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July 23, 2002 9:45 a.m.
Joe Lieberman’s Cover-Up
Where is Robert Rubin?
he news this morning for Citigroup, Inc., one of Enron's largest creditors, is bad.
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 .…"
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.
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.
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."
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.
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.
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.)
On January 14, 2002, while being interviewed about Enron's collapse on the NewsHour
with Jim Lehrer,
Lieberman said, in part:
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.
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.
http://www.nationalreview.com/levin/levin072302.asp
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