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Articles: Enron's Ken Lay: Cuffed but confident

Posted by admin on Friday, July 09, 2004 - 12:16 AM

At the height of his power, former Enron chairman and CEO Kenneth Lay dined with political royalty. He commanded a fleet of corporate jets. He rallied forces to build a new sports stadium here.
But now he's known to still-angry Houston residents as perhaps the most infamous criminal defendant among all the corporate scandals. His name, in their minds, is synonymous with unbridled greed. In the climactic prosecution of a three-year investigation into the Enron scandal, Lay was charged here Thursday with 11 counts of conspiracy and fraud. In Washington, the Securities and Exchange Commission filed parallel civil charges that accused Lay of securities fraud. Lay and his defense lawyers deny all the charges. At a nearby downtown hotel, a confident Lay spoke to the media about his case during an extraordinary press conference filled with family and friends. The biggest target in the Justice Department's aggressive campaign against corporate crime, Lay is the 31st Enron-related defendant facing charges in the government's vast Enron investigation. The collapse of Enron in late 2001 led to billions of dollars in losses for investors and former employees, plus the largest bankruptcy restructuring in U.S. history at the time. "The top echelon of Enron has now been called into account for their crimes," says prosecutor Andrew Weissmann, head of the Justice Department's Enron Task Force, surrounded by a media horde outside the courthouse. Lay, wearing a navy blazer, surrendered at dawn at the FBI headquarters here to get fingerprinted. Then agents escorted him, handcuffed, to the federal courthouse, where he smiled at the media and disappeared into a back entrance. Before midday, Lay and his lawyers entered the overflowing seventh-floor courtroom of U.S. Magistrate Mary Milloy. Gently rocking in his chair, Lay surveyed the courtroom and grinned at folks he knew. His wife, Linda, and their family and friends filled the first two rows. When asked by the magistrate how he wished to plead, Lay said loudly: "Not guilty, your honor." Prosecutors told the court that Lay, if convicted of all charges, could face a prison term of 175 years and tens of millions of dollars in fines and forfeited money. Milloy released Lay on a $500,000 personal recognizance bond backed by his family's assets. Shortly after his arraignment, Lay, defense attorney Michael Ramsey and Houston public-affairs adviser Kelly Kimberly put on the news conference near the courthouse. It's highly unusual — and legally risky — for high-profile criminal defendants to speak to the media about their ongoing cases. But Lay's team is aggressively telling his side of the story and burnishing his image. His attorneys believe they should take the offensive in his case, not backpedal. Lay recently gave an interview to The New York Times proclaiming his innocence. Fielding questions for half an hour, Lay said: • That he committed no crimes. "As CEO of the company, I accept responsibility for Enron's collapse," Lay said. "However, that does not mean I knew everything that happened at Enron, and I firmly reject any notion that I engaged in any wrongful or criminal activity." • That Andrew Fastow, the former Enron chief financial officer who pleaded guilty to fraud and is helping prosecutors in their case, betrayed his trust. Earlier in the day, defense attorney Ramsey called Fastow "a liar and a thief." • That he will remain haunted by the Enron meltdown for the rest of his life. "I continue to grieve," Lay said, "as does my family, over the loss of the company, my failure to be able to save it, and the tremendous hardship that it caused so many employees, retirees and others. But failure does not equate to a crime." • That rather than sell Enron stock as the firm faltered, he listened to his financial consultants and bought more, then borrowed against it to diversify his investments. "I believed that Enron stock would only increase in value over time," Lay said. "In September 2001, I even used a $10 million cash bonus I received from the company to pay down debts, rather than use Enron stock." Defense attorney Ramsey said he would seek Lay's right to "a speedy trial" for this fall. He hinted he would seek to move the trial out of Houston. He also said he would ask the court to sever Lay's charges from the expanded indictment that includes fraud and conspiracy charges against former Enron CEO Jeff Skilling and former chief accounting officer Richard Causey. They're expected to be tried together. As the press conference ended, Lay's backers applauded. "I'm here to give support to Ken Lay," said the Rev. William Lawson of the Wheeler Avenue Baptist Church. He has known Lay for years. Attorneys and media experts who are not involved in the case called Lay's aggressive strategy either a brilliant move or a dangerous step that will anger prosecutors. Allen Adamson of Landor Associates praised the approach, saying it shows that Lay isn't hiding anything. "If you're willing to stand up, take the questions and shoot straight, people will give you the benefit of the doubt," he says. "In 20 years, I've never seen a defendant hold a press conference," says Thomas Ajamie, an attorney at Schirrmeister Ajamie in Houston. "I don't think it's wise. Ken Lay felt compelled to speak. ... He better have been speaking the truth." As news of the indictment spread, Houston was abuzz with unpleasant memories of Enron. Former employees and callers to radio talk shows bashed Lay, saying he deserved to get nailed. "Ken Lay, along with the other responsible parties, needs to be stripped of their wealth and made to feel like the others who lost everything as a result of their greed," says Maritta Mullet, a former Enron worker who lost $100,000 from her retirement plan. Ed Cottrell, a project engineer in downtown Houston who watched Lay's press conference on TV, says: "He should have known what his direct reports were doing. If he didn't know, shame on him." The indictment marks the stunning downfall of one of the most admired captains of industry in recent years. Lay's life was the classic, rags-to-riches yarn of a farm kid from Tyrone, Mo., making it big in Corporate America. The son of Baptist preacher, Lay became a fraternity president at the University of Missouri and earned a doctorate in economics there. In 1984, Lay became CEO of Houston Natural Gas and built the company into a national powerhouse, soon naming it Enron. By the 1990s, Enron had grown into a highflying, commodities-trading energy firm that revolutionized the industry. Then scandal struck three years ago. Federal investigations and shareholders' lawsuits ensued. Thousands of news stories and several books and films have documented the suspected accounting scams that brought down the once-proud firm. Lay, once worth $400 million, told The New York Times that he lost most of his riches in the Enron meltdown. His net worth now: $20 million. Meanwhile, the Lays are trying to sell Jus' Stuff, their used-furniture store outside downtown Houston that peddles antiques at bargain rates. The store was opened by Linda Lay after the Enron debacle. Lay's attorneys had hoped to ward off what they believe to be a weak indictment. They met in Washington last week with Justice Department prosecutors, urging them to drop the indictment. But their appeals were rebuffed, and a federal grand jury handed up the indictment Wednesday. Barring a settlement between Lay and prosecutors, Enron watchers can look forward to perhaps the final chapter in the saga of Enron and Ken Lay.

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