Dean Condemns Enron-Focused Report

SPARTANBURG, S.C. — Democratic presidential candidate Richard A. Gephardt on Friday accused the race’s front-runner, Howard Dean, of “gross hypocrisy” following a published report on the former governor’s aggressive use of tax breaks to lure insurance companies to Vermont.

The Missouri congressman said Dean’s use of tax breaks to woo companies, including one set up by the Enron Corp., to Vermont contradicted his speeches condemning President Bush’s ties to big business.

“He really has been governing under the Bush model,” Gephardt charged in a conference call with reporters after the Boston Globe reported on the tax-break policy Dean had pursued.

“[W]e’ve got to have a candidate who can stand on Democratic values in dealing with budgets -- and I think I can do that -- and I don’t think Howard can do that,” Gephardt said.

Dean dismissed the criticism, saying there was nothing wrong with the business he sought to bring to Vermont, known as “captive insurance.”

The term refers to firms created to help insure their parent corporations. Use of these “captive” companies -- rather than traditional insurers -- can result in significant cost savings for the businesses that establish them.

During the last three months, Gephardt has singled out Dean for attack on a variety of domestic issues, seeking to raise questions about his rival’s commitment to core Democratic principles.

Polls show the two dueling for first place in the Jan. 19 Iowa caucuses that kick off the nomination process.

Political analysts generally believe Gephardt must win the caucuses to have a realistic chance of capturing the party’s presidential nod. The efforts by Gephardt and the other Democratic contenders to derail Dean also gained new urgency this week after the former governor won the endorsement of former Vice President Al Gore.

During more than a decade as governor, Dean made Vermont a hub of the captive insurance firms, boasting that he was keeping jobs and revenue that might have otherwise gone overseas. He repeated that claim Friday.

“The captive insurance business is a clean insurance business which companies use to reduce their insurance costs,” Dean told reporters after a town hall meeting in Council Bluffs, Iowa. “We’re actually taking jobs out of Bermuda and back into the United States based on what we were doing.”

Dean sharply disputed suggestions that his policies were aimed at giving Enron -- and other big firms -- a tax break. And he denounced the Globe report for focusing on Enron. “I think anybody who tries to do that has got something the matter with them,” he said of the reporter. “That’s like saying a bank is in bad shape because they had an account with Enron.”

The issue is sensitive because Dean frequently mentions Enron, a Texas-based energy company that filed for bankruptcy in late 2001, for policies the Democrat says have hurt the nation’s economy. In November, for example, Dean blamed massive job losses during the Bush presidency on “2 1/2 years of Enron economics.”

The Globe story described how Dean, after becoming governor in 1991, cut taxes two years later by up to 60% on premiums paid by the parent companies to captive insurers. This move helped encourage captive insurers for Microsoft, Dupont and many other companies, including Enron, to make Vermont home, according to the report.

Though many governors, Republicans and Democrats, compete to make their states business-friendly in an effort to broaden their corporate tax base, Gephardt derided Dean’s policy. “It’s wrongheaded to think you can solve your economic problems by giving huge tax breaks to people like [former Enron executive] Ken Lay and Enron,” he said.

A spokesman for Dean, Jay Carson, dismissed such comments as “a total distortion and a desperate attack.”

Gephardt’s continued criticism of Dean is not without risk. It could, for instance, anger Democrats who are eager for the party to avoid an intra-party clash so bitter that it weakens whoever wins the nomination.

But Gephardt said: “Elections are about differences. I don’t think it’s an attack if you talk about legitimate differences on issues.”

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Anderson reported from South Carolina, Gold from Iowa. Times staff researcher Susannah Rosenblatt contributed to this report.