January 25, 2002

Associates of Bush Aide Say He Helped Win Contract


WASHINGTON, Jan. 24 - Karl Rove, President Bush's top political adviser, recommended the Republican strategist Ralph Reed to the Enron
Corporation (news/quote) for a lucrative consulting contract as Mr. Bush was weighing whether to run for president, close associates of Mr. Rove say.

The Rove associates say the recommendation, which Enron accepted, was intended to keep Mr. Reed's allegiance to the Bush campaign without putting him on the Bush payroll. Mr. Bush, they say, was then developing his "compassionate conservativism" message and did not want to be linked too closely to Mr. Reed, who had just stepped down as executive director of the Christian Coalition, an organization of committed religious conservatives.

At the same time, they say, the contract discouraged Mr. Reed, a prominent operative who was being courted by several other campaigns, from backing anyone other than Mr. Bush.

Enron paid Mr. Reed $10,000 to $20,000 a month, the amount varying by year and the particular work,
people familiar with the arrangement say. He was hired in September 1997 and
worked intermittently for Enron until the company collapsed.

In interviews today, both Mr. Rove and Mr. Reed said the contract with Enron had had nothing to do with the Bush campaign. But Mr.
Rove said he had praised Mr. Reed's qualifications in a conversation about
the job with an Enron lobbyist in Texas.

"I think I talked to someone before Ralph got hired," Mr. Rove said. "But I may have talked to him afterward."

"I'm a big fan of Ralph's," Mr. Rove said, "so I'm constantly saying positive things."

But a friend of Mr. Bush recalled a discussion in July 1997 in which Mr. Rove took credit for arranging an Enron job for Mr. Reed.
"Karl told me explicitly of his concerns to take care of Ralph," this person said. "It was important for Karl's power position to be the guy who put this together for Ralph. And Bush wanted Ralph available to him during the presidential campaign."

Mr. Rove was concerned, this person also said, that Mr. Reed not have a prominent public role in the campaign because "Ralph was so
evangelical and hard right, and Karl thought it sent the wrong signal." Another Republican said: "It was basically accepted that Enron took care of
Ralph. It's a smart way to cut campaign costs and tie people up" so they do not work for other candidates.

Mr. Rove's involvement in Mr. Reed's hiring underscores the close association between Enron and the Bush inner circle.

"If Karl Rove was partly responsible for him getting the job at Enron, it illustrates the close relations between the Bush political world and Enron," said Trevor Potter, a Republican who is a former chairman of the Federal Election Commission. "If it was done for the avowed reason to keep Reed satisfied and out of someone else's political camp, it illustrates what everyone in the Republican world has known for years: Enron has been an important source of political power in the party."

Mr. Potter said Mr. Reed's hiring could have been a violation of federal election law if it turned out that "it was a backdoor way of getting him extra compensation for the time he was spending on Bush activity."

Mr. Reed said he had been hired mostly to help with an Enron campaign in Pennsylvania to win a central role in the state's electricity market, which was being restructured. He said he had had no idea that Mr. Rove or anyone else had spoken on his behalf.

Mr. Reed, who is now chairman of the Georgia Republican Party and runs a lobbying and political consulting firm called Century Strategies, based in Atlanta, said he had assumed he was being hired by Enron because he was a well-known political operative. "It was in every newspaper in America that I had started this firm," he said. "Everybody knew my background. Heck, my name ID was 50 or 60 percent."

Mark Palmer, a spokesman for Enron, said he had been in a meeting where company officials discussed hiring Mr. Reed or James Carville, a prominent Democratic strategist, for the Pennsylvania campaign. He said he had never been called by Mr. Rove, although he added, "Karl may very
well have talked to someone else in the organization."

Of Mr. Reed, Mr. Palmer said, "Ralph was a great help; he's such a hard-working guy."

Mr. Carville said, and Mr. Palmer confirmed, that Mr. Carville had been interviewed by Enron in Houston but had turned down the job that Mr. Reed later accepted. "I told them that it wasn't the kind of thing I do," Mr. Carville said. "It was about a deregulation thing."

Around the time that Mr. Reed worked out his deal with Enron, he made clear to the Bush team that he was supporting Mr. Bush for president. Mr. Reed once recalled that at a meeting in 1997, he told Mr. Bush, then the governor of Texas: "I hope you go. I hope you run. And if you run, I'll do everything I can to help get you elected."

From then on, Mr. Reed was an unpaid consultant to the Bush organization, though after the race was well under way his firm was paid by the campaign for direct mail and phone banks.

Mr. Reed said today that inasmuch as he had not known that anyone had spoken to Enron on his behalf, the contract could not have influenced his decision to support Mr. Bush. "I was a friend and strong supporter for the president based on my affection and high regard for him," Mr. Reed said. "I was going to be supporting President Bush regardless."

One Enron official, speaking on the condition of anonymity, said the company had hired Mr. Reed because it wanted a big name from politics.

Enron also hired other prominent political consultants. An Enron official said Frank Luntz, a Republican pollster, did polling for the company before and after the 2000 presidential campaign, gauging attitudes about energy-market restructuring in California, among other issues. Mr. Luntz said today that he worked for Enron in 2000 on energy policy and in 1995 on environmental policy, but he would not be more specific.

In early 2000, Mr. Reed ran into trouble with the Bush campaign for lobbying Mr. Bush, who was still governor, on behalf of the Microsoft Corporation (news/quote). Mr. Reed terminated his work for Microsoft after officials from the campaign complained about it. His firm said then that it had been concerned about "possible misperceptions" of the arrangement.

Mr. Rove, who sold roughly $100,000 in Enron stock last year, months before the company's collapse, said Mr. Reed was clearly on Mr. Bush's team prior to taking the Enron job.

"Ralph Reed made it clear right from the beginning," Mr. Rove said, "that he wanted to be for him, and gave sound and solid advice in the years running up to the president's decision to be a candidate."