Up In Smoke

Enron used political ties to rid itself of regulators. But in the end, its supposed free-market trailblazing only burned investors.

"Enron would have been a major campaign issue," he says. "The Democrats would have gone ballistic: 'What? Your wife was on the board of directors? She was on the audit committee? Why didn't you protect these workers who were laid off?' "

"Any potential for criminal investigations into his wife would have been a major liability and might have become a major scandal," Slocum says.

Enron's massive political donations and friendships -- the Center for Responsive Politics says it failed to report $1.6 million in contributions last year -- have muted some of the backlash. For example, Congressman and senatorial candidate Bentsen says the relationship of the Gramms to the company may have been an "uncomfortable situation." But he says he has "every confidence" that they followed the rules.

"There's no instance here I see where Enron was in a situation with a regulator that was giving them a hard time, or affecting their business such that they were saying back off," he says. Executives "called the White House when they were in trouble, but the White House, to their credit, demurred."

Others say the Enron-fueled deregulation made government derelict in its role as watchdog for the unbridled trading markets.

"The collapse of Enron makes it plain that the key gatekeeper institutions that support our system of market capitalism have failed," Frank Partnoy, a law professor and former Wall Street derivatives trader, told a Senate panel. "The institutions sharing the blame include auditors, law firms, banks, securities analysts, independent directors and credit rating agencies."

Banks and investment firms like J.P. Morgan, the United Bank of Switzerland and Lehman Brothers, who contributed $2.1 million to Phil Gramm in the last decade, are first in line to divvy up the carcass that was once Enron. Then they'll go back to investing their clients' savings in an unregulated $95 trillion financial market where people bet on the weather and the availability of aircraft hangar spots in London.

"The 'Who Shot John' over the politics of all this, I think, is beside the point," says former white-collar prosecutor Michael Greenberger. "What I think we have to worry about is that, because [derivatives] are only brought to people's attention when there is an emergency, nobody knows how many more companies are out there trading these things. Nobody knows whether there are destabilizing trades that are being made that could bring other corporations down as well."

The latest revelations indicate that Enron's own board may have already known of the questionable financial and accounting practices 18 months ago -- at the GOP convention reception where they and the rest of the free-marketeers saluted George W. Bush and the Gramms. Loyalists and their political allies had a damning descent from the luxurious trappings they savored in their time at the Top of the Tower. But their legacy of deregulation means plenty of others are still jostling in line for that dizzying ride to the top.

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