Hot Potato: Playing Politics with Enron

If Washington doesn't handle its probe with care, it could burn either party

When Enron Corp. (ENE ) tumbled into bankruptcy, it put thousands out of work and drained billions from investors' portfolios. But the collapse of George W. Bush's top corporate backer may have a silver lining for one group: the Democrats. "Politically, this is a gift from heaven," says Larry Makinson, a senior fellow at the nonpartisan Center for Responsive Politics.

Of course, Senator Joseph I. Lieberman (D-Conn.) took care not to gloat when he announced that his Governmental Affairs Committee would investigate Enron. "This is a search for the truth, not a witch hunt," Lieberman said on Jan. 2. "The questions that need to be asked and answered about what happened to Enron are of great public--not partisan--interest."

Carefully chosen words, especially coming from the man who could be Bush's top challenger for the White House in 2004. And for good reason: The Enron debacle is a minefield. Dems will attempt to make Enron a case study in cozy GOP relations with Big Business and insensitivity to working people, while putting a dent in the President's armor. They'll charge that Enron's generosity to Republicans, who pocketed 73% of Enron's $5.77 million in campaign donations in the past decade, bought looser regulation of energy deals and a blind eye toward accounting conflicts.

Lieberman will be under pressure from the party leadership to rake the Republicans over the coals. That strategy would score points with the liberal Democratic base he must cultivate if he wants to challenge Bush in 2004. But the longtime pro-business Democrat risks looking like an opportunistic partisan if he moves too aggressively. "This wasn't Whitewater. This was bad business," warns one Democratic lobbyist. "If they try too hard to connect the dots to the Administration, they might jeopardize the credibility of the whole hearings."

It'll be a hard balance to strike, even for a pol like Lieberman, who has cultivated a persona of high-mindedness. Lieberman criticized President Clinton for his dalliance with Monica Lewinsky and split with his party during investigations into the 1996 fund-raising practices of Clinton and Vice-President Al Gore. That virtuous image helped him land a spot on Gore's 2000 ticket. Says Charles E. Cook Jr., editor of the nonpartisan Cook Political Report: Lieberman is "good at appearing as though he's earnestly seeking the truth rather than seriously exploiting a situation--even if he is seriously exploiting a situation."

But many Democrats smell GOP blood. Representative Henry A. Waxman (D-Calif.), the top Democrat on the House Government Reform Committee, released details on Jan. 8 of Enron's role in shaping the energy policy drafted last year by Vice-President Dick Cheney. With the Justice Dept. opening a criminal investigation, the Labor Dept. and Securities & Exchange Commission conducting civil probes, and five congressional committees holding hearings, "the name Enron and its relationship to the Bush family are going to remain in the headlines--and that's not something that displeases your average Democratic strategist," says Kim Wallace, chief political analyst for Lehman Brothers Inc.

Republican leaders aren't counting on Democratic restraint. The GOP-controlled House is launching its own probes, in part to try to insulate Republicans from charges of favoring the company. And Enron will try to capitalize on both parties' fear of a political backlash. "The public policy issues that this tragedy raises should not be lost in a partisan food fight," says Enron's outside counsel, Robert Bennett.

Business lobbyists are particularly concerned that losses in Enron's 401(k) plans--which have decimated the pensions of many workers--may lead to stiff new regulations. "When you're dealing with trillions of dollars and the retirement prospects of an aging nation, political lines get drawn quickly," says James A. Klein, president of the American Benefits Council, which represents big employers and pension managers.

Congress' full-throated pursuit of Enron should provide fascinating political theater. But as elections draw near, all sides must avoid overplaying their parts, lest they get booed off the stage.

By Lorraine Woellert and Mike McNamee, with Laura Cohn and Alexandra Starr, in Washington

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