A lifelong Army veteran with no corporate experience takes a job at an upstart energy company, earns tens of millions of dollars in questionable stock sales before the company goes belly up and lands a powerful position working in the administration of the President of the United States.
Such is the story of Army Secretary Thomas White, the former vice chairman of Enron, who proved to the nation Friday that his tenure at the disgraced energy company paid off well when he sold his Florida mansion for a staggering $13.9 million. Meanwhile, thousands of Enron investors lost billions of dollars and employees of the company lost their life savings when the company imploded a year ago in a wave of accounting scandals.
But White, like other Enron executives, has repeatedly denied having any knowledge of the company’s financial machinations, despite the fact that the unit he ran, Enron Energy Services, inflated the value of its energy contracts–according to dozens of former employees–and has been directly linked to the California energy crisis. Had the true value of EES’ contracts been known to investors, White would not be the wealthy man that he is today and might very well be living in a one-bedroom apartment in Washington, D.C.
Now White is getting ready to lead hundreds of thousands of the country’s soldiers into a war with Iraq. This is a man that clearly should not be managing a multibillion military budget. Nor should he be serving in the administration of the President. Even though White testified about his work at Enron before a senate committee hearing last July, there are numerous questions about his sale of Enron stock shortly before the company collapsed that have yet to be answered. The sale of his home–where antiwar activists have recently staged protests–will only fuel speculation that White did indeed use inside information to unload the bulk of his Enron stock before the company filed what was then the largest bankruptcy in U.S. history. At best, the Securities and Exchange Commission should revisit that issue.
White bought the beachfront property in 2000 for $6.5 million. He tore down an adjacent 2,000 square-foot home and built a 15,145 square-foot mansion and invested $10.5 million of his own money into the construction, which was completed last month.
In May of 2001, White was tapped by President Bush to serve as Secretary of the Army. He sold some of his Enron shares, but not all of it as required by law. In October 2001, while the nation was still reeling from the September 11 terrorist attacks and ground troops were dismantling the Taliban government in Afghanistan, White made dozens of phone calls to his former Enron colleagues. He testified before the Senate committee that he was “concerned” about his old friends, but after those phone calls White unloaded the rest of his stock. Between May and October of 2001, White sold 405,710 shares for $14 million. Meanwhile, Enron’s lower-level employees were restricted from selling their own shares. It’s common knowledge that White financed his Naples home with proceeds from the sale of Enron stock. But if White was concerned that he wouldn’t be able to complete his mansion and needed to know whether he should dump his shares of Enron than that is clearly a violation of the Securities and Exchange Act, which is criminal.
Senate Democrats must reopen this issue and demand that White explain whether the construction of his mansion coincided with his sale of Enron stock and whether the proceeds from the October sale helped to fund the project.
President Bush said in his State of the Union speech Tuesday that he would be tough on the corporate executives who commit white-collar crimes. The President should start with his own administration, particularly Secretary White.
Bush may have the only presidential administration in history that has been accused of misdeeds while working in the corporate sector and have treated the most vicious corporate scandals with a mere slap on the wrist. But that’s what you get when you have a bunch of ex-CEO’s running the country.
JASON LEOPOLD can be reached at: email@example.com