This partial transcript of Special Report with Brit Hume, January 16, 2002, was provided by the Federal Document Clearing House. Click here to order the complete transcript.
JEFF BIRNBAUM, FOX NEWS CONTRIBUTOR: Hey, Brit.
HUME: Now, we all know that Enron engaged in risky business practices, concealed the true condition of their company from the public and from a very large number of the stockholders. So that's why it's a financial scandal.
BIRNBAUM: That's right.
HUME: But we also know that a lot of people got hurt. Now the question is, people are losing their jobs. How many people are out of work as a result of this?
BIRNBAUM: Well, at least 4,500. That's how many...
HUME: At the company.
BIRNBAUM: At the company – out of what was once 21,000. So a very large percentage of Enron employees are now on the street.
HUME: Right. But still, that means that the rest of those people are still working there, right?
BIRNBAUM: That's right, or...
HUME: It remains a very large company.
BIRNBAUM: It is a very – it was once the seventh largest company in the United States, but it's a good bit smaller now.
HUME: Right, now. But some of its businesses do remain functioning, correct?
BIRNBAUM: That's right.
HUME: It's a – what else?
BIRNBAUM: It's basically a pipeline company on top of which was put a number of trading kinds of firms, hedge firms – a commodity trading firm on top of that.
HUME: Which the commodity being, of course, energy, right?
BIRNBAUM: Energy, electricity, gas, oil and lately broadband, which is high-speed Internet connections.
HUME: Right. And so, they were speculating – not speculating, but they were trading in this?
BIRNBAUM: They were trading in that, and...
HUME: Undoubtedly speculating.
BIRNBAUM: Yes. And what this is all about is some of the executives – the top executives, two dozen or so of them, were trading in their stock options, making hundreds of millions of dollars, while they possibly knowing that the financial condition of this company was not as strong as their financial balance sheets were saying, and telling their employees and investors that things were OK. And as a result, a lot of investors stayed in, as some $60 billion worth of market value of that company was lost, and employees held onto a lot of their stock, especially in their 401Ks.
HUME: Now, about the company at its peak was – what – about 80 bucks, something like that.
BIRNBAUM: Over – about 85, and now that is – $85 a share. It's now less than $1 a share.
BIRNBAUM: That's 60 billion...
HUME: Now, when did all these people get out? And the impression is that the big shots got out with all of their money intact, and the little guys who worked at the company and had it in their 401K programs couldn't get out. Is that true?
BIRNBAUM: No. In fact, most of the money that was in the 401K plans could have – those employees could have gotten out, but decided not to out of loyalty to this company that had been a big high flyer. But perhaps relying on the assurances of the executives, they didn't get out, even though they could sell it. And so as a result, they were...
HUME: And meanwhile, the company stock plunged from 80 until to about what?
BIRNBAUM: 85 to ...
HUME: Well, I know, but there was a point at which they were – it got to about 16 at one point, and people were still staying in, right?
BIRNBAUM: That's right. And as a result, some 6,000 to 8,000 employees lost virtually all of their nest egg – the 401K money. Another few thousand lost a very good portion of it, and thousands of others also...
HUME: ... stockholders around the country, who...
BIRNBAUM: Oh, no. These were the...
HUME: Only employees.
BIRNBAUM: I'm speaking just the employees. For investors around the country, there have been very severe implications, because when the stock went from over 85 down to less than $1, more than $60 billion worth of investors' equity was lost in that huge plunge, which just happened within the last year. HUME: All right. Now, talk to me about, then, the question of what the company – I mean, what the administration could have done, or that any administration could have done, and what it was ever asked to do. What do we know about that?
BIRNBAUM: Well, though there are some denials here, it seems pretty clear that Ken Lay, the chairman of Enron, asked the commerce secretary, Don Evans, to intervene and with debt credit agencies to try to bolster Enron's credit rating that would help...
HUME: So they could borrow more money and keep them going?
BIRNBAUM: Could borrow more money and help prop up this tumbling stock price.
BIRNBAUM: And another possibility would be a coordinated effort to infuse money into the company very much like long-term Capital Management, the hedge fund that essentially went under a few years ago, but was prevented from rocking the stock market, because of the intervention of the Federal Reserve.
HUME: Right. Now, and that was basically with liquidity in the form of loaned money.
BIRNBAUM: Of loaned money, and Lay was either asking for or hinting that he wanted some kind of either intervention like that or just a few kind words about Enron to the Moody's, the debt rating service to try to improve – or rather keep Enron's debt rating high, so that it could borrow on its own.
HUME: Right. Now, here is this company, who made enormously large political contributions to both parties, but predominantly to the Republicans, and especially a large contributor to the Bush campaign.
BIRNBAUM: That's right.
HUME: And not the biggest, but one of the bigger.
BIRNBAUM: That's right.
HUME: What does it now appear, from what we now know, that Enron got for its – in return for its campaign contributions?
BIRNBAUM: As best as we can tell, they got nothing. Despite the pleas of Ken Lay, there was no intervention with the debt agency. There was no infusion of capital from the Federal Reserve. And it's peculiar that campaign finance reform may actually pass, because...
HUME: Talk to me a little bit about that.
HUME: Campaign finance reform, which failed in the House of Representatives and was thought a dead letter, which is based on the argument that campaign money buys too much influence in Washington, you're saying to me that this has been given a new lease on life?
BIRNBAUM: It's one of the great ironies. Maybe it's one of the nonsensical items that's likely to happen when Congress returns that campaign finance reform is very likely now to pass in the House of Representatives, because of the appearance of influence and access that Ken Lay had when he called Treasury Secretary O'Neill or Don Evans at the Commerce Department, even though neither O'Neill nor Evans, nor in fact anyone in the Bush White House, did anything to intervene on their behalf to save the company.
HUME: And this is likely to come up – what – as an early item when the Congress...
BIRNBAUM: I assume it's a very early item. There will be other items as well related to here, and we'll hear tomorrow the Securities and Exchange Commission will try to create a new accounting oversight board from the accounting industry profession...
HUME: …reforms in that whole area of reporting and accounting, right?
BIRNBAUM: And also pensions.
HUME: All right. Jeff Birnbaum, thanks very much.
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