For months, the 78-year-old founder and former Adelphia CEO had been in the cross hairs, pursued by charges that he and his family had looted the company. It was widely assumed that he and his sons would face charges at some point. But in New York and Washington, the urgent question last week wasn’t whether, but how. From the moment it was formed two weeks ago, NEWSWEEK learned, President George W. Bush’s new Corporate Fraud Task Force had taken an interest in the stage managing of the event. What they wanted was a perp walk.
The script was written midweek. When Rigas visited his lawyer in Manhattan last Tuesday, a team of investigators from the U.S. Postal Service tailed him. Sensing what was about to come next, Rigas’s attorney–a canny old pro named Peter Fleming–called the Feds to offer an immediate (and low-key) surrender, NEWSWEEK has learned. His pitch: Rigas is 78 years old. He’s had triple bypass surgery. You know he’s not going anywhere. And I have Rigas’s passport. The prosecutors’ reply, says Fleming: we have nothing at all to say. But late that night, the leader of the task force, Deputy Attorney General Larry Thompson, called Bush’s counsel, Alberto Gonzales, to report that “a sensitive law-enforcement action will take place tomorrow morning regarding Adelphia.”
This was good news for a president eager to drop some legal bunker busters on the evildoers of corporate America. Gonzales told the president and White House Communications Director Dan Bartlett early the next morning. Meanwhile camera crews–tipped off by officials in Washington–were lining up at New York’s main post office, where Rigas would be booked. White House officials monitored the coverage as it unfolded, giving Bush an update later on the arrests. The president’s one-word reply: “Good!” At his briefing, Press Secretary Ari Fleischer crowed about the action. Indeed, together with passage of a corporate-responsibility bill later that day, the arrests may have goosed the Dow, which rose 489 points. On a Bush fund-raising trip the next night, senior adviser Karl Rove accepted facetious kudos for the Manhattan show, which he insisted he’d learned about from TV reports. “Wait’ll you see what’s next,” Rove joked with a cackle. “Orange jumpsuits!”
The Rigas arrests were only one part of an all-out White House effort to, as they say in the spin-doctoring business, “get out ahead of the story.” In this case, the story being written by Bush’s critics questioned the president’s ability to shore up an economy threatened by the shaky stock market. Administration officials claim to be unfazed by the political risks to Bush or the Republican Party. But the Bush White House was taking no chances, pursuing an array of strategies designed to show that the country has a commander in chief of the economy as well as the war on terrorism.
And, after the usual rhetorical stumbles (he played Louis Rukeyser, badly, in one photo op), Bush seemed to gain some footing. He planned to sign the corporate-reform measure with a flourish this week. It’s far tougher than the one he originally asked for, but he’ll take credit. (“Presidents have Rose Gardens, unfortunately,” said Democratic Party spokeswoman Jennifer Palmieri, sighing.) Bush made progress brokering a congressional deal on free-trade powers, which he sees as an economy-boosting measure. Rising deficits notwithstanding, he will hold the line on his tax cuts, daring timorous Democrats to fiddle with last year’s 10-year, $1.5 trillion pact. From his August vacation base in Crawford, Texas, Bush will travel on a “heartland tour,” conducting “hug a shareholder” events along the way.
Despite poor reviews, he’s sticking with his economic team, but is reining them in. Treasury Secretary Paul O’Neill won’t be making foreign trips with aging rock stars. A half-dozen cabinet members will go to Texas next month to take part in an “economic forum” at Baylor University. As for Dick Cheney, he hasn’t quite achieved “Where’s Waldo?” status, but he’s close. With his former company under SEC investigation, hectored by dem-onstrators and a shareholders’ suit, he’s been inspecting submarines, avoiding all Q&As with the press and stumping for candidates in key states such as North Dakota. He won’t do Sunday talk shows from now until September. The reason, a top aide says with a straight face, is that he is being “saved” to talk about the anniversary of September 11.
But for Bush–who unblinkingly administered the death penalty in Texas and loosed laser-guided bombs on Al Qaeda–the easiest way to improve the ethics of Wall Street is to throw a lot of people in the slammer. Thompson is the honcho in charge, peppering federal prosecutors from coast to coast for updates on hot cases. The first could involve WorldCom. This week at least two senior executives of the bankrupt company–former chief financial officer Scott D. Sullivan and former controller David Myers–are expected to be indicted on charges they fraudulently accounted for $3.9 billion in expenses. Another company whose top executives are high up on a Justice Department SWAT list, NEWSWEEK has learned, is Qwest Communications, the Denver-based telecom giant whose founder, Phil Anschutz, is a leading GOP contributor.
And that’s just the start. Federal prosecutors, under pressure from the task force, have dramatically accelerated their probe of Enron. An indictment of the firm’s former chief financial officer, Andrew Fastow, could come as early as next week, one source close to the case told NEWSWEEK. Lawyers for Fastow have been attempting to reach a plea bargain, offering his testimony against Enron higher-ups in exchange for a lighter sentence. But given the new tough-cop attitude, Justice Department prosecutors were undecided about whether to take the deal, with some arguing for a no-holds-barred strategy on the theory that Fastow was the most culpable of the company’s officers. On the other hand, one of the people Fastow could conceivably rat out is Enron CEO Ken Lay, one of Bush’s top fund-raisers. It’s far from clear that Fastow has the goods on Lay, but still, that’s one “perp walk” many investors (and former Enron employees) would like to see, and that the president may have no choice but to applaud.
