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White House intervened on behalf of Enron in India

The Bush administration intervened with top Indian officials last year in a bid to salvage an Enron Corp. project in India, according to documents released on Friday that shed new light on the administration's relations with a major financial backer.

The White House said the effort, involving Vice President Dick Cheney and other senior officials, was justified because the $2.9-billion Dabhol power project was financed in part through the US government's Overseas Private Investment Corporation, a taxpayer-backed agency that provides "political risk" insurance and loans to help US companies invest in developing nations.

The White House denied the push was influenced by Enron's political contributions. Enron was Bush's biggest backer heading into the 2000 presidential election, giving about $623,000 to his campaigns since 1993, when he was raising money for his first Texas gubernatorial race.

OPIC's exposure to the Dabhol project amounted to $340 million in both insurance and loans. In a Nov. 6, 2001 letter to India's national security adviser, OPIC President Peter Watson said the issue had risen "to the highest levels of the United States Government (and) could force OPIC to close its programs entirely in India."

Watson's letter followed a June meeting between Cheney and Indian officials in which the vice president brought up the Enron project. In the months to follow OPIC would prepare "talking points" on Dabhol for Bush's meeting on Nov. 9 with Indian Prime Minister Atal Bihari Vajpayee.

Bush did not bring up the issue, however, according to the documents and White House officials.

Just days before Vajpayee came to the White House, Enron chairman Kenneth Lay had called Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans, Bush's 2000 campaign manager, to warn them of the company's mounting financial problems.

Enron President Lawrence "Greg" Whalley called Treasury Undersecretary Peter Fisher in late October and early November, seeking help for the energy-trading giant, which on Nov. 8, the day before the Bush-Vajpayee meeting, disclosed that it had overstated earnings dating back to 1997 by almost $600 million. The company filed for bankruptcy on Dec. 2, the largest in US history.

In recent weeks the White House has sought to distance itself from the widening scandal surrounding Enron. The White House says it monitored the situation but did nothing to help the Houston-based company avert collapse.

White House defends Dabhol effort

Enron owns 65 per cent of Dabhol, General Electric Co. and construction firm Bechtel Corp. each own 10 per cent and the Maharashtra State Electricity Board the remaining 15 per cent.

White House spokesman Ari Fleischer defended the administration's intervention. "The United States taxpayers have an exposure to risk and loss through OPIC," he told reporters.

"It's not uncommon for (companies) to have exposures which do require contacts between American officials and government officials in other countries to minimize those risks to taxpayers."

Fleischer noted that former President Bill Clinton's commerce secretaries had made similar appeals on behalf of Dabhol at various stages.

In addition to OPIC's exposure, Fleischer said the US Export-Import Bank had made $300 million in direct loans toward the project.

The Dabhol plant, about 250 km south of Bombay, has been idle since June due to a tariff dispute with its sole customer, MSEB, the government-run monopoly distributor of electric power in the area.

The Bush administration was pressing the Indian government to reach an agreement with Enron and other investors to revive the stalled project. "It is an important project to create jobs in America," Fleischer said.

According to government documents obtained by Reuters, Cheney raised the Enron issue at a June 27 meeting in Washington with Sonia Gandhi, the leader of the main Indian opposition Congress party.

"Good news is that the Veep mentioned Enron in his meeting with Sonia Gandhi yesterday," a National Security Council official said in an e-mail dated June 28. The name of the official was blotted out before its release.

The White House said on Friday that Cheney had simply inquired into the project's status and denied that anyone from Enron had asked the vice president to intervene with Gandhi.

In his Nov. 6 letter to India's National Security Adviser Brajesh Mishra, Watson pressed New Delhi to resolve the matter, saying: "Without substantial and demonstrable progress in the resolution of Dabhol, I cannot see a way for OPIC to support the new venture."

"As a result of the lack of action by the Government of India, we anticipate Dabhol will be raised during Prime Minister Vajpayee's visit to Washington this week," Watson wrote.

An earlier e-mail, dated Nov. 1, included what it called "OPIC's talking points on Dabhol prepared for the President's meeting with Prime Minister Vajpayee."

But before the White House meeting, a Nov. 8 e-mail labeled "High" priority by its unidentified author, said Bush "cannot talk about Dabhol" in his meeting with Vajpayee. Instead, the e-mail said national security adviser Condoleezza Rice would do so when she met Mishra.

The Nov. 8 e-mail noted that Lawrence Lindsey, chairman of Bush's National Economic Council, had met Mishra on Nov. 7, but it said Lindsey was "advised that he could not discuss Dabhol." Lindsey is a former Enron consultant and had served on its board of advisers.

A final e-mail, dated Nov. 9, said Rice did not discuss Dabhol with Mishra.

Likewise, Bush did not raise the issue in his talks with Vajpayee, the White House said.

"The vice president had raised it earlier, and the determination was made that this would be one of the issues that did not rise to the president's level," Fleischer said on Friday.

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