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Army secretary denies role in Enron problems

White tells Senate panel that he didn't manipulate California energy prices

Associated Press

July 19, 2002

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WASHINGTON - Army Secretary Thomas White said yesterday that he is "appalled and angered" by the scandals that drove Enron Corp. into bankruptcy but denied any role in or knowledge of wrongdoing while he was an Enron executive.

In testy exchanges with skeptical senators, White repeatedly said he had played no part in manipulating California energy prices and knew nothing of other improprieties while he helped run an Enron subsidiary.

"Thousands of us who worked at that company were proud of what we accomplished," White said, testifying voluntarily and under oath before the Senate Commerce Committee. "I am ashamed of what has happened to that corporation."

He told senators that he shared their outrage and their desire "to hold people accountable who were responsible" for any illegal conduct. "I am responsible for the portion of that company that I ran. The deals that we put together, within the accounting structure that was the standard in the industry, I stand behind."

Although White said after the hearing that he had no plans to resign his Pentagon post, Democratic Sen. Barbara Boxer of California urged him to do just that in a letter late yesterday: "I believe it is in the best interest of the country for you to step down as the Secretary of the Army as I believe today's hearing will spark more investigations and more distraction from your crucial duties."

Boxer said she was not satisfied with White's testimony: "I found him evasive, argumentative, not contrite about what happened, not forthcoming."

Enron's bankruptcy in December was the first of a series of scandals that have rocked the stock market and prompted Congress to push for passage of legislation that would crack down on corporate fraud and accounting irregularities.

Democrats are trying to use the scandals as an election-year issue against Republicans, pointing to President Bush's close ties to corporate leaders and the large number of former business executives, such as White and Vice President Dick Cheney, in his administration.

Most of yesterday's questioning concerned the electricity crisis in California and neighboring states in 2000 and last year, which caused soaring bills, rolling blackouts and the bankruptcy of Pacific Gas and Electric.

Boxer and other senators grilled White about trading strategies in California's electricity market detailed in December 2000 Enron memos. The memos described several schemes that critics say took advantage of California's power crisis, including one that involved White's Enron subsidiary, Enron Energy Services.

EES had long-term contracts to provide power to retail customers in California and other states. One Enron strategy called for using inflated estimates of how much power EES customers needed to show congestion in California's electricity grid - thereby driving up the price of power supplied by Enron's wholesale power divisions.

White said he was unaware of the strategies and memos until the Federal Energy Regulatory Commission made them public this year. He said the ploys would have hurt his subsidiary by driving up power costs that EES could not pass on to its customers.

But Boxer challenged him: "I never saw so many smart people running away from the truth."

"I'm not running away from the truth," White retorted. "I'm telling you how it ran."

Democratic Sen. Byron L. Dorgan of North Dakota expressed disbelief that people in White's division did not know what other divisions were doing: "It's all part of the Enron Corp. You're all kissing cousins here."