Enron: The Scandal That Keeps on Giving

By Daren Fonda and Adam Zagorin

For Enron watchers who feared things might be getting stale, last week brought fresh material for outrage. Although whistle blower Sherron Watkins testified in Congress that she believed former CEO Kenneth Lay was "duped" by underlings about accounting abuses, a trove of newly released exchanges shows just how chummy Lay was with George W. Bush in his days as Texas Governor. In one note Bush teases Lay about getting older; in another Lay scribbles that he's "so proud" of the Governor and his wife. Beyond the niceties, Lay repeatedly seeks Bush's support for legislation that would benefit Enron.

Separately, Enron disclosed that Lay sold $100 million in its stock last year (about $70 million more than he earlier reported), $20 million of it after Watkins warned him of the company's precarious situation, according to the New York Times. It was also revealed that for several weeks before Enron's Dec. 2 bankruptcy filing, 20 to 30 senior officers were allowed to withdraw millions of dollars from "deferred-compensation accounts" even as retirees and former execs also owed money were refused the same right until it was too late. Other documents emerged that show how aggressively Enron used its financial clout to protect its interests. A memo from Enron's auditor Arthur Andersen discusses the "influence" and "access" Enron hoped to get in exchange for a contemplated $500,000 donation to the International Accounting Standards Board, which harmonizes accounting standards among nations--something Enron was presumably very interested in. Sources tell TIME that since 1989, Enron gave $46,000 to that body's U.S. counterpart, the Financial Accounting Standards Board.

--By Daren Fonda and Adam Zagorin