For nearly a year, I have been investigating Army Secretary Thomas White’s role in Enron’s demise, specifically, whether he was aware of the financial machinations that went on in the division he ran, Enron Energy Services, and if he took part in a scheme to make the unit look profitable when it wasn’t.
I had already written several stories on what Thomas White knew for The Nation, Salon and Dow Jones Newswires, where I worked for two years as Los Angeles bureau chief. But in late July I hit the jackpot. During a conversation I had with an Enron source, I was told several emails were sent to White in 2000 and early 2001 by former executives of EES, warning him that EES was losing cash on many of the divisions energy contracts.
“Close a bigger deal. Hide the loss before the 1Q,” one email response from White to an Enron underling read. Another email from White to EES’ sales team said contracts should be closed a month before Enron reports its quarterly earnings. Was this a smoking gun? I wasn’t sure yet. White had testified before a Senate committee in mid-July that EES was not a money losing venture and that he did not take part in any financial shenanigans or misleads investors. I phoned several other EES sources I cultivated during the past year to find out whether they were aware of these emails written by White to an EES sales executive saying that losses should be hidden by signing larger contracts.
Here’s what one source told me. “I definitely new of the e-mail,” one source said. “I had been told about it from by boss and others. The e-mail is definitely authentic and that I heard about it from too many people for it not to be true.”
This started getting interesting. I felt I was about to uncover the biggest story of my career. Still, I called another source and then another– 24 in all–to get to find out exactly what the emails meant and to put it into context. One source, a former high-level exeecutive at EES who worked on many of the division’s energy contracts, explained it to me in a language that was not so easy to understand. He said he had copies of energy contracts EES entered into with Eli Lilly, the Indiana-based pharmaceutical company, Owens Corning and Quaker Oats. The contracts, however, all of which were signed by White and included details about the accounting mechanisms EES would employ to create illusory profits, showed for the first time what White knew and when he knew it. For one, the Eli Lilly contract showed EES booking multimillion profits even though the unit paid $50 million in cash to Lilly to sign the deal. That contract also, for the first time, contained details of a secret partnership between the two companies and showed, in black and white, that EES was nothing more than a Ponzi scheme. Enron said in a press release in 2001 that the Lilly contract was worth $1.3 billion. The documents I obtained said it was worth about $600 million and if EES ever saw any money from the deal it would likely be a little more than $100 million because the company would split profits with Lilly, 70/30.
The Quaker Oats contract showed how EES would book profits for doing nothing more than changing light bulbs and chillers. The Owens Corning contract contained details of another secret partnership between the two companies.
White’s fingerprints were all over the 60-plus pages of documents I obtained over the course of two weeks of investigative work. Not only was his name on the memos and his signature on the approval sheets, but he actually wrote a couple of memos himself telling employees how these deals would hide any existing losses incurred by EES. Moreover, the documents showed the bonuses White received by getting his sales team to close the deals. Several other sources spent days explaining to me the accounting tricks the division used to book profits, the quarterly floor meetings held by White, the arcane military terms White used to describe an elite team of EES executives, and his knowledge that EES was losing millions of dollars a day from energy contracts in California and a few other states.
The emails I mentioned now made sense.
I now felt like I had a story, a HUGE story. I approached Salon with the story and explained the details of what I had uncovered with Salon’s Washington bureau chief. I had already written five investigative pieces on Enron for Salon and felt a sense of loyalty to the news organization.
Salon’s bureau chief, whom I’d rather not identify by name in this story, was excited. We both felt this story that would finally show that White knew full-well that the division was losing money, that the energy contracts were highly suspect and money losers and we had the documents to back it up.
I faxed the documents to Salon, including the smoking-gun emails, and more than a dozen emails my sources had sent me while we were communicating about the story. One EES source actually created a chart on his computer so I could understand how the questionable accounting practices worked. I still have all of those emails stored on my hard-drive.
I confirmed the authenticity of the documents–minus the emails–through Enron, Eli Lilly, Quaker Oats and Owens Corning. Enron could not confirm the authenticity of the eemails. So I called the Pentagon. I asked Major Mike Halbig, a spokesman for White, about the emails sent to the Army Secretary and whether he could discuss it with me. Halbig told me it was time to move on, that White had already testified, and that there was nothing more to say.
“Yes but you don’t understand I am writing a story about the emails, the documents and that Secretary White told one employee to hide losses,” I said. Halbig would not address the emails or the documents per se. He repeated his general comment. I told this to Salon and we felt that we had told White’s camp exactly what we were going to write and that they turned down the opportunity to respond.
Now it was time to write. It took me two weeks to write this story largely because the documents were written in accounting jargon and I needed someone to help me put it into plain English. I sent copies of the documents to tax attorneys, accounting firms, analysts and academics. They all gave me the same short answer. “Wow. Enron really pushed the envelope. How did their accountants let them get away with this?”
Thankfully, the experts did explain everything to me in plain English. I used one of their comments in the body of my story. While I wrote the story, Salon poured over the documents. No one had any questions.
“Are you sure?” I asked.
“Do the emails look OK? Do you understand everything in there?” I asked again.
“Yes,” the bureau chief said to me over the phone.
We had even talked about posting all of the documents on the Salon’s website, including the emails, but Salon’s managing editor said, “it’s so easy to forge an email it’s not worth it.”
In addition, we didn’t want to give up to others in the media the fruits of our labor. This was one month of intense investigative work and posting the documents would just make it easier for others to write their own story without crediting Salon.
About three different drafts of the story were passed back and forth via email. We finally settled on one, about 4,000 words.
It was a good read. My biggest story. I patted myself on the back. So did Salon.
We debated when we should post the story. The Senate was on summer break and not many politicos were in Washington D.C. We considered posting it after Labor Day but we were all worried that another news organization could scoop us. It’s a chance we didn’t want to take. After sitting on the story for a week, Salon posted it on Aug. 29. No one seemed to notice. We sent copies of the story out to everyone in the media and influential government officials–at least Salon did. No one bit. That story was in cyberspace for more than a week and no one noticed.
That didn’t bother me. I was simply proud to have written the story. I was proud that as a journalist I told the truth. I was already on to the next story, which says a lot about my personality.
About a week after the story was published I got a call from Salon’s bureau chief telling me to expect a call from New York Times op-ed columnist Paul Krugman. He was “very interested” in learning more about the White story and was considering using it for a future column.
“Krugman’s no bullshit,” the Salon bureau chief said. “So send him whatever he asks for. Any documents he wants give to him.”
“Fine. Consider it done,” I said.
Ten minutes after my phone conversation with Salon’s bureau chief I got a call from Krugman.
“My first question is why did you write this for Salon?” Krugman asked. “Nobody ever picks up anything from Salon.”
I was defensive. I told him that I was loyal to Salon. Truth is, I had phoned The New Republic and some other publications about the story. I’m sure the editors at those publications are breathing a sigh of relief that they didn’t have me write the story for them.”
“Well, you know this is an issue that’s very dear to my heart,” Krugman said.
“I know,” I responded.
Krugman then asked me how I got the documents, how I cultivated these sources and I explained to him that I had been writing about Enron for two years. I told him I wrote more than 2,000 stories on California’s energy crisis in the two years I worked for Dow Jones and wrote about 200 stories on Enron beginning last October. I told him I left Dow Jones in April to write a book on the energy crisis and in-between I was still writing about Enron.
He asked me to fax him the documents. I did. And that was the beginning of a two-week correspondence with Krugman about this story. My job was to simply fax him the documents. What he did from there was up to him and The New York Times. He did ask me several questions about the material and I sent him copies of my most recent emails from sources that helped to answer some of those questions.
On Sept. 17, Krugman’s column “Cronies in Arms” appeared in the New York Times. The first paragraph mentioned the email.
Krugman credited me. That’s when all hell broke loose.
Despite the story being out for three weeks, no one saw it. I must have received 50 phone calls from the Washington Post, ABC News and the BBC to members of Congress and the Senate. Everyone wanted these documents Krugman spoke about in his column. I was completely unprepared and overwhelmed. Salon celebrated the moment. Salon’s managing editor Scott Rosenberg mentioned the Krugman reference of the Salon story in his blog.
I agreed to fax the documents to ABC News and the Washington Post based on promises Salon had made with the news organizations to provide the news agencies with the material in order for them to write their own story. Of course, they said they would mention Salon so that was a big selling point for, well, Salon.
However, the high-fives quickly came to an end. I got a call two days after Krugman’s column ran from the Salon bureau chief saying he received a call from the Financial Times claiming I “plagiarized” seven paragraphs from a story the paper wrote in February about the Quaker Oats contract EES signed.
I was well aware of the FT article. The EES source that sent me copies of the Quaker contract told me I should read the February story the FT wrote to understand how EES booked profits from the Quaker contract. In my original story for Salon, I credited the FT three times. I did, in fact, use seven paragraphs from the FT story in my story. But I could have sworn I credited everything I wrote about that deal to the FT. I mean why would I credit a story only to then try and pass off elements of the very same story as my own work?
My first response to the Salon bureau chief was that the FT was wrong. I was convinced I had written the story first and that the FT stole it from me. As a wire reporter covering the California energy crisis and Enron’s bankruptcy, the FT and many, many other publications took my wire copy, rewrote it, and slapped their bylines on it. But I wasn’t just your run-of-the-mill wire reporter. I had exclusive; one of a kind, not to be found elsewhere, stories on Enron. An example of this is a story I wrote on Enron’s phony trading floor that appeared first on Dow Jones Newswires and then with my byline in the Wall Street Journal. A Reuters reporter actually reported the same story two weeks later as if it was his own. I also was one of three reporters who were given exclusive access to interview Jeff Skilling, Enron’s former chief executive, last December. That story also ran in several newspapers under other bylines.
I found what appeared to be a story I wrote on the Quaker deal while I was at Dow Jones three weeks before the FT story. I had a copy of the story. But we couldn’t find it in the Dow Jones archives. Was this some sort of conspiracy? I wondered. Still, I did credit the FT in the original story, albeit not properly. I believe one is guilty of plagiarism if there is intent to steal another person’s work and pass it off as your own. This was clearly not the case. Salon felt Krugman should be aware of the FT claims. The Salon bureau chief called Krugman to tell him the news. Here’s what Krugman said to me about it in an email when it was first brought to his attention on Sept. 23. “I should tell you that Salon let me know about the FT flap, and it’s clear no harm was intended, or done. I can see exactly how it happened. Someday someone will notice that the title of my book, “The age of diminished expectations”, was unconsciously borrowed from Christopher Lasch,” Krugman wrote in his email to me.
This guy is a class act.
Salon, in the meantime, was trying to locate the story I said I wrote while I was at Dow Jones. But this was moot. I intentionally used the FT story because of how well the paper did in explaining the Quaker contract. That’s why I credited the paper three times in the original piece. Salon simply should have said this and printed a correction. Instead, the paper alluded to the fact that I was a plagiarist.
The correction forced Salon to start looking at the White story even more closely. I don’t know if Salon was under further pressure, say from politicians in Washington or members of the right-wing media, but clearly something else was going on here.
I was no longer in their good graces.
Around this time, White had also sent a letter to the editor of the New York Times claiming he was unaware of any email authored by him that directed an EES employee to hide losses by signing bigger contracts. Here’s what Krugman said about White’s letter in an email to me.
“White has sent a pretty poor letter to the NYT in which he says that “I do not recall saying or writing anything close to the quote”; he acts as if your Salon article was never published, too,” Krugman wrote in his email.
I thought White’s letter was interesting because it left open the possibility that he did write the letter and may have said something to the effect of hiding losses because White used the words “recall” and “close.”
The media, many of whom admitted to me they never even read my Salon piece, seized upon the email and questioned its authenticity directly to Salon. Salon questioned the authenticity of the email to me, three weeks after the story was published and nearly two months after the documents had been in Salon’s possession.
The bureau chief at Salon, without my knowledge, called my source that wrote the email and sent it to me and confronted this person in an antagonistic way, my source told me later. He denied ever speaking with me. He did this because he believed Salon was going to reveal his identity and because he told me to keep his name out of the story. Salon called several they of my sources to verify the veracity of the Tom White story and the email. Some of my sources, which knew of the email, verified its authenticity. My sources went a step further and confirmed every element of my story and even explained to Salon why former Enron employees won’t speak to members of the media unless they know and trust that person. There is a real sense of paranoia among former Enron employees. Some believe if they talk to certain people in the media they will be subpoenaed by the government.
To further help Salon authenticate the story and the email, I sent more than 20 pages of phone bills, which show that I phoned my sources, particularly the source that sent me the email. Still, that was not good enough. Frankly, Salon became very confrontational and threatening toward me. Naturally, I became defensive.
Salon removed the Tom White story from its website the same day that Howard Kurtz of the Washington Post and New York Times media reporter Felicity Barringer called Salon and said they were going to write a story on the correction Salon ran about the FT issue. A note from Salon’s editors said they could not authenticate the email and that I was a plagiarist as the reason for removing the story. Meanwhile, I credited the FT but no one was listening.
I called Barringer and it became clear that she was going to write a story on me questioning my credibility and integrity as a journalist. She claimed she had spoken to several news organizations I had written stories for during the past six months and that none of them would work with me again.
What did I do? How could this be? I have written for CBS Marketwatch, Associated Press, Reuters, The Nation, In These Times, but none ever told me that they never wanted me to write for them again.
I truly thought I was being set up. Why? I don’t know. I suppose I have angered many people with the Enron stories I have published. I don’t doubt that people would love to see my hands broken so I can never type another word on Enron.
But I had one last beacon of hope, Krugman.
The week Salon removed the White story Krugman called me from Tokyo to ask for my help. He said he was told by Times editors that if I reveal my sources to him, specifically the person who sent me the email, then he could write a column saying he independently verified my story and everything is true.
I revealed my sources to Paul Krugman, including the person who sent me the email. He spoke to each and every one of my sources and verified their employment with Enron through W-2 documents they faxed to him. In addition, he verified the authenticity of the email by speaking directly with the person who sent it.
I took these unusual steps to reveal my sources to Krugman and provided him with documents because the Times editorial board told him that if he could get me to do that then he could write a column that defends me and state that he independently verified everything. This was a painstaking process, having to convince more than a dozen sources to speak up, albeit in defense of me and confirm the authenticity of documents, particularly the email. However, when Krugman informed his editors and the editorial board of the NYT that he had independently secured confirmation from all of my sources and verified the authenticity of the email, the Times him that he was “going to have to take a bullet for the company” and “take it like a man” and print a correction because “he was too much of a lightning rod.”
Despite all of the verification provided to Krugman he could still not write a column in support of my story, the documents mentioned, or reveal to readers that he spoke to my sources. Krugman, to his credit, did everything in his power to get the Times editorial board to allow him to write the column he wanted regarding the Tom White email. They would not budge. Now the Times has put me into a position where I can no longer win the trust of my sources because they broke their promise to me. Had the Times told Krugman or me their plans for never honoring the agreement, I would have never revealed my sources to the paper. This clearly became an issue for the Times to pursue a salacious story about me rather than pursue the story itself, which is Thomas White, whether he wrote this email and if he knew that Enron was imploding.
The story the Times wrote about me was nothing more than a way to ensure I never work again as a journalist. The story, written by David Carr, who was put on the story because Barringer had another “important” assignment, suggests that I am a reckless journalist because of a correction that ran in the Wall Street Journal in March, a week before I resigned.
I started at Dow Jones Newswires as bureau chief in April 2000. At that time, the California energy crisis was just two months away. My job was covering the energy industry. When the crisis hit in California I went into overdrive. In my two years at Dow Jones, I wrote 2,000 stories, was credited with being the leader on coverage of the energy crisis and won the company’s journalist of the year award in my first eight months at the company for my coverage of the crisis.
When the Enron debacle began, I was put on a number of investigative stories. One story that received widespread play was an article I wrote about Enron’s phony trading floor. My point is this: Yes, the correction the NYT mentioned in the article is true. It was a major correction. Huge. The biggest of my career. But guess what? It was the only one in my two years at Dow Jones. Out of 2,000 stories I wrote in two years only one correction ran. I misread documents and so did the WSJ fact checkers. We had to issue a correction. When I resigned from Dow Jones to pursue a book, the company offered me more money to stay.
I left Dow Jones because I did not want to work in a corporate environment like that anymore. I wanted to pursue a career writing books. That too is now in doubt.
Carr knew all of this. He was aware that I wrote 2,000 stories while at Dow Jones. I even sent him my performance reviews, which were impeccable. I sent him copies of emails from Dow Jones CEO Peter Kann congratulating me on my work covering Enron.
But Carr didn’t care. He was going to do a hatchet job on me no matter what and he took the whole thing about the WSJ correction out of context. In addition, in one of the worst breaches of journalistic ethics, Carr revealed the identity of my source by name without my permission or my source’s permission.
When I asked Krugman to explain how this happened here is what he said to me in a series of emails.
“My fault. I am sick to my stomach. The email I sent, on which you had scratched out the name, was apparently still legible. I should have marked it off better. I am incredibly sorry, and will do anything at all to help,” read one Krugman email.
“All along, I was trying to help. I have clearly fucked up in earnest. Give me any lead, and I will work on trying to clear your name,” said another email.
“I have screwed up very seriously. The story was that (Times Washington reporter Richard) Oppel initiallyquestioned me, and said that you were not responding to calls. I shared the email with him, but thought I had an understanding that he would not use it, and certainly not reveal the hidden name. It’s just a terrible thing. I am trying to think what can be done,” said another.
That was my last correspondence with Krugman. The Times won’t return my phone calls, they won’t print my letter to the editor and they won’t explain what happened. Worst of all, Carr, whose story on me was about my so-called track record with printing corrections got my title wrong. He said I was a Los Angeles correspondent for Dow Jones. I was, in fact, the Los Angeles bureau chief. I managed three reporters. Carr, not suprisingly, won’t print a correction.
Since Monday, I have spoken to a dozen journalists who are curious about what went on behind the scenes at Salon and the New York Times. This has become some sort of bizarre circus sideshow. No one has even tried to follow up on the Tom White story and look into the fact that there may be a great deal of evidence out there that supports the theory that Thomas White may have been responsible–and aware–of many of the financial machinations that went on at the division he was co-chairman of, Enron Energy Services. This is a sad time for journalism. Here we have a high-ranking official in the White House who may or may not be involved and have great knowledge of one of the biggest bankruptcies in American history. Instead, the media would rather eat their own.
To all the naysayers out there, I dare you to get off your asses and pound the pavement. Until then, don’t judge me.
JASON LEOPOLD can be reached at: email@example.com