Enron's Labour links exposed

THE storm over the collapsed £50bn American energy giant Enron threatened to engulf Tony Blair last night after dramatic revelations about the firm's financial links with New Labour.

The Government was involved in a new 'cash for access' row after Ralph Hodge, the former British boss of Enron's European operations, blew the whistle on how it wined and dined its way to the heart of the Labour establishment.

Hodge said the firm felt it had to give money to the Labour Party to influence Cabinet Ministers. He disclosed how New Labour threw open its doors to Enron after it spent £36,000 on a Labour charm offensive. The money was for exclusive Labour functions, including a gala dinner attended by Blair.

Hodge said that shortly after the dinner, the then Trade Secretary, Peter Mandelson, agreed to meet Enron's US bosses. Weeks before the dinner, Mandelson approved Enron's £1.5bn purchase of Wessex Water, Britain's biggest water operator, without referring it to the Monopolies and Mergers Commission.

Enron chiefs also met disgraced former Treasury Minister Geoffrey Robinson. 'I do not think we would have been successful at getting a table full without donations and I suspect if we had just invited them to dinner, then attendance would be zero,' Hodge, who quit Enron 18 months ago, said. 'It is clear that in the current climate, sponsorship and donations are the most efficient ways of getting access.' Hodge strongly believes that such donations should be stopped.

Hodge revealed that Ken Lay, who resigned as Enron's chairman last week, made several visits to the UK and believes he met Labour Ministers.

It also emerged that Cliff Baxter, the former Enron director who committed suicide in Texas, masterminded the company's campaign to buy Wessex Water - and made several visits to the UK to make sure the bid was successful.

Former ICI executive Hodge, non-executive chairman of Enron Europe from 1997 until July 2000, told how he arranged to sponsor dinners at the Labour Party conference in 1998 and 1999. Blair was guest of honour in October 1998 at the Labour gala dinner at Blackpool's Stakis Hotel, where Enron executives rubbed shoulders with Labour's high command. When Labour came to power, Enron's main aim was to stop it going ahead with plans to ban the building of gas-fuelled power stations. Labour Left-wingers wanted the move to protect mining jobs.

When the Government went ahead with the ban, Enron launched a massive and expensive campaign to overturn the policy. Hodge hired Karl Milner, a former spin doctor to Gordon Brown who then worked for political lobbyists GJW, to represent Enron. Milner is no stranger to controversy - in 1998 he was accused of leaking a top-secret Commons report to a potential client.

Late last year, he was lined up by Transport Secretary Stephen Byers to assist the Government's propaganda campaign on the railways after the row over the behaviour of Byers's senior spin doctor Jo Moore, who said 11 September was 'a good day to bury bad news'.

Hodge said: 'My biggest interface with the Government was over ending the moratorium on building gas-fired power stations. My American colleagues wanted to get familiar with the British system of government and British politicians and officials.'

But Hodge did not approve of the process. 'It would be a better world if companies could not make donations to parties. Before I joined Enron, I spent most of my career at ICI, which never made political donations as far as I recall. You could say I was brought up that way.'

Enron also gave more than £500,000 to the Prince of Wales Trust. Recalling the Enron meeting with Mandelson at the DTI, Hodge said: 'It was attended by myself, a US Enron employee named Mark Schroder and another UK Enron employee. Mandelson was with a young man who was his special adviser and a civil servant in charge of energy policy. Mandelson listened to us and we had a good dialogue.'

The moratorium was eventually lifted by Mandelson's successor Byers in October 1999, leading Enron to go ahead with a new gasfuelled power station on Teesside.

Hodge says he expected Mandelson to be sympathetic as his Hartlepool constituency was close to Enron's Teesside plant, which employs many of his constituents.

The Trade Department said on Saturdayt that Enron executives had not met current Trade Secretary Patricia Hewitt. They were unable to discuss meetings with her predecessors, Mandelson and Byers.

It is not only Labour politicians who are at risk from the Enron affair. Former Energy Secretary Lord Wakeham was paid £80,000 as an Enron board member.

A Labour spokesman said: 'The party has not received any donations from Enron. It is a matter of public record that Enron Europe have bought tickets for dinners and sponsored one event.' Allegations about 'cash for access' were ' completely without foundation'. 'We are committed to complete openness with regard to party funding.'

Enron, virtually unknown outside its native Texas until a few years ago, quickly became one of the biggest names in Britain's energy market. It employed 5,400 people in Britain and accounted for up to 15% of energy trading in the country. About 150,000 homes and businesses use Enron electricity and gas.

Mandelson was last night unavailable for comment.

MPs are to demand an investigation into the Government's links with Andersen, Enron's auditor, according to weekend reports. Andersen has reportedly won hundreds of millions of pounds of Government work. It also reportedly supplied staff and researchers to develop Labour's fiscal policies while in opposition.