Former Enron Chairman Ken Lay talks to reporters outside Federal court at the end of his first day on the witness stand in his fraud and conspiracy trial in Houston April 24, 2006. REUTERS/Tim Johnson
Posted on 04/24/2006 4:34:06 PM PDT by NormsRevenge
HOUSTON – Enron Corp. founder Kenneth Lay declared his innocence Monday on the witness stand, somberly saying the company's legacy of lost jobs and wrecked retirement savings pained him even more than the loss of a loved one.
Lay blamed the implosion of Enron, once the nation's seventh-largest company, on a series of devastating circumstances that included theft by the chief financial officer, negative press, a bear market and investor anxiety after the Sept. 11 attacks.
“I don't think there ever was a conspiracy of any kind,” he said.
His testimony, defending against criminal fraud and conspiracy charges that could send him to prison for the rest of his life, represented an extraordinary moment in an era in which Lay and Enron, fairly or not, have come to be seen as symbols of corporate scandal.
Lay, 64, a former chairman and chief executive of the company, said he was eager to tell the truth about what happened at Enron, a story he said was distorted by overzealous federal investigators and bad publicity.
Under questioning from a defense lawyer, he made a point of accepting “full responsibility for everything that happened at Enron” and acknowledged the thousands of jobs and billions of investor dollars that were vaporized in its collapse.
“I'm sure there's absolutely nothing in my life, including the loss of life of many of my loved ones, that even comes close to the same level of pain, and the same enduring pain, that has caused,” he said.
He explicitly denied committing fraud, participating in a criminal conspiracy or knowingly misleading investors and employees about the health of the company.
Lay spoke in conversational and even folksy terms, appearing more relaxed than his co-defendant, former Enron CEO Jeffrey Skilling, who testified earlier this month and played the brilliant strategist to Lay's affable visionary.
He even cracked a few jokes, some at the expense of lawyers. When his lawyer George Secrest asked him what his birth date was, he deadpanned, “I appreciate the fact that you do acknowledge I was born.” The jokes appeared to fall flat with jurors.
When Secrest asked Lay what his worst mistake was as head of Enron, Lay said the answer was easy – hiring Andrew Fastow, who has admitted stealing tens of millions of dollars from the company.
“It all began with the deceit of Andy Fastow,” Lay said of the former CFO.
Fastow was a pivotal piece of the government's case against Lay and Skilling, insisting both men knew the company was in poor health in 2001 even as they were making public statements to the contrary. Fastow has agreed to serve 10 years in prison after pleading guilty to two counts of conspiracy.
In Lay's version of events, Fastow's theft was the beginning of the end for Enron. Lay also blamed short sellers, who were in effect betting on Enron's failure, and a series of negative stories in The Wall Street Journal in late 2001.
Set against an economy already reeling from the bursting of the technology-stock bubble in the late 1990s and the 2001 terror attacks, Enron was faced with “a firestorm that we couldn't stop,” Lay told jurors.
Lay compared that firestorm to a classic run on the bank, with investors and creditors pulling out cash. He maintained the company was fundamentally sound as late as six weeks before it entered bankruptcy protection in December 2001.
Lay also directly refuted Fastow's claim that the CFO had given him a rundown in 2001 of huge, looming write-offs, a massive accounting error and deterioration of fragile financial structures Enron allegedly used to mask losses.
Asked whether Fastow ever discussed such a list of impending problems with him, Lay said: “That did not happen, period.”
Outside court, Lay told reporters he was pleased to begin addressing “a lot of the lies about me, about Mr. Skilling and about Enron. And we're going to keep doing that.”
Lay's testimony, expected to last at least through Wednesday, follows two weeks in which Skilling declared his own innocence on the witness stand. Skilling's testimony included some prickly exchanges with a prosecutor on cross-examination.
Character witnesses and expert witnesses are expected to follow Lay, and the defense could wrap up by the end of next week. The government will have the chance to present a rebuttal case before jurors hear closing arguments and begin deliberating.
Lay faces six counts of fraud and conspiracy. Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors. The conspiracy count accuses both men of leading an effort to portray Enron as healthy when they knew accounting tricks hid bad news and failing business ventures.
On Monday, Lay backed Skilling's account that Skilling said he was resigning as CEO in August 2001 for personal reasons – not because disaster loomed for the company. Lay said Skilling had always been a “very straight shooter” with him.
In a separate case, Lay is accused of obtaining $75 million in loans from three banks and reneging on an agreement with lenders that he would not use the money to buy Enron stock on margin. Those criminal charges, covering 1999 to 2001, will be tried before U.S. District Judge Sim Lake, who is also presiding over the Lay-Skilling trial, while the jurors in the Lay-Skilling trial are deliberating.
The direct examination of Lay on Monday sought to give jurors a portrait of where he came from and what he achieved.
The ex-CEO spoke of being raised by parents who had no education beyond high school, and attending the University of Missouri and naval officer candidate school in Newport, R.I.
He described a business career that brought him fabulous wealth. Lay founded Enron in 1985 when his company, Houston Natural Gas, merged with InterNorth, a Nebraska natural-gas pipeline company.
Lay called himself an optimistic man and leader, and said he is buoyed by a strong moral underpinning and a deep religious faith. He said he made no apologies for his success.
“I've not only pursued the American dream, I've achieved it,” he told Secrest from the stand. “I suppose we could say the last few years, I've also achieved the American nightmare.”
Former Enron Chairman Ken Lay talks to reporters outside Federal court at the end of his first day on the witness stand in his fraud and conspiracy trial in Houston April 24, 2006. REUTERS/Tim Johnson
Very good movie on Enron.
he takes the banks for $75M to buy stock in enron... either he was trying to prop up a sick company, or really believed in the company... can't be both
Kennny can't see the truth of his actions because he's so deep in you-know-what that his eyes are covered.
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