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The Secretary from Enron

Bear with me while I beat this dead horse.

Two weeks ago, Secretary of Defense fired Thomas White, who was tapped by President Bush two years ago as Secretary of the Army. Today, White, the former vice chairman of Enron Corp., the disgraced energy company that imploded in a wave of accounting scandals two years ago, leaves the Pentagon for good. In the two years White spent at the Pentagon he is credited with nothing other than taking up space. White’s dismissal barely made a sound in the media. Newspapers ran wire copy of his departure and chalked it up to his frequent run-ins with Rummy over disagreements in transforming the army. But that’s not an accurate portrayal nor is it the true reason White was canned, according to a half-dozen senior Pentagon officials interviewed between April 26 and May 7. Simply put, the Enron scandal tainted White as soon as it became common knowledge that he contacted dozens of his former colleagues after the company collapsed and failed to unload the bulk of his stock after he became Secretary of the Army. His job security became further strained when the FBI launched an investigation of White last year into allegations of insider trading. White’s phone conversations with his Enron buddies took place shortly after the Sept. 11 terrorist attacks in New York and Washington, D.C. and while military personnel were being sent to break up the Taliban government in Afghanistan. Pentagon officials said White never disclosed to Rumsfeld that he phoned his former colleagues and that the Bush administration only learned of it when it was reported by the media.

Neither White nor his spokesman returned calls for comment.

Moreover, internal Enron memos surfaced in 2001 that described in detail how Enron Energy Services, the division White ran, manipulated the electricity market in California over a two-year period.

White maintained his innocence in testimony last year before a Senate committee investigating Enron’s collapse and its role in California’s electricity crisis that he was unaware of the financial shenanigans that took place at Enron. It has since been well documented, however, that EES, under the leadership of White, contributed heavily to Enron’s collapse and that so-called profits at the unit were illusory.

White has not yet responded to a written inquiry from Congressman Henry Waxman, D-California, how EES booked a $1.3 billion profit from a contract the unit signed with Eli Lilly even though Enron paid the pharmaceutical company $50 million in cash as an incentive to sign the contract and hid this fact from investors and the public.

White’s signature is on the approval sheets and he earned a hefty bonus from the Eli Lilly deal despite the fact Enron Energy Services never performed any of the services described in the contract.

Internal documents related to White’s role in approving EES’ byzantine contracts and partnerships can be viewed here. One senior Pentagon official said White was close to being fired by Rummy soon after the Enron scandal broke in late 2001, but advisers to Bush cautioned Rummy that doing so could tarnish “the office of the president.”

“Instead of asking Secretary White to resign, Secretary Rumsfeld just made his life miserable,” the Pentagon defense official, who requested anonymity, said. “He didn’t allow Secretary White to make any decisions on his own on matters relating to the army.”

A spokesman for Rumsfeld would not comment on private conversations that “may or may not have” taken place between the two.

White complained to Rumsfeld several times, another defense official said, about being kept out of the loop on matters related to transforming the army but Rummy rebuffed White and frequently took it upon himself to make decisions to reshape the army. White only made things worse for himself when he used a military aircraft for personal use and went behind Rummy’s back by telling members of Congress that the army supported the now cancelled $11 billion Crusader artillery program, a weapons system that Rummy said publicly last year needed to be cancelled so the military could invest in other futuristic weapons systems

“Once he did that it was only a matter of time before Secretary Rumsfeld fired him,” a senior Pentagon official, who worked closely with White said. “Secretary White knew it and so did everyone who worked with him.”

JASON LEOPOLD can be reached at: jasonleopold@hotmail.com

 

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JASON LEOPOLD is the former Los Angeles bureau chief of Dow Jones Newswires where he spent two years covering the energy crisis and the Enron bankruptcy. He just finished writing a book about the crisis, due out in December through Rowman & Littlefield. He can be reached at: jasonleopold@hotmail.com

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