The Enron Corporation was founded by Ken Lay in 1985 as a gas pipeline company and grew into the nation’s seventh largest corporation through an online energy trading system. It also moved swiftly to become the world’s largest energy trader. Enron soon accumulated 2,832 subsidiaries, of which 874 were registered in the Cayman Islands and other areas which provide tax exemption. During the economic boom of the 1990s, Enron began branching out into other areas to bolster its net worth. The company branched out into the water, coal, fiber-optics, and newsprint sectors -- as well as buying and selling properties. Upper management personnel began raking in millions annually in stock options and increased salaries. By 2000, the corporate giant generated $100 billion of business. Its stock spiraled to close to $95 a share in early 2001. Less than a year later, a share was worth 50 cents.

Enron paid no corporate federal income taxes in four of the last five years that it was solvent. It received a net tax rebate of $381million and a $278-million tax rebate in 2000. Enron also created no less than 800 “subsidiaries” in tax havens such as the Cayman Islands to make this possible. Any corporation’s income earned abroad by the offshore “subsidiary” was not taxed by the United States government. (Los Angeles Times, February 24, 2002)

According to the Institute on Taxation and Economic Policy, from 1996-98, the top 250 companies paid only 20.1 percent in 1998, down from 26.5 percent in 1988, following a landmark tax reform. (Los Angeles Times, February 24, 2002)

The George W. Bush friendship spanned more than a decade. Both were hot shots in the Big Oil sector, but Bush was an unsuccessful businessman. On the other hand, Lay was a financial success -- but only to the fall of 2001. The Bush-Lay relationships goes back to at least the late 1980s. During the 1992 Republican national convention when the elder Bush received the presidential nomination -- Lay served as the chair of the host committee. The two were so close, that Bush nicknamed his cronie “Kenny-boy.” After senior Bush lost his bid for reelection to Bill Clinton, the Bush family switched its political ambitions to George W.’s prospects for governor, and Lay came up with the first of many contributions to that effort. The young Bush, campaigning for his daddy, knew him well. Enron received a gigantic boost as a result of the deregulation of electricity with the passage of the 1992 Energy Act through efforts by the elder Bush’s administration. Lay publicly thanked Bush with a column in the Dallas Morning News a week before the 1992 election. Calling Bush “the energy president,” Lay wrote that “just six months after George Bush became president, he directed Energy Secretary James Watkins to lead the development of a new energy strategy.” (Los Angeles Times, January 15, 2002)

After Bush the elder’s defeat in 1992, the ties between Enron and the Bushes grew even stronger. In March 1993, Enron hired Bush’s Commerce secretary, Robert Mosbacher, and his secretary of State, James A. Baker III, to line up contracts for Enron around the world. In the 2000 election, George W.’s named Baker his Florida election strategist in a successful effort to halt the recount which would have given Al Gore the state’s 25 electoral votes and would have propelled him into the White House. (Los Angeles Times, January 15, 2002)

As Enron’s representative, Baker even went on a trip accompanying the ex-president to Kuwait to do big business in the nation Bush had fought the Gulf War to save. The trip was criticized by General Norman Schwarzkopf, who said that he had turned down millions in offers to do business in Kuwait after the war. (Los Angeles Times, January 15, 2002)

When Bush co-owned the Texas Rangers and construction began on a new stadium, Lay agreed to spend $100 million over thirty years for rights to name the park after Enron. As Bush was running for president, Lay lent the candidate the Enron corporate jet fourteen times, and the Bush campaign reimbursed Enron a measly 60,000 for those flights.

Enron’s collapse also placed Bush in a precarious political dilemma. Always an advocate of deregulation, the president now was compelled to deal with a situation where deregulation proved to be a failure -- from federal rules governing private pensions, to securities law, to accounting standards, and even to campaign finance reform. He was also tied to the staffs of several key regulatory agencies -- including the Securities and Exchange Commission -- where he had appointed many key officials. It seemed certain that the Bush administration needed to place deregulation the backburner.

In his two Texas gubernatorial campaigns, Bush received $312,000 from Enron officials, including Lay, who was one of his biggest donors. Bush received more than $100,000 from Enron officials for his presidential campaign. Lay was one of the Bush “pioneers” who raised at least $100,000 for his presidential run. Although Bush signed a law deregulating the electricity market in 1999, the documents do not appear to show that Bush responded in print to Lay's interest in the issue.

In February 2002, 1,800 boxes of correspondence during Bush’s service as governor from January 1995 until December 2000 were released. The letters were included in 350 pages of correspondence between Enron executives and Bush when he was Texas governor. In more than two dozen letters written from Lay to then-Governor Bush, the Enron CEO lobbied repeatedly for the deregulation of energy; he sought the governor's presence at Enron-related functions; and he sent magazine articles and personal notes. The manuscripts suggested that Lay was involved in a variety of pressing state issues, including education, civil justice reform, and electric deregulation. Lay also asked for the governor to lobby the state’s Congressional delegation on federal issues important to Enron, including tax relief. In other correspondence, Lay asked Bush to push for stricter tort reform laws. Bush had made clear during his first gubernatorial campaign that tort reform would be a top priority. He signed a sweeping bill into law in 1995. (New York Times, February 16, 2002; Houston Chronicle, February 15, 2002)

Lay’s primary concern in his letters was the deregulation of the retail electricity market, a law signed by Bush in 1999. Lay wrote Bush several letters about the issue, including one after the 1997 legislative session, when the measure fell short of passage. Lay wrote, “We would have liked to have accomplished more, but realistically, the issue would not have moved nearly as far as it did without your involvement, and for that Enron is deeply grateful.” (New York Times, February 16, 2002)

Regarding deregulation in Texas, Lay wrote to Bush about competition in Texas’ wholesale power market as early as a month after Bush took office. In a February 15, 1995, letter, Lay outlined his position that restricting important competitors from the wholesale power market harms the economy by causing higher electric prices. (Houston Chronicle, February 15, 2002)

In another letter in July 1996, Lay wrote that every day in which electric deregulation was delayed meant money lost to the nation’s economy and a diminished ability for Texas to compete in a global market. He said, “The existing system discourages innovation, forbids most competition and tolerates inefficiency by insulating producers against the market pressures that work to hold down costs.” (Houston Chronicle, February 15, 2002)

In separate letters in 1996, Lay and Enron executive Jeffrey Skilling told Bush that Enron officials could arrange for him to tour Enron’s trading floor in Houston. Skilling wrote, “We would like to show you how we do business.” (Houston Chronicle, February 15, 2002)

In an April 3, 1997, letter, Lay wrote Bush about Enron's negotiations for a $2 billion joint venture with Neftegas of Uzbekistan and Gazprom of Russia to develop Uzbekistan’s natural gas and transport it to markets in Europe, Kazakhstan and Turkey. According to the note, Bush was scheduled to meet with Uzbekistan’s ambassador to the United States just a few days later. Lay wrote, “This project can bring significant economic opportunities to Texas, as well as Uzbekistan.” (Houston Chronicle, February 15, 2002)

In an October 17, 1997, letter, Lay thanked Bush for calling then-Pennsylvania Governor Tom Ridge. Lay wrote, “I am certain that will have a positive impact on the way he and others in Pennsylvania view our proposal to provide cheaper electricity to consumers in Philadelphia as well as make it possible for open and fair competition at a much earlier date.” (Houston Chronicle, February 15, 2002)

In a November 16, 1998 letter to Bush, Lay once again asked for continued support for electric deregulation, which would benefit the now-fallen energy giant. Lay wrote, “By passing such a bill, your administration would be responsible for providing the citizens of Texas with the equivalent of a tax cut which could immediately amount to $1.7 billion or more annually. Please have your team let me know what Enron can do to be helpful in not only passing electricity restructuring legislation but also in pursuing the rest of your legislative agenda.” (Houston Chronicle, February 15, 2002)

Lay wrote, “It was a thoughtful gift and one our family will enjoy hanging on the tree every year. We want to wish you and your family a healthy, happy and prosperous 1998. Ken.” A year later, after thanking Bush for a “Tejano Santa” print for Christmas, Lay scribbled a handwritten note in the margin: “George and Laura -- Linda and I are so proud of both of you and look forward to seeing both of you in the White House. Hope you have a great Christmas with your family, Warmest Regards, Ken.” (New York Times, February 16, 2002)

On other occasions, Lay solicited Bush to appear at a variety of functions, including twice for an annual conference promoting trade between Japan and the United States, for a gala in Houston for a Civil War musical sponsored partly by Enron as well as for the 1998 World Economic Forum in Davos, Switzerland. Bush attended the Japan conference at least once, though he apparently declined the gala for the musical. It could not be confirmed whether he attended the Davos conference. (New York Times, February 16, 2002)

In April 1997, Lay wrote the governor about an upcoming meeting scheduled between Bush and an influential official from Uzbekistan. He noted that Enron had opened an office in Tashkent and was negotiating a $2 billion joint venture. Lay wrote, “I know you and Ambassador Safaev will have a productive meeting which will result in a friendship between Texas and Uzbekistan.” (New York Times, February 16, 2002)

Two years later, Lay wrote asking that Bush meet with the prime minister of Romania during his visit to Houston. He noted that Enron had recently finalized a joint venture gas marketing deal in the country. But a handwritten note by a staff member suggests that Bush declined to meet the official. (New York Times, February 16, 2002)

Lay offered an Enron board seat to Clinton administration Treasury Secretary Robert Rubin in 1999, when Enron was lobbying intensely to block government efforts to regulate its derivatives-trading business. Lay sought to influence the Clinton administration on issues affecting Enron. Lay wrote to Rubin two days after Rubin announced he would step down as Clinton’s treasury secretary and about two months before he turned over the job to Lawrence Summers. Rubin rejected the offer of an Enron board seat. (Washington Post, February 21, 2002)

In a May 14, 1999, letter, Lay wrote, “If you are considering joining any corporate boards, I would very much like to talk to you. Given the way Enron has evolved, not only do we badly need a person with your experience and insights (gained both at Goldman Sachs and at the Treasury Department, but also I think you would find serving on our board intellectually and otherwise interesting.” Lay said in the letter he also had placed a call to Rubin “in the hope that I mention this to you personally.” (Washington Post, February 21, 2002)

In a letter sent on the same day as Lay’s letter to Rubin, Lay wrote to congratulate Summers, the incoming Treasury secretary. Lay wrote, “I can’t imagine anybody better prepared” for the job. Five months later, in another letter, Lay complained to Summers about proposals to regulate over-the-counter derivatives. Lay said he was upset that the Treasury’s assistant general counsel, John Yetter, had said at a public forum that the President’s Working Group on Financial Markets might recommend regulation of “otherwise unregulated entities, such as Enron” that traded in derivatives. Lay’s letter read, “As you would expect, we are troubled by being singled out, but even more troubled by the notion that financial regulators may be considering any regulation of OTC (over-the-counter) dealers, particularly in the energy field, where we believe derivatives are truly customer based risk management tools.” (Washington Post, February 21, 2002)

A few months later, Lay referred to his connections with Rubin in a letter to Summers, urging Treasury officials to back off from proposals to regulate Enron's trading in financial products, known as derivatives, that were tied to energy commodities. Enron was preparing to initiate an online operation to trade energy derivatives. (Washington Post, February 21, 2002)

Lay did not get what he had hoped from the Clinton administration. Treasury Department officials decided against government oversight of derivative traders such as Enron. In December 2000, Congress adopted that policy in legislation that exempted from government oversight the kind of energy derivative contracts traded by Enron. (Washington Post, February 21, 2002)

Hoping to squelch any administration plans for further regulation, Lay wrote, “Enron believes there is no need for any additional regulation, because there have been no problems.” He then asked for a chance “to make our case” if increased regulation were in the offing and requested “a call or note” in reply. Lay concluded by referring to Summers’s previous boss. Lay wrote, “I spent some time with Bob Ruben (sic) in Shanghai last week and he appears to be doing very well. I must say he looked more relaxed than I have seen him in years.” (Washington Post, February 21, 2002)

The next month, in November 1999, the working group’s report was returned and Summers sent a copy to Lay, telling him that it “is not recommending legislative action with respect to derivatives dealers (such as Enron) that are unaffiliated with a federally regulated entity at this time.” (Washington Post, February 21, 2002)

Then came the Enron crash in 2001. Bush was president of the United States. For several months, he said nothing. On January 11, 2002, he showed his true colors. The president tried to distance himself from “Kenny-boy.” He refused to come clean. Instead, he said Lay actually “was a supporter of (Democrat) Ann Richards in my run in 1994.” What Bush did not say was that Lay gave him three times as much money as he did Richards in the gubernatorial election. Bush also said that he did “know” Lay until after he won the governor’s race. (Los Angeles Times, January 15, 2002)

After he was fired in December 2002, former Treasury Secretary Paul O’Neill and Federal Reserve Chairman Allan Greenspan devised a plan to make CEOs accountable. But according to former Treasury secretary Paul O’Neill, Bush went with a more modest plan because 'the corporate crowd' complained loudly and Bush could not buck that constituency.” (http://www.whitehouse.gov/news/releases/2002/03/20020307-3.html)

However, Bush spoke differently to the American people. He publicly touted a reform package that would be tough on corporations. Bush said, “America is ushering in a responsibility era and this new culture must include a renewed sense of corporate responsibility. If you lead a corporation, you have a responsibility to serve your shareholders, to be honest with your employees.” (http://www.whitehouse.gov/news/releases/2002/03/20020307-3.html)