Enron donated funds to Bush's campaign for the Texas governorship

The White House said the probe was necessary to protect the interests of workers and pensioners in similar companies and has announced a review of rules for all corporate pension plans.

Enron's 20,000 employees lost billions of dollars in their pensions plans, after they were barred by the company from selling shares when their value plummeted.

Many of the company's executives - who have also advised the White House on energy policies - allegedly raked in massive profits, selling their shares before the steep fall in prices.

The exact focus of the Justice Department's criminal investigation has not been disclosed, but it is likely to focus on the company's heavy reliance on so-called off-balance sheet partnerships, which concealed financial problems from investors.

The Senate Energy committee has also said it is to look at whether changes are needed to federal energy policies in the wake of Enron's collapse.

Markets stunned

Enron, which is based in Houston, Texas, and has close links with the Bush administration, is now being investigated by five Congressional committees and two other government departments.

Its financial collapse stunned financial markets, its share price dropping to less than $1 from $85 in the space of a year.

Enron's downfall

16 Oct 2001: Third quarter results reveal black hole in finances 22 Oct: Regulator launches inquiry 9 Nov: Enron admits inflating its profits 11 Nov: Dynegy, a smaller rival, bids for Enron 29 Nov: Dynegy drops takeover plan 2 Dec: Enron files for bankruptcy 11 Dec: Hearings in Congress begin 10 Jan 2002: Criminal inquiry confirmed

The BBC's Washington correspondent Nick Bryant says it is a scandal which threatens to embroil the White House.

When President Bush first ran for the governorship of Texas, the company was his biggest corporate patron, donating hundreds of thousands of dollars.

More recently, Enron executives met Vice President Dick Cheney and his staff, offering advice on the administration's controversial energy plan.

But the White House denies that Enron's financial situation was discussed at the meetings.

On Thursday White House press secretary Ari Fleischer said there had been contact between Enron and the government.

He said Enron's chairman Kenneth Lay contacted the Treasury Secretary Paul O'Neill and Commerce Secretary Don Evans to say Enron might not be able to meet its obligations.

But Mr Fleischer said they decided not to take any action to intervene, and that they did not tell President Bush of the decision.

The White House said it was likely to propose new policies shortly to protect against a debacle similar to the Enron case happening again.