Mr. Enron & His Buddy Mr. President
The New York Daily News
1/14/02
Not long ago, President Bush was
so close to the man that he
called him Kenny Boy. His
name was Kenneth Lee Lay, and he
was smooth in a Texas country club
way. His hair had thinned over the
years, but according to a man who often saw him
at the River Oaks Country Club in Houston, he
seemed to shave three times a day and wore
perfectly tailored suits. He will surely look elegant,
if irritated, if and when the feds hand him an
orange jumpsuit.
"He was smooth, not slick," said a Houston friend
of mine, who used to see Lay at fund-raisers,
museum openings and charity balls. "Good
manners, low-key. Everybody respected him. Or
deferred to him. For one thing, he was smarter
than all of them. And more important, he was
richer."
Kenny Boy was certainly not
a typical hard-nose primitive
from the oil patch. Born and
raised in Missouri, where he
took a B.A. from the
University of Missouri, he
moved to Texas at the end of
the 1960s, and found work
with Exxon. He earned a
doctorate in economics from
the University of Houston in
1970 and then learned the
ways of Washington in the time of President
Richard Nixon. He taught economics at George
Washington University and worked for Nixon's
Department of Interior and the Federal Power
Commission. Day after day, theory was tested
against actual practice.
When the Nixon administration began unraveling
with the Watergate scandals, Lay chose to move
on. In 1974, he started work as a vice president of
the Florida Gas Co. in Winter Park and within two
years, at 32, he was president. By then, Lay was
certain of the fundamental truth of the gospel of
deregulation. Capitalism could only work with
absolute freedom, unhobbled by governmental
constraint. If big businesses were to expand in a
truly modern way, then most regulations must be
scrapped. Only politicians stood in the way.
How it Works
At the same time, Kenny Boy had learned the key
rule of the game. True influence - and
meaningful change - depended upon leverage,
friendship, access and money. Above all, money.
Political friendships depended upon the ability of
a businessman to write checks. The larger the
checks, the more intimate the friendship. And the
greater the access. And the better chance to get a
politician to do your bidding.
By 1980, with Ronald Reagan coming to power -
supported by the oil barons and the preachers of
deregulation - Lay was back in Houston. By
1985, he was running the obscure Omaha
corporation that would become Enron. He built it
into the greatest provider of energy resources in
the world.
Along the way, Kenny Boy wrote many political
checks. He wrote them to Democrats. More often,
he wrote them to Republicans. He wrote them to
Ann Richards when she was the Democratic
governor of Texas, and he wrote them to George
W. Bush when he began his improbable rise to
the presidency. He urged all of his associates to
write checks, too. For hard money. For soft.
For a long time Lay got what he paid for. Enron
grew bigger and bigger, less and less regulated
and more and more mysterious. At its peak,
nobody truly knew how it operated, except the
tiny group at the top, but the stock price kept
climbing, and enthralled investors kept buying
shares.
The business had gone beyond oil and gas, and
with the help of instant trading on the Internet,
Enron was soon peddling advertising time, steel,
wood pulp, electricity, insurance. Lay, with the
help of a driven, nasty-mouthed protégé named
Jeffrey Skilling, had transformed Enron into a
giant, worldwide electronic gambling casino. That
ingenious shift brought with it the ethics of the
gambling casino.
Heart of the Swindle
Now we are seeing the results. By early last year,
Enron was billions of dollars in debt, but only the
top players knew that dreadful truth. By all
accounts, beginning with a long piece in the Wall
St. Journal, that debt was hidden by corrupt
accounting practices. Arthur Andersen and Co.
were Enron's accountants, occupying an entire
floor in Enron headquarters in Houston. They
chose to ignore the heart of the swindle: the
creation of off-the-books companies where the
debt could be hidden, so that Enron seemed
profitable.
In 1997, Lay had stepped aside as chief operating
officer in favor of Skilling, but must have known
what was happening. By August last year, Skilling
was gone, under murky circumstances that will
soon be clarified under oath. Lay returned, and
among his first duties was to reassure his
5,000-plus employees that their own 401K
retirement investments in Enron - a total of $1.2
billion - were secure. He sent them two e-mails:
"Our performance has never been stronger," he
wrote on Aug. 14, "our business model has never
been more robust. We have the finest organization
in American business today." ANOTHER followed on
Aug. 27, promising employees a stock-option
program that would lead to "a significantly higher
price" for Enron stock. Both e-mails were lies.
Months before sending those e-mails to his
trusting employees, Kenny Boy and his friends
had begun unloading their own Enron stock,
surely a case of insider trading. Lay started
unloading in 1999, when he must have known
that the jig was up, and would take out $101.3
million for himself.
According to civil suits reported in the New York
Times, from January last year to the month of the
e-mails, Lay unloaded $40 million of the
busted-out casino's stock. Skilling took home
$66.9 million. A fellow named Lou Pai picked up
$353.7 million for 5 million shares. A woman
named Rebecca Mark-Jubasche cashed in 1.4
million shares for $79.5 million. Altogether, Lay
and 28 others sold their pieces of the casino for
$1.1 billion. The poor employees lost everything.
Thanks, y'all. See ya on the back nine at River
Oaks. In a just world, they should all be facing
RICO indictments.
Everybody Backs Off
Bush, whose administration sometimes looked
like an Enron subsidiary, now sounds as if he
barely knew good ol' Kenny Boy. His attorney
general, John Ashcroft, has had to recuse himself
from the Enron case because he took more than
$50,000 from Enron for his own campaigns. The
entire U.S. attorney's office in Houston has
recused itself, because so many of its people had
money in Enron, or relatives who were suckered
by Enron.
Bush's treasury secretary, Paul O'Neill, is
shrugging away the phone call he received from
Lay on Oct. 28, when the stock was plummeting
from its high of $90 a share (it's down to about 65
cents). No, he did Enron no favors. And after all,
why should he have bothered to warn potential
Enron investors, or God forbid, call the cops?
Commerce Secretary Donald Evans, the
President's best friend, banked Lay's checks
during the 2000 campaign. Why should he have
warned the American people after receiving his
own phone call from Lay? Deregulation means
you don't regulate.
There are now eight investigations - criminal,
civil and congressional - into this gigantic
swindle, the largest bankruptcy in world history.
From his current hideout, wherever it is, Dick
Cheney will be forced to release minutes of his six
meetings with Lay. Accounting records,
appointment calendars, phone logs, e-mails, voice
mails - all will be subpoenaed and scrutinized.
Small fry will implicate big shots to get out of
prison time. What is coming will certainly be at
once entertaining and vile.
But when it all starts to reach critical mass, when
the hearings are being televised every day, and
reporters are finding more and more examples of
the con, we should be ready. That's when the dog
will be wagged and bombs will fall on Iraq.
E-mail: phamill@edit.nydailynews.com |
