Ken Lay Quits And Spins
By Dan Ackman
Thursday January 24, 8:50 am Eastern Time
Forbes.com
Kenneth Lay, the longtime chairman and chief executive of bankrupt Enron , quit his post last night. As always, he was thinking about the other guy.
"I want to see Enron survive, and for that to happen we need someone at the helm who can focus 100% of his efforts on reorganizing the company and preserving value for our creditors and hard-working employees," Lay said in a statement released by the company. He added that his decision was made "in cooperation" with the company's creditors.
Enron Special Report: Enron's Endgame To the end, Lay was hard at work himself, spinning. "Unfortunately, with the multiple inquiries and investigations that currently require much of my time, it is becoming increasingly difficult to concentrate fully on what is most important to Enron stakeholders," he said.
Lay is being straightforward--by Enron standards--when he says this. But the reorganization bit is another stretcher. Enron has already sold its trading business, which accounted for more than 90% of its purported $101 billion in revenue. (For why that revenue was largely phony, see"Enron The Incredible.") The price paid initially by UBS Warburg , the Swiss bank, was zero.
The harder assets, such as pipelines and foreign energy plants, may be salable, but it's hard to believe those assets would not be more valuable stripped of the name Enron. Lawyers representing creditors told Forbes.com that while they have not challenged Enron's legal right to present a plan of reorganization, liquidation is the more likely outcome.
Meanwhile, the investigation into the Enron documents shredding is intensifying. A subcommittee of the House Energy and Commerce Committee will hold hearings on Capitol Hill today, focusing on actions by Arthur Andersen , Enron's auditor. Subcommittee chairman James Greenwood (R-Pa.) said yesterday that his investigators had determined that up to 80 people had received orders to destroy papers.
Greenwood said that revelation made dubious Andersen's attempts to blame rogue executives for the destruction, some of which continued even after Enron received subpoenas from the Securities and Exchange Commission.
David Duncan, the Andersen accountant who headed the Enron audit and who has been fired by the firm, is scheduled to testify today. But his lawyers have indicated that he will invoke his Fifth Amendment right not to incriminate himself. Duncan has already spoken to the committee in private, but not under oath. The hearings today will be Congress' first public exploration into the collapse of Enron.
Greenwood was incredulous at the idea that Duncan was primarily responsible for the shredding. "Do you believe that 80 Andersen employees were directed by Mr. Duncan to violate an express provision of policy by Andersen in the face of yet another investigation, and none of them picked up the phone and called their superiors and said,
'This doesn't seem right' "? he asked. "The question we need to get to is, Were there instructions from above."
So far, Enron's executives such as Lay, Jeffrey Skilling, his former second in command, and Andrew Fastow, the former chief financial officer fired in October, have benefited from all the attention focused on Andersen, whose executives have been comparatively forthcoming. But the problem with Andersen was that it was working too directly for Enron, rather than fulfilling its duty to the public. (See Accounting For Texans...
forbes.com
In October 2001, Andersen's Duncan wrote a memo warning that Enron's Oct. 16, 2001, press release announcing a $1.2 billion reduction in the company's net worth was itself misleading since it should not have referred to its losses as based on one-time events. The memo also warned of possible action by the SEC.
Congressional investigators who released the memo described it as "internal," and it is not clear who received it. One person who might have benefited from reading was Wendy Gramm, a college professor in Washington, D.C., and the wife of Sen. Phil Gramm (R-Texas). Wendy Gramm was a member of the Enron's board's Audit Committee.
Yesterday, Sen. Gramm said he and his wife lost nearly $700,000 in deferred compensation when Enron went bankrupt. But prior to the bust, the senator said he and his wife, a former head of the Commodity Futures Trading Commission, made a point of not discussing business. She has been named as a defendant in shareholder lawsuits.
"My wife and I have had parallel careers ever since we came to Washington,'' he said. "When we go home, we talk about important things like Texas A&M football, me taking out the garbage, those kind of things.''
Now the senator--who was one of the top recipients of Enron's political contributions--has spoken. His wife, the Enron director, is still silent. |
