Lay Loses His Cool on Stand
April 27, 2006
By ALEXEI BARRIONUEVO and SIMON ROMERO
HOUSTON, April 26 — After waiting 13 weeks to respond to his accusers, Kenneth L. Lay lost his legendary cool on the witness stand Wednesday.
Just minutes into his cross-examination by a prosecutor, John Hueston, Mr. Lay, Enron's founder and former chief executive, testily accused Mr. Hueston of personally preventing him from repaying a company credit line Mr. Lay had used to shore up his personal finances.
"Mr. Hueston, you know you blocked it," Mr. Lay said, his voice booming. "It's a simple answer."
Mr. Lay also struggled Wednesday to restrain his agitation when Mr. Hueston suggested that Mr. Lay had tried to tamper with potential government witnesses.
Before he took the stand, a number of legal experts had predicted that Mr. Lay would use the same folksy charm he employed during his heyday as the public face of Enron to seek to win over the 12 jurors deciding his fate in the criminal fraud trial here. But during his three days so far as a witness, Mr. Lay has found it harder and harder to maintain a kindly grandfatherly image.
Instead, Mr. Lay, 64, has become increasingly agitated, at times reacting impatiently even to his own lawyer, George McCall Secrest Jr., and lashing out at what Mr. Lay portrayed as a cabal of former Enron executives, investors and journalists whom he repeatedly blamed for the company's downfall in late 2001.
The contrast to his fellow defendant, Jeffrey K. Skilling, was particularly striking. Despite a much harsher reputation for arrogance, Mr. Skilling, in his two weeks on the stand, generally maintained his composure with only a few exceptions.
In the first 90 minutes of a cross-examination that is expected to continue at least to Monday, Mr. Lay also found himself on the defensive over a matter that tripped up Mr. Skilling as well. Mr. Lay acknowledged that he had violated Enron's code of ethics by investing $120,000 in Photofête, the same photo-sharing company that Mr. Skilling had supported, in part because it was run by Mr. Skilling's girlfriend at the time.
In testimony critical to his defense, Mr. Lay also insisted on Wednesday that he borrowed $77.5 million from Enron in the months before it collapsed to pay personal bank debts, not because he knew that the company was about to implode. Mr. Lay was under pressure to repay the loans from banks, which were issuing margin calls because of Enron's falling stock price. The margin calls required Mr. Lay to pay his debt in cash or face the prospect that the banks would sell the Enron shares he was using as collateral. He was seeking to counter government suggestions that his stock sales showed he knew Enron had serious problems.
Mr. Lay said Wednesday that he was "fighting off bankruptcy myself" at the time.
Mr. Lay boiled over even before Mr. Hueston began his cross-examination Wednesday. In a long discussion of his deteriorating personal financial situation, Mr. Lay lashed out when questioned by Mr. Secrest about efforts Mr. Lay said he had made to repay several million dollars owed on an Enron credit line.
Mr. Lay testified that he used the final $1 million he borrowed from the line, which was backed by his Enron shares, to pay the mortgage on his $4 million Houston condominium. At the time plaintiffs' lawyers were seeking to freeze the assets of Enron executives and, Mr. Lay said, he was concerned that he would be "left without a place to live." Mr. Lay said he tried to work out a deal with Enron's creditors after the company declared bankruptcy. When asked by Mr. Secrest why a deal was not consummated, Mr. Lay nearly jumped out of the witness box.
"It was not finished because John Hueston blocked that deal," he said loudly as he pointed with an outstretched arm at Mr. Hueston.
When Mr. Hueston took over, he challenged Mr. Lay over whether he had ever repaid the last $7.5 million he owed on the Enron credit line, evoking a response that it was the prosecutor himself who had prevented him from paying the debt.
When Mr. Hueston pressed, Mr. Lay retorted: "Mr. Hueston, when I was sworn in here it was to tell the whole truth, not just in part."
Mr. Hueston then drew Mr. Lay's ire by asking him about efforts to reach out to potential government witnesses and what the prosecutor described as "character assassination" of government witnesses.
Mr. Lay, his voice rising, responded, "Are you considering yourself?"
Mr. Hueston questioned Mr. Lay about comments by Mr. Lay's lawyers, who described the former Enron treasurer, Ben F. Glisan Jr., as a "monkey" and a "liar" to reporters after Mr. Glisan testified last month about fraudulent activities at Enron. "I can't take full responsibility for what my attorneys do," Mr. Lay said.
Mr. Lay acknowledged that he had tried to meet with some of the witnesses against him, including Vincent J. Kaminski, the former Enron risk management specialist. Under questioning, Mr. Lay said he sought Mr. Kaminski out in a bid to arrange a private chat over coffee just nine days before he testified in the government's case.
Mr. Hueston also suggested that Mr. Lay was trying to tamper with a witness when he spoke with an executive and longtime friend in the Houston office of Goldman Sachs, which was one of Enron's most prominent former investment banks. Mr. Hueston asked whether Mr. Lay was trying to "recruit people" at the bank to convey Mr. Lay's version of events in the trial, a suggestion that Mr. Lay angrily denied.
Earlier Wednesday, Mr. Lay described the deterioration of his personal finances, saying his net worth had dwindled to "about a quarter of a million dollars negative." Mr. Lay earned $223 million in total compensation from 1999 to 2001 but was $100 million in debt by early 2001, he said.
"Where does $100 million go?" Mr. Secrest asked.
Mr. Lay said he was forced to sell his three homes in Aspen, Colo., and three others in Galveston, Tex., to pay legal fees and other debts. What remains are his Houston condominium and three cars. But he acknowledged that he had lived very well for a long time.
"Happily," he said, "we achieved the American dream."
That comment drew a muffled laugh from a spectator in the courtroom, which was packed with ordinary Houston citizens on Wednesday.
Mr. Lay said his investment advisers and his wife had urged him to diversify his holdings — roughly 80 percent of his net worth was tied up in Enron shares or stock options. "But very simply," he testified, "I had great confidence in Enron and Enron stock."
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