February 1, 2002

CHICAGO–In a textbook example of conflict of interest, Texas Republican Senator Phil Gramm and his wife Wendy used their federal positions to benefit Enron Corp. while the two were simultaneously sitting on the company’s board of directors,” the Chicago Tribune has reported.

The January 18 story by Staff Reporter Robert Manor says the Washington power couple worked hand-in-glove to eliminate federal oversight proceedures that might have protected investors in companies such as Enron which traded energy contracts.

It started in the early 1990s when Wendy Gramm, who had been appointed chairman of the Commodity Futures Trading Commission by President Ronald Reagan, moved to eliminate governmental oversight of energy trades.

“A short time later she was appointed to Enron’s board of directors,” Manor wrote.

Mrs. Gramm, an economist and a Republican, lost her government job when a Democrat, Bill Clinton, became president in 1993. But her husband, a powerful GOP senator and one of only nine senators to vote against the 2001 Railroad Retirement reform bill, in 2000 “helped clear the way for a bill turning his wife’s deregulation decision into law, something Enron had long wanted,” the story said. The new law deregulating energy trading was called the Commodity Futures Modernization Act.

Enron Chairman Ken Lay said at the time that Mrs. Gramm’s appointment to the board had nothing to do with the favorable treatment she gave the company while she was a federal regulator. But in the corporate news release announcing her appointment, Lay was quoted as saying, “Dr. Gramm’s eperience in financial and commmodity markets will prove extremely valuable to Enron.”

Neither Sen. Gramm nor his wife returned Tribune phone calls asking them to comment on the story. But the Tribune indicated that the Gramm-Enron relationship has been fruitful for both sides.

“Phil Gramm has collected more than $97,000 in campaign contributions from Enron, according to the advocacy group Public Citizen,” Manor wrote. “Wendy Gramm was paid between $945,000 and $1.8 million in salary, attendance fees, stock options and dividends over the past eight years,the group concluded.”

In addition, says a January 18 story in the Chicago Tribune, Wendy Gramm was serving on the audit committee of Enron’s board at the same time the company began setting up partnerships in which it hid hundreds of millions of dollars worth of losses from shareholder scrutiny. The audit committee is a special unit of the board of directors which by law is supposed to examine the company’s accounting strategies to make sure the shareholders’ equity is being protected.

“The members of the audit committee were to oversee the partnerships, according to a report by Enron’s law firm, Vinson & Elkins,” wrote Tribune reporter Robert Manor. “That means the partnerships were not merely a misstep by a lower-level executive but rather were supposed to be known to Wendy Gramm and the top leaders of Enron.” Manor quoted the research director of Public Citizen, Tyson Slocum, as saying, “The audit committee knew of and approved these partnerships.”