Published on Saturday, January 26, 2002 in the Los Angeles Times
Army Secretary Takes On Afghan, Enron Wars
Thomas White battles foes abroad. At home, his connection to the energy giant is raising some questions
by John Hendren
Army Secretary Thomas E. White is fighting battles on two fronts. As his soldiers lead the ground war in Afghanistan, the former Enron Corp. executive has found himself increasingly fielding uncomfortable questions about his role in the energy company's sudden collapse.
The public advocacy group Public Citizen, founded by activist Ralph Nader, has suggested the Army secretary has engaged in a conflict of interest by pursuing changes in Army energy policy that could have benefited his former employer. White recused himself from dealing with Army contracts involving Enron but continued to play a role in advocating the privatization of energy services at Army installations, which employ 1.2 million soldiers and civilians on 15 million acres of land.
After going from the Army, from which he retired in 1990 as a brigadier general, to Enron and back, White argued that privatization would trim costs from the department's $82-billion annual budget. "If indeed Enron was in a position to secure more contracts, clearly there was a conflict of interest," said Tyler Slocum, Public Citizen's research director for energy issues. "We know he headed up a division . . . that was specifically targeting military installations to provide utility services."
White did not initiate the idea of privatizing energy services, said Army spokeswoman Martha Rudd. Army officials did not return calls seeking further comment.
During his 11 years at Enron, White accrued millions of dollars in company stock, more than any other administration official. Upon joining the administration last May he sold the stock, as required by a government ethics agreement, for $12.1 million.
White held a litany of titles at the energy company. He was chairman and chief executive of Enron Operations Corp. and was in charge of Enron Engineering and Construction Co.
And he was vice chairman of Enron Energy Services, which has been criticized for accounting practices in which the division counted future contracts as profits rather than waiting until the services were delivered. Critics have said that those unusual accounting practices contributed to the parent company's collapse.
"With the severe accounting problems going on at Enron, what was Thomas White's knowledge of those practices within his division?" Slocum asked.
In a Jan. 22 response to a congressional inquiry from Rep. Henry A. Waxman (D-Los Angeles), White acknowledged that he has had numerous phone conversations and meetings with Enron employees since joining the administration--and has discussed the company's plight with Defense Secretary Donald H. Rumsfeld and Secretary of State Colin L. Powell. But he said the conversations were personal in nature, focusing on the effect of the company's problems on him and his former co-workers.
He said that he has participated in 23 phone calls and seven meetings with Enron employees and that he initiated only two of the calls. White said he called Kenneth L. Lay, Enron's chairman, on Sept. 10 to wish him luck as he took over additional duties as the company's chief executive.
"At no time in any of these conversations or meetings did any one of the Enron employees, to include Ken Lay, ask me to intercede in any way with anyone to the potential benefit of Enron Corp.," White wrote.
White said that, in brief conversations with Powell in December and Rumsfeld in November, the focus was "a concern on their part for the impact that the bankruptcy of Enron may have had on my personal well-being. My response in both cases was that I had suffered significant personal losses but that I would persevere."
Phil Schiliro, Waxman's chief of staff, called White important to the congressional investigations into Enron's collapse because of his knowledge of the energy giant. But Schiliro said that the congressman, the top Democrat on the House Government Reform Committee, is evaluating White's response to questions about his contacts with Enron employees after joining the administration.
White is one of the few Bush administration officials so far to respond to Waxman's request for details about contacts with Enron. Schiliro complimented White for responding to Waxman's letter but said the congressman will want to know more.
"Secretary White may be one of the keys to understanding Enron," said Schiliro. "It's very likely that congressional committees will want to question him closely."
White took pains to defend himself against any suggestion of impropriety in the letter to Waxman, saying that, since joining the Bush administration on May 31, he has bought no Enron stock, exercised no options and "renounced" the options, now worthless, he did own.
A financial disclosure report White filed May 4, 2001, said he held from $25 million to $50 million in Enron stock, $25 million to $50 million in stock options, a "phantom" stock award--a future bonus of appreciated stock--of $5 million to $25 million, an employee stock ownership plan worth $1 million to $5 million and a retirement account worth $100,000 to $250,000.
White converted his cash retirement account into an annuity that pays $1,061.50 a month. But while an outside trust continues to pay its share, $372.51, White said, Enron has not paid the remaining $688.99 since declaring bankruptcy.
Since joining the administration, he has sold 405,710 shares of Enron stock for a total of $12.1 million, which dropped in value from $50.35 a share June 13, the date of his first sale, to $12.85 a share Oct. 30, the date of his last.
Copyright 2002 Los Angeles Times