- The news this morning for Citigroup, Inc., one of
Enron's largest creditors, is bad.
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- The New York Times reports that "senior credit
officers of Citigroup misrepresented the full nature of a 1999
transaction with Enron in the records of the deal so that Enron could
ignore accounting requirements and hide its true financial condition,
according to internal bank documents and government investigators."
The Wall Street Journal reports that Enron "marketed similarly
structured deals to a slew of other companies." And yesterday, the
Washington Post reported that Citigroup, along with J. P. Morgan Chase
& Co., "transferred billions of dollars to Enron ... in recent
years in what amounted to loans that Houston energy trader concealed
as it struggled to survive."
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- Given the central role played by Citigroup in
concealing Enron's debt from investors, the general public, and
government regulators, why, then, hasn't former Clinton treasury
secretary, Robert Rubin, now the chairman of Citigroup's executive
committee, been called to testify before Congress? In particular, why
hasn't the chairman of the Senate Governmental Affairs Committee,
Senator Joseph Lieberman, sought Rubin's testimony? After all,
Lieberman is heading up the Senate's investigation into Enron's
bankruptcy and fraudulent dealings.
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- And there's ample reason to hear from Rubin. In
addition to this week's disclosures about Citigroup's assistance in
cooking Enron's books, during Enron's final days Rubin played a direct
role in attempting to conceal Enron's financial condition from
credit-rating agencies. Specifically, on November 8, 2001, Rubin made
a telephone call to Peter Fisher, the Treasury Department's
undersecretary for domestic finance, seeking Fisher's intervention
with Wall Street credit-rating agencies on behalf of Enron when those
agencies were about to downgrade Enron's ratings.
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- As reported on January 12, 2002 by the Associated
Press, according to Treasury Department spokeswoman Michele Davis:
"Rubin asked Fisher what he thought of the idea of Fisher placing a
call to rating agencies to encourage them to work with Enron's bankers
to see if there was an alternative to an immediate downgrade. Fisher
responded that he didn't think it advisable to make such a call. Rubin
said he thought that was a reasonable position. Fisher made no such
call."
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- Rubin's spokesman, Michael Schlein, told AP that
Fisher's characterization of the phone call was "largely accurate." He
added that Rubin "had prefaced the call by saying, 'This may not be
the best idea,' and in the end agreed with Fisher that it wasn't a
good idea." Neither the fact that the call was made nor the purpose of
the call are in dispute.
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- Moreover, AP reported that at a March 21, 2002
hearing before Lieberman and his committee, John Diaz, managing
director of Moody's Investors Service, a major credit-rating agency,
Diaz testified that Rubin had contacted him about seeking a higher
credit rating for Enron. Diaz said nothing came of Rubin's telephone
call. However, this was the second time Rubin intervened in an attempt
to keep Enron's credit rating high.
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- When asked why credit-rating agencies delayed the
lowering of Enron's rating, Diaz said that Enron executives lied to
his agency in the fall of 1999 about its complex web of partnerships
and that "material information was missing."
-
- Consider Lieberman's remarkable reply: "I feel as if
you weren't as aggressive as you should have been. We have got to look
seriously at creating some kind of system of accountability and
monitoring of what the agencies are doing."
-
- Yet, Lieberman knew that Rubin, on behalf of
Citigroup - which had an approximate $1 billion investment in Enron
and the potential of large merger and other fees in pending deals - on
at least two occasions, sought personally to protect Enron's credit
rating. Still, as best as I can tell, Lieberman has never asked Rubin
to testimony before his committee. Furthermore, Carl Levin, chairman
of the Senate Governmental Affairs Committee's Permanent Subcommittee
on Investigations, which is holding a hearing today on "The Role of
the Financial Institutions In Enron's Collapse," has, to the best of
my knowledge, not sought Rubin's testimony. (An inquiry I made to
Levin's subcommittee asking whether Rubin would be a witness at
today's hearing went unanswered.)
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- On January 14, 2002, while being interviewed about
Enron's collapse on the NewsHour with Jim Lehrer, Lieberman said, in
part:
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- The stock was being touted by executives of the
company, while they, in fact, were selling theirs and average
stockholders were holding on and in the process of losing their life's
savings, so this was a really shocking and unsettling scandal in which
greed and arrogance, deception and fraud and maybe criminal behavior
was involved.
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- Lieberman's supposed concern for "average
stockholders" and "their life's savings" clearly doesn't outweigh his
political interests in covering up Rubin's central role in helping to
prop up Enron and protect Citigroup's investments. If Lieberman were
to force his fellow Democrat to testify about his conduct, the
Democrats might lose their election-year issue. Meanwhile, Citigroup's
stock value has declined by more than ten percent, to the lowest level
in nearly three years, on news of its deceptive activities.
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- First published July 23, 2002
- http://www.nationalreview.com/levin/levin072302.asp
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