Founder to tell the 'truth' about Enron
So far in Enron founder Kenneth Lay’s fraud and conspiracy trial, a slew of prosecution witnesses have pointed the finger at him while a few—including his co-defendant, former chief executive Jeffrey Skilling—spoke up for him. On Monday, he aims to speak for himself.
Lay, who founded Enron in 1985 when his Houston Natural Gas merged with Omaha, Nebraska, natural gas pipeline company InterNorth, is slated to take the witness stand in his own defence after another defence witness testifies on Skilling’s behalf.
“I want to put more of the facts and the truth out about what happened at Enron,” the affable ex-chairperson said last week, noting he planned to spend the weekend getting ready.
Lay (64) has said from the day he got indicted in July 2004 that he would testify at his trial.
His lead lawyer, Michael Ramsey, was recovering from stents placed in a coronary artery and then his carotid artery in late March and early April. One of Lay’s other lawyers, George Secrest, was slated to question the ex-chairperson.
For the past two weeks, the trial’s focus rested on Skilling’s often contentious testimony. The pair has presented a unified defence, so Lay aims to build on what Skilling already told jurors: Enron was no bed of fraud and both are innocent of any wrongdoing.
The government contends Lay and Skilling lied repeatedly to investors and employees when they touted an increasingly weak company as strong before Enron swiftly spiraled into bankruptcy protection in December 2001. The failure of what was once the United States’ seventh-largest company left thousands jobless and wiped out billions from investors.
The 28 counts of fraud, conspiracy, insider trading and lying to auditors against Skilling span 1999 through his abrupt resignation in mid-August 2001 after succeeding Lay as CEO for only six months.
Lay’s six counts of fraud and conspiracy largely focus on his actions between Skilling’s resignation and the company’s failure.
However, the overarching conspiracy count alleges that both participated in a sprawling effort to portray Enron as healthy when they knew accounting tricks hid bad news and flailing ventures.
Lay is expected to be the more unflappable of the two, as he was when they ran Enron. Skilling described differences in their leadership strengths during his testimony, saying he spent the bulk of his time on internal and domestic issues, while Lay was more involved in Enron’s international ventures and much more visible with government officials.
Skilling also said he and Lay were “taking a stand” to rid their much-maligned company of its scandalous taint so former workers can look back with pride.
“The great strength that Ken Lay has is that he is remarkably personable, and juries give verdicts to people they like,” said David Berg, a Houston civil litigator.
But Berg added that the defence teams’ stance that no fraud occurred at Enron could be problematic for Lay. The defendants attribute Enron’s implosion to bad publicity that siphoned market confidence rather than unsustainable fraudulent accounting maneuvers, overvalued assets that brought in paltry returns and crumbling business units.
“Lay’s biggest obstacle is predicated on an almost unbelievable story—that there was nothing wrong at Enron,” Berg said.
Unlike Skilling, Lay isn’t charged with improper stock sales. But his credibility could be damaged by his heavy usage of his line of credit with Enron in the months before the company failed to repay his personal bank loans.
Lay repaid more than $70-million in company loans with Enron stock throughout 2001. He had used Enron stock as collateral for personal bank loans, which he has said he had to repay because banks issued margin calls as the company’s share price fell.
However, he didn’t tell employees of those sales as he encouraged them to buy more stock in September 2001.
An executive’s stock sales back to a company don’t have to be reported to regulators until the year after they occur. Had Lay sold stock on the open market, he would have had to report it to the Securities and Exchange Commission. â€’ Sapa-AP