go with a thorough investigation.

BORGER: So you don't see that happening in Congress?

HOLLINGS: I don't see that happening, no.

SCHIEFFER: Do you think that Enron was the exception rather than the rule in business?

HOLLINGS: Oh no, no, you can read the morning papers and you can see what's been going on, and it hasn't been just with us politicians. It's been with journalists, pundits, consultants, everybody getting all of this money. It's political corruption, what's money done to politics.

And you can go right to the matter of the offshore tax havens. Here Enron had 874 of them. Now our friend, Larry Summers, who's now the president of Harvard University, he was the secretary of treasury, and he'd gotten together 30 countries, and they were going to outlaw these offshore tax havens where bin Laden and the terrorists hid their money, and Enron and 874 hid its money.

And so who's opposing him? Why none other than Larry Lindsey, who President Bush appoints as the chairman of his national economic council. And even though we had a bill in the House that had already been reported out 30 to 1 -- 31 to 1, by gosh, the first thing they do last April is cancel it out, that particular effort. Now 9/11 comes, now they said they're starting it back up.

SCHIEFFER: Senator, we could go on. We'll be watching those hearings next week.

Thank you so much for being with us this morning.

HOLLINGS: Thank you.

SCHIEFFER: When we come back, more on the Enron scandal. We'll talk to two Republicans.

(COMMERCIAL BREAK)

SCHIEFFER: We continue the Enron discussion. Joining us from New Orleans, the chairman of the House Energy and Commerce Committee, Billy Tauzin; in Washington, Jim Greenwood, the chairman of the House Energy Subcommittee on Oversight and Investigations.

Gentlemen, thank you for coming.

Of course they have been leading the investigation on the House side.

Chairman Tauzin, let me start first with you. You just heard Senator Hollings say this is, quote, "a big political scandal." Is that the way you view it?

REP. BILLY TAUZIN. R-LA: Well, I've never heard so many conspiracy theories rolled up into one in my life. If you listen to Senator Hollings, I think Osama bin Laden was working for Enron on the Eli Lilly board or something. I'm not sure how he put all that together.

No, this is primarily a scandal of corporate greed and corruption, the likes of which I've never seen in any corporation in America. You can tie it in, if you want, to campaign finance and make all those arguments that Mr. Hollings does.

But the fact of the matter is that these were inside thieves operating without fear that they'd get caught, and stealing millions and millions of dollars from a corporation and leaving it bankrupt.

It's like the bank president and the janitor and the teller got together at night and robbed the bank, when everybody was sleeping. It's a terrible story, but I think it's a big aberration in corporate behavior in America.

SCHIEFFER: Chairman Greenwood, you were there. Mr. Skilling testified before you.

REP. JIM GREENWOOD, R- PA: Right.

SCHIEFFER: We all heard him say, gosh, I didn't know about any of it, there was nothing improper happen. Let me just ask you a flat question. Did you believe him?

GREENWOOD: I wanted to. You know, when he came on, he was so earnest, and talked about the fact that his best friend had committed suicide and he wanted to be open. And, you know, he came without need of a subpoena, he didn't take the Fifth, and I wanted to believe him.

But, after that, he became non-credible. It was, the dog ate my homework. And there was a poignant moment when we had the current CEO and president, Mr. McMahon, versus Skilling's testimony. McMahon says, "I went in there and said, boss, this is killing me. I'm in an untenable position, it's stretching my credibility, my integrity. You have to fix this system. This company is going down the tubes." And Skilling can barely remember that conversation happening.

And so, unfortunately, I don't think he was forthcoming with us at all.

SCHIEFFER: Did you believe him, Chairman Tauzin?

TAUZIN: Not at all. I mean, in the end, when you -- as Jim said, as much as you wanted to believe the guy was going to come and tell us the truth voluntarily, and then he was totally incredible. I mean, he was out of the room, the power was out, he never got the memo. Three different attempts by Mr. Mintz to ask him to sign these documents, and he doesn't even remember seeing the documents. He doesn't know what they look like, what they contained.

This is the guy who was in charge of the corporation, Bob. To believe that, you would have to believe that every time you get in a cab, the cab-driver is not really driving the car. It's just incredible.

BORGER: Well, Congressman, let me just ask you, why do you think Mr. Skilling risked testifying before the committee?

TAUZIN: All the information we got was that he really thought he was smarter than everybody in Washington, that he could come and just, you know, flamboozle us, just tell us anything he wanted, and we would buy it. I'm afraid he may have put himself in some legal jeopardy as a result.

BORGER: Congressman Greenwood, Congressman Tauzin has said that this Enron case is a corporate aberration. Do you see it as an aberration or something more widespread?

GREENWOOD: I think the good news is this is not something we've seen all over corporat America, and that tends to make me think this is somewhat of an anomaly.

But the other side of that story is the roach theory, where if you see one, there are probably others under the baseboard.

I think this gives us an opportunity to take a look at corporate governance, to take a look at the accounting processes in this country. It could be a wonderful opportunity for change.

What we need not be is the keystone cops now where as soon as we've got this opportunity to fix campaign finance, to fix corporate governance, we start shooting at each other, Republicans and Democrats. Americans are sick of that, I think.

SCHIEFFER: Let me go back to Chairman Tauzin, I just want to ask you a follow-up.

You said that you think that Mr. Skilling may have put himself in some legal jeopardy. What do you mean, Congressman?

TAUZIN: Well, you can't come to Congress, take the oath to tell the truth, and then not tell the truth without some problems.

And, you know, I think ABC interviewed his administrative secretary yesterday, and she said that he absolutely told untruths. That, in fact, he did know about the deals. He knew them intricately. That he did know about the fact that these papers were to be signed by him, that he was supposed to sign these approval forms, and that he didn't sign them. He did know about the memo.

In effect, we're hearing from others in the corporation that he came to us and told us a lot of untruths. If he did that, if that is true, there are some consequences to that. And I think he may be in some difficulty.

SCHIEFFER: Well, you're saying he may be indicted for perjury?

TAUZIN: Well, that could happen. I mean you can't come to Congress, whether under subpoena or voluntarily, take that oath as he did in front of Jim Greenwood, and then not tell the truth.

If you are going to come and talk to us without the benefit of the Fifth Amendment, you are obliged to tell the truth. And as Jim said, we thought he would do that. All of us wanted to know the truth, and I don't think we got it. He could have some real problems.

SCHIEFFER: What do we need to know now, Chairman Greenwood?

GREENWOOD: Well, I think, frankly, we need to know how much of this debacle that has caused so much pain to not only the 4,000 employees of Enron, but to investors all over the country, undermined the credibility of our whole free market system, how much was actually what they did was legal? Because we have to find out what was legal and make it illegal.

And as I said, this is a great opportunity for significant reforms to restore the confidence of the American investor in our whole system.

BORGER: Congressman Tauzin, are you interested in setting up sort of one special committee in Congress so that you can investigate this without having 10 committees on both sides looking into this? The American public can focus on just one group.

TAUZIN: Well, e're going to get to the bottom of this pretty quickly, I think. I've asked Jim Greenwood to carry on his subcommittee hearings -- and he has done a great job, by the way, for the American public -- and then to give me a report.

What I want to do is turn a corner. I want to do what Jim is talking about. I want to see if we can change some laws, change some policies, make some corrections to make sure that other corporations don't behave liken Enron; that Americans can have the confidence when an analyst says that a company is making or losing money, to believe them again. That's critical for our markets.

And whether Enron is a total aberration or there's another company or two like it, we need to make sure that the vast majority of American corporations behave better than this.

BORGER: Well, do you intend to investigate Wall Street, as you were talking about last week?

TAUZIN: Well, if you notice, this week Wall Street came out with some new recommendations; that corporate bankers and analysts eliminate the conflicts of interests that exist today. Stock analysts, they're not really analysts, their stock promoters. And we need to know the difference. There is too much of a coziness between the banker funding the deal and the analyst recommending the deal to the rest of us who invest. And changes are being recommended there as well.

We need better accounting standards. We certainly need better standards for boards of directors. What we saw this week, I think Jim will agree with me, was a total failure of the board of directors system to ask the right questions at the right time and to make sure the corporation was behaving.

GREENWOOD: I also think it is an opportunity for the business schools of this country to take a look at how they're teaching ethics, if they're teaching ethics, to be able to produce out of the Whartons and Harvard, et cetera, these geniuses, these masters of the universe, who can manipulate the market so well, and then have them come out without what appears to be a shred of decency, a sense of ethics, a sense of obligation to their employees and to the investors, is pitiful.

SCHIEFFER: Let me ask both of you. Of course, we all know about Congress asking the White House and the vice president for records of the meetings that they have.

Chairman Greenwood, should the White House turn over those records? Do they have something to hide?

GREENWOOD: The first thing I think is important is that, in all of the thousands of documents that we've looked at, all of the interviews that we've conducted, the testimony we've taken, there is zero linkage that's been -- I've been able to identify between the Enron collapse and the White House.

Now there's a separate issue, and it has to do with the energy policy. There is a long tradition, goes back to the beginning of this nation, of conflict between the Congress and the presidency with regard to executive privilege. Tey usually get sorted out in the courts, and I think that will happen here, too.

I think our first instinct is always, of course, we want all of the information to be forthcoming, open everything up. But in this instance, I think the president is protecting this issue of privilege, and it needs to be settled in the courts.

SCHIEFFER: So you're willing to just let it be settled in court.

Mr. Tauzin, I understand you think they probably ought to just go ahead and turn it over.

TAUZIN: Yes. I mean what's being asked for is the names and dates and the times of the meetings. They ought to give that up. I mean, the confidentiality of the advice, you fight to protect that. The president's entitled to get advice without necessarily compromising. I understand that.

But you know, who was there and who was invited, who was on the task force? Those are the--that's the kind of information we asked Hillary Clinton to give up when she had her health care task force. I think that ought to be given up, and I think it will in due course.

But as to defending the executive privilege on getting confidential advice, certainly they have a right to defend that in court. And the courts will make a decision on that.

SCHIEFFER: We have about 30 seconds left.

Congressman Tauzin, do you think campaign finance reform will pass?

TAUZIN: Of course.

SCHIEFFER: You do?

TAUZIN: Yes. I mean Enron has sort of added, you know, fuel to the flames that people want campaign finance reform. And I think everyone in Congress wants to see a bill passed.

The fight we're having is over the terms of it and whether or not it's a fair term. My only complaint with the bill as it's now written is that it forbids outside groups to speak during an election in the last 60 days.

GREENWOOD: I pray that it will pass.

TAUZIN: That violates the First Amendment.

SCHIEFFER: All right.

GREENWOOD: I pray that it will pass.

SCHIEFFER: We have to leave it there. Thanks to both of you. Very interesting discussion.

Back in a minute with a final word.

(COMMERCIAL BREAK)

SCHIEFFER: Finally today, the other night the president urged people who want to join the war on terrorism to join the Peace Corps and other volunteer organizations.

It is a great idea, but here's why I won't be elected president. I would ask Congress to pass a law making it mandatory that everyone at age 18 would be required to give one year of service to the country. Just a year, in the military or teaching or at a hospital or in the Peace Corps.

When I was coming up, we didn't have a choice. It was, be drafted into the Army for two years or take ROTC in college and spend three years in the service as an officer.

I chose Air Force ROTC, not for noble reasons. Because it was a better deal is why I chose it than two years as an Army grunt.

But it was the best thin I ever did. I did things I would have never done, and I was thrown together with people from every corner and every walk of America.

I thought about that as a watched the Enron hotshots explain their financial expertise to Congress last week. They all went to the best schools. But I wondered if they might have been more sensitive to their workers if they had been exposed to the cross section of Americans they might have met in a draft Army.

In ROTC we were taught that a leader's first responsibility is to his people. Were the Enron officers thinking of their people, the shareholders and the Enron workers? Did they even know any of the workers who lost their life's savings? Or did they follow the farmer's rule; don't name an animal you may have to eat?

We'll never see the draft again. But we need to find a way to bring young people from every strata of America together. The draft did that. It helped us to know each other and to know the pride that only comes when we feel we've been part of making something better. The draft forced those lessons on my generation.

I don't know if the country benefited from my small service, but I sure did.

Well, that's it for us. We'll see you next week, right here on Face the Nation.

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