"Kenny Boy" sure promoted the idea that his company had wonderful prospects. Thanks for the post.-Mephisto
Two months before disaster
struck, Lay told employees
company's growth 'has never
been more certain'
By Pete Yost, Associated Press, 1/12/2002 17:22
WASHINGTON In a pair of e-mails to his employees in
August, the chairman of now-bankrupt Enron touted the
company's stock and declared that the energy trader giant's
growth ''has never been more certain.''
''Our performance has never been stronger; our business
model has never been more robust. ... We have the finest
organization in American business today,'' Ken Lay said in an
Aug. 14 e-mail just two months before Enron's long-hidden
financial problems surfaced.
In an Aug. 27 e-mail, Lay announced the details of an
employee stock option program which spoke of ''a significantly
higher price'' for Enron stock in the future. Selling for $37 a
share in August, Enron stock now sells for 68 cents. The
stock was at $83 a share a year ago.
''It appears that you misled your employees into believing that
Enron was prospering and that its stock price would rise,''
Rep. Henry Waxman, the ranking Democrat on the House
Government Reform Committee, said in a letter Saturday to
Lay. Waxman released the e-mails along with the letter to
Lay, whose political donations along with those of other Enron
executives have made the company President Bush's biggest
financial supporter through two governor's races and the
presidential election.
Enron spokesman Mark Palmer responded Saturday that the
picture for the company was solid in August and that financial
problems didn't become clear until later.
''Ken Lay was telling the truth'' in August, said Palmer. ''We
had had 21 consecutive quarters of earnings growth, the same
number of consecutive quarters of volume growth. Our core
business at Enron had never been in better shape.''
On Oct. 16, the company acknowledged hundreds of millions
of dollars in third-quarter losses and a billion-dollar writedown
of its equity, a belated admission that touched off a crisis in
investor confidence and sent the company careening toward
bankruptcy. The company for several years had kept huge
amounts of debt off the company's books in partnerships that
had been set up by Enron executives, who collected millions
of dollars from the partnerships.
Declaring that Lay sold $40 million of Enron stock between
January and August last year, Waxman demanded to know
whether Lay was aware of the company's financial
vulnerabilities.
''If you were not aware of this, please explain whether this was
because Jeffrey Skilling or other executives withheld that
information from you,'' Waxman wrote. Skilling had abruptly
left the company in August after just six months as president
and CEO.
In one of the August e-mails to employees, Lay said he
regretted Skilling's ''resignation. ... Jeff is resigning for personal
reasons and his decision is voluntary.
Palmer said that ''all of those partnerships had been through
review processes and approval processes that were set up
with and in many cases worked out with Arthur Anderson as
our outside auditors, plus outside legal counsel.''
The Enron spokesman said problems with the partnerships
were brought to light ''as the result of our investigation. We
found there were accounting problems with one of those
partnerships and we fixed that by restating those earnings and
that was not knowledge we had in August.''
''The company's later writedowns in connection with problems
with the partnerships were not understood until later,'' Palmer
added.
The company says its executives regularly sold some of their
own Enron stock as part of their compensation packages. A
lawsuit in Texas alleges that Enron's top management
received $1.1 billion by selling 17.3 million shares of the
company's stock from 1999 through mid-2001.
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