Ex-Enron CEO Kenneth Lay Pleads
Innocent
Thu Jul 8, 2:37 PM ET
story.news.yahoo.com
By KRISTEN HAYS, AP Business Writer
HOUSTON - Former Enron Corp. CEO Kenneth Lay pleaded innocent
Thursday to federal charges that he was involved in a wide-ranging
scheme to deceive the public, company shareholders and government
regulators about the energy company that he founded and led to industry
prominence before its collapse.
"Not guilty, your honor," Lay, speaking loudly
and clearly, told U.S. Magistrate Judge Mary
Milloy at a court hearing hours after he
surrendered to the FBI (news - web sites)
and was hustled to the federal courthouse in
handcuffs.
A federal indictment unsealed Thursday
added 11 counts against Lay to charges
already filed against his hand-picked protege,
former CEO Jeffrey Skilling, and former top
accountant Richard Causey.
It accused Lay of participating in a
conspiracy to manipulate Enron's quarterly
financial results. It also accused him of
making public statements about Enron's
financial performance that were false and
misleading and omitting facts necessary to
make financial statements accurate and fair.
Milloy set his bond at $500,000, and Lay
emerged from the courthouse less than an
hour later. Prosecutors had sought a $6
million bond, saying he was a flight risk.
"It has been a tragic day for me and my
family," Lay said at a news conference
shortly after his court appearance. "An
indictment came down that should not have
occurred."
While repeating his assertion that he took responsibility for Enron's
collapse as chairman, "that does not mean I know everything that went
on at Enron."
"I continue to grieve as does my family over the loss of the company, my
failure to be able to save it," Lay said. "But failure does not equate to a
crime.
"I firmly reject any notion that I engaged in any wrongful or criminal
activity," he added. "Not only are we ready to go to trial, but we are
anxious to prove my innocence."
Lay was allowed to keep his passport because he travels internationally
on business, but Milloy said if he left the country he would have to seek
permission from the court.
In a separate action, the Securities and Exchange Commission (news -
web sites) filed civil charges Thursday against Lay, accusing him of fraud
and insider trading and seeking recovery of more than $90 million in what
the agency said were illegal proceeds from stock sales.
The contents of the criminal indictment, returned Wednesday, were
released a few hours after Lay was taken away in handcuffs after
surrendering to the FBI Thursday morning.
The indictment of Lay, 62, who also was Enron's chairman, caps an
investigation that snared dozens of other employees and executives but
took nearly three years to reach the man at the top.
Enron's collapse in late 2001 cost investors billions of dollars, put
thousands of Enron employees out of work and wiped out retirement
savings for many. The company, once admired, became a symbol of
corporate greed and excess, and its fall was followed by a string of
scandals at other companies.
Lay entered the packed courtroom and smiled at his wife, Linda, who
had driven him before dawn to the Houston FBI headquarters. She rose
from her seat to pat him on the back, then was told by a marshal she
could have no contact with her husband.
Lay was accompanied by attorney Michael Ramsey. When Milloy asked
if Ramsey was his lawyer, Lay drew laughter from spectators by
responding: "I think his billings will indicate that I have hired Mr.
Ramsey."
The new indictment, now totaling 53 counts, accused Lay, Skilling and
Causey of enriching themselves through salaries, bonuses, grants of
stock and stock options.
It names Lay in 11 counts: one of conspiracy, two of
wire fraud, four of securities fraud, one of bank fraud
and three of making false statements to banks. If
convicted on all counts, the Justice Department (news
- web sites) said Lay could receive up to 175 years in
prison plus fines possibly totaling more than $5.7
million.
Andrew Weissmann, director of the Justice
Department's Enron Task Force, said Thursday that
Lay's arrest called to task the "top echelon" of Enron
and showed "no one is above the law."
After Skilling's resignation, "Ken Lay took the helm of
the criminal scheme," Weissmann said. "Rather than
come clean and tell the unvarnished truth about
Enron, Lay chose to conceal and distort and mislead at
the expense of shareholders and employees, people to
whom he owed a duty of complete candor."
But Lay's lawyer Ramsey said before entering the
courthouse, "Ken was not in any conspiracy."
Ramsey said he would push for the former Enron chief
executive to go to trial ahead of other executives
charged in the investigation. He maintains Lay did
nothing wrong and cast blame on former chief financial
officer Andrew Fastow, who pleaded guilty to two
conspiracy counts in January. Fastow admitted to
orchestrating partnerships and financial schemes to
hide Enron debt and inflate profits while pocketing
millions of dollars for himself.
"Andy is obviously a liar and a thief," Ramsey said
before entering the courthouse Thursday. "He admits
that."
Prosecutors have aggressively pursued the one-time
celebrity CEO and friend and contributor to President
George W. Bush (news - web sites) who led Enron's rise
to No. 7 in the Fortune 500 and resigned within weeks
of its stunning failure. Lay is the 30th and
highest-profile individual charged.
The indictment particularly focuses on Lay's behavior
after Skilling abruptly resigned in August 2001 before
Enron's collapse. Skilling had succeeded Lay as CEO
six months earlier. He was indicted in February on
nearly three dozen counts of fraud and other crimes.
Prosecutors allege Lay knew Enron was preparing to
announce massive third-quarter losses and a $1.2
billion writedown in shareholder equity, yet told Enron
employees in a Sept. 26, 2001 Internet chat that he
had strongly encouraged management to buy Enron
stock.
"Some, including myself, have done so over the last
couple of months and others will probably do so in the
future," he said. "My personal belief is that Enron stock
is an incredible bargain at current prices."
Then on Oct. 12, 2001, he told a credit rating agency
that Enron and its auditors had "scrubbed" the
company's books and that no additional writedowns
would be forthcoming. Four days later, the company
announced those big losses, but the shareholder equity
writedown was not in Enron's press release.
The indictment alleges Lay also knew Enron was facing
a $700 million writedown in its water business, Azurix,
but didn't disclose detailed information. In addition, it
alleges Lay knew Enron had shifted hundreds of
millions of dollars in losses from its retail energy unit
to its wholesale trading unit to hide the retail energy
unit's actual poor performance.
"We're not trying to conceal anything," Lay told
analysts on Oct. 23, 2001, according to the indictment.
"We are not trying to hide anything."
He also told employees that same day: "Our liquidity is
fine; as a matter of fact, it is better than fine, it is
strong."
But prosecutors allege Lay knew Enron had been forced
to offer its pipelines as collateral to get a $1 billion
bank loan to maintain liquidity.
Then on Nov. 12, 2001, in a call to analysts and in
another effort to combat bad publicity, he said: "We
don't have anything we are trying to hide. I am
disclosing everything that we've found."
But prosecutors allege Lay knew that he and other
senior Enron managers had not disclosed a litany of
negative facts about Enron's finances.
The counts alleging bank fraud accuse Lay of
improperly drawing from his lines of credit, and
exposing banks to a higher risk of loss, to directly or
indirectly buy and carry margin stock.
Skilling succeeded Lay as CEO in February 2001 and
resigned abruptly six months later, just weeks before
the scandal broke. He was indicted in February on
nearly three dozen counts of fraud and other crimes.
Waiting to testify for the prosecution is Fastow, who
pleaded guilty to two conspiracy counts in January.
Fastow admitted to orchestrating partnerships and
financial schemes to hide Enron debt and inflate profits
while pocketing millions of dollars for himself.
Enron's collapse was the first of a series of corporate
scandals that led to Congress' passage of sweeping
reforms to securities laws with the Sarbanes-Oxley Act
two years ago. Thousands of Enron's workers lost their
jobs, and the stock fell from a high of $90 in August
2000 to just pennies, wiping out many workers'
retirement savings. |
