Lawmakers to White House, Don't Support Friends of Enron

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Lawmakers say the President should stay out of Enron appeal


By MARCY GORDON
Associated Press


WASHINGTON — Sen. Christopher Dodd, who heads the Senate Banking Committee, has joined a number of lawmakers and officials of both parties in calling on the Bush administration not to side with defendant companies in a Supreme Court case that could determine the fate of a separate Enron lawsuit.

At issue in the case is shareholders' ability to recover damages from parties, such as investment banks and accountants, that are accused of aiding corporate fraud.

Dodd, a Connecticut Democrat seeking his party's presidential nomination, wrote President Bush urging him "to take appropriate steps to discourage" the Justice Department's solicitor general from filing a brief in the case in support of the defendants.

His letter was sent Tuesday, the day before the deadline for Solicitor General Paul Clement to submit such a brief.

Dodd urged Clement not to file a friend-of-the-court brief that contradicted the Securities and Exchange Commission's position "that parties who contribute to defrauding investors should be held accountable."

On the other side, a bipartisan group of three former SEC chairmen, 13 other former SEC officials and 11 academic experts filed a brief with the court Tuesday supporting the defendant companies. The three ex-chairmen were Roderick Hills, appointed by President Ford; Harvey Pitt, one of Bush's former appointees to the position, and Carter appointee Harold Williams.

Justice Department spokesman Erik Ablin declined to comment.

The controversy escalated in mid-June when the administration, through Clement, rejected an SEC recommendation in the case and did not support the position of investors suing for damages.

In the ensuing weeks, several lawmakers and former SEC officials have urged the administration not to take the further step of supporting the defendants.

On Tuesday, a group of people who lost retirement savings in the collapse of Enron Corp. renewed their plea to Bush, Clement and Attorney General Alberto Gonzales to support the shareholders' position in the other case, Stoneridge Investment v. Scientific-Atlanta.

Although the high court has not decided whether to hear arguments in the Enron case, justices have agreed to review the Stoneridge case, a similar suit brought by investors against suppliers to one of the nation's largest cable TV companies.

If the court rules against investors in the cable TV suit, it could mean that other cases — like the Enron shareholders' suit — would not be able to go forward.

In the cable TV case, two suppliers — Motorola Inc. and Scientific-Atlanta Inc., now owned by Cisco Sytems Inc. — allegedly engaged in sham transactions with Charter Communications Inc. to boost Charter's cash flow and meet the expectations of Wall Street.

The shareholders' class-action lawsuit, seeking $40 billion in damages, contends that Merrill Lynch & Co., Credit Suisse Group and Barclays PLC should be held liable as participants in Enron's accounting fraud.

The shareholders appealed to the Supreme Court after a federal appeals court in New Orleans ruled in March that they cannot proceed with the suit.

Bush had personally weighed in with his views, telling Clement that it is important to reduce unnecessary lawsuits and that federal securities regulators, rather than shareholders, are in the best position to sue.

In recent weeks, a flurry of filings with the Supreme Court, public statements, and letters to Bush and Clement, several lawmakers and former SEC officials have implored the administration not to take the further step of supporting the defendants.

The group includes Sen. Arlen Specter of Pennsylvania, the senior Republican on the Senate Judiciary Committee; Reps. John Conyers, D-Mich., and Barney Frank, D-Mass., chairmen of the House Judiciary and Financial Services panels, respectively; and another of Bush's former appointees as SEC chairman, William Donaldson — who joined with Clinton administration SEC chief Arthur Levitt and former SEC commissioner Harvey Goldschmid.