Six months ago, when US President George W Bush turned down California's request for energy relief, many observers believed the reason was the close ties between Mr Bush and the Enron Corporation of Texas, the biggest US electricity trader.

Enron's chief executive, Mr Kenneth Lay, was the President's biggest campaign contributor. The 58-year-old billionaire, who ran Mr Bush's Texas gubernatorial campaign, loaned the Bush family Enron's private Lear jets, and contributed $100,000 (€114,000) towards the inaugural gala in January.

After Mr Bush took over the White House, Mr Lay became a powerful voice in Washington as energy adviser, helping to shape a policy which enraged environmentalists and encouraged Mr Bush to use California as a stalking horse for plans to drill for new oil on federal lands.

Now Mr Lay's reputation and career lie in ruins, and his company is fighting for survival.

Stock in Enron, once considered the smartest and most aggressive company in the electricity and natural gas industries, has crashed from $90 to $5.

Enron's controversial financial dealings are under federal investigation following the disclosure of massive write-offs in hitherto hidden partnerships.

The dizzying speed of Enron's fall has threatened widespread disruption in the US energy market which it dominated.

Whether the company survives depends now on its banks and the commitment of rival energy firm, Dynegy, to follow through on an offer to pay about $9 billion in stock for the debt-ridden company.

Since the scandal broke it has been revealed that Enron had 33 partnerships which held billions of dollars in debt, for which the company was liable.

Enron needed such debt, analysts said, to support expanding levels of trading in electricity and gas. However, the weight of debt left the company unable to maintain its credit rating, growth and high stock valuation.

The revelation that partnerships were used to move debt off the company's balance sheet and that Enron overstated profits in the past five years by almost $600 million was shocking enough for Enron employees.

However, they were infuriated further when they learned on Thursday that Mr Lay was due to get a severance package of $60.2 million from Dynegy at the same time as the value of their stock options and retirement accounts had evaporated.

The reaction to the idea that Mr Lay would profit handsomely from the merger was so hostile that the chief executive was forced to waive the compensation, amounting to three year's severance pay.

Still, Mr Lay's personal wealth is not threatened; last year he cashed in options for $123 million.

Since 1989, Mr Lay has accumulated $13 million in salary, $26.8 million in cash bonuses and $266.7 million in profits from selling stock.

His bonus in 2000 was $7 million, an award that Enron's board said was based on rising profits and high shareholder return.

The company has since admitted it improperly applied accounting rules and that about 40 per cent of its profit in 2000 came from transactions with partnerships controlled by Enron's chief financial officer.

Yesterday, shares in Enron fluctuated wildly as concerns grew over whether the Dynegy acquisition plan could be changed or that the deal could collapse.

Enron shook the markets when it disclosed on Monday that it might have to repay $690 million debt by November 26th because its credit ratings had been lowered, but on Wednesday repayment was postponed to mid-December.

The three-week reprieve gives the company more time to restructure its finances, but its bonds fell amid concern Enron would run out of cash before the Dynegy takeover is completed next year.

Enron's current cash balance is inadequate to pay off debt repayments of $2.8 billion due before the end of December, according to Goldman Sachs, and wholesale trading customers have asked Enron to put up more cash for collateral, according to the Fitch ratings agency.

Mr Lay, the son of a country preacher, and his partner Mr Jeffrey Skilling - who resigned abruptly as Enron's CEO in August - used innovative financial techniques during the 1990s to profit from increased federal deregulation of the energy industry.

The financial control Mr Lay exerted over the oil and gas markets - labelled excessive and misguided by critics - had an enormous effect on California's disastrous experiment with electricity deregulation, according to the Los Angeles Times.

Analysts said Enron faced collapse if the merger with Dynegy, a much smaller company, fell apart - and that its survival depended on being able to restore investors' and trading partners' confidence in its financial health. Many energy companies have already scaled back their dealings with Enron.

The Enron case will come before the Securities & Exchange Commission (SEC) chaired by Bush appointee Mr Harvey Pitt.

The commission will look into whether Enron adequately disclosed the risk to shareholders from its partnership deals.