Lumpy:
You have obviously learned well from the Michael Moore school of argument via insinuation while not providing any evidence for your key critique: Bush in the back pocket of Ken Lay. I swear some people - Moore admirers, Nader voters, and the tin-foil helmet brigade - think yelling “Enron” and “Halliburton” is a form of argumentation.
Anyway, here is an article concerning the indictment – and not that I’m a Ken Lay fan, but notice the “limited role” aspect. I’ve always thought he was a dupe – he put his own money into the company right through the initial stock-price tumbles.
Lay Strikes Back as Indictment
Cites Narrow Role in Enron Fraud
By JOHN R. EMSHWILLER, DEBORAH SOLOMON, KARA SCANNELL, and REBECCA SMITH
Staff Reporters of THE WALL STREET JOURNAL
July 9, 2004; Page A1
Prosecutors accused Enron Corp.'s former chairman and chief executive, Kenneth Lay, of playing a criminally culpable but surprisingly limited role in what they said was a massive conspiracy to deceive and defraud investors of the fallen energy giant.
In an unusual response by a defendant to such charges, Mr. Lay immediately came back swinging. Less than two hours after he was led handcuffed into a packed Houston courthouse, where he pleaded not guilty, Mr. Lay held a press conference at which he sought to make a public case that he wasn’t responsible for the company’s accounting scandal (watch the video). Instead, Mr. Lay singled out for blame former Enron Chief Financial Officer Andrew Fastow. Defendants, especially in high-profile criminal cases, almost always decline to speak publicly for fear they could provide new ammunition to prosecutors.
The 11 criminal counts against Mr. Lay accuse him of helping to manipulate Enron’s financial statements and give a falsely rosy picture of the company’s health in the months before it filed for bankruptcy-court protection in December 2001, which at that time was the largest such filing in U.S. history. If convicted on all counts, Mr. Lay could face decades in prison and millions of dollars in financial penalties. Mr. Lay was released on a $500,000 bond.
Meanwhile, the Securities and Exchange Commission filed civil charges of fraud and insider trading against Mr. Lay, saying he lied to investors about Enron’s financial health and falsely inflated the company’s share price so he could profit from a series of stock transactions. In its heyday, Enron, which reported revenue of $100 billion in 2000, operated natural-gas pipelines and was a global trader dealing in everything from megawatts of electric power to space on the information superhighway.
At the press conference in a Houston hotel banquet room, Mr. Lay acknowledged that there had been wrongdoing at Enron but claimed he didn’t know about it. He focused criticism on Mr. Fastow, whom Mr. Lay said “betrayed” his position of trust at the company. Mr. Fastow, who has pleaded guilty to committing crimes at Enron and has a cooperation agreement with prosecutors, could be a witness against Mr. Lay at trial.
One of the striking aspects of the Lay indictment was the role that prosecutors paint of his place in the alleged conspiracy. Despite Mr. Lay’s tenure as Enron CEO for almost all of the company’s 16-year history, the position of principal architect of the purported wrongdoing remained with Jeffrey Skilling, Enron’s former president and Mr. Lay’s former protege, according to the indictment. Mr. Skilling’s sudden resignation from Enron in August 2001 triggered a cascade of events that resulted in the company’s bankruptcy filing four months later.
In the indictment, Mr. Lay comes across more as a protector of the manipulative scheme, keeping it secret from the public, than its designer. The allegations focus on his activities and statements after Mr. Skilling departed, though Mr. Lay is also charged with bank fraud for supposedly misusing loan money to purchase stock as far back as 1999.
Until his resignation, Mr. Skilling “spearheaded” the alleged scheme and only afterward Mr. Lay “took over leadership of the conspiracy,” according to the indictment, which was handed up by a Houston federal grand jury that has been investigating the Enron scandal for more than two years.
Underscoring Mr. Lay’s role in the alleged conspiracy, the charges against him were added to an existing indictment against Mr. Skilling and former Chief Accounting Officer Richard Causey that was filed earlier this year in Houston federal court. Messrs. Skilling and Causey each face more than 30 criminal counts. In yesterday’s superseding indictment, the government filed several additional counts against Mr. Causey. Messrs. Skilling and Causey have pleaded not guilty and await trial, which had been expected to begin sometime next year but could be delayed because of the superseding indictment.
The indictment also argued that the alleged wrongdoing involved losses of more than $100 million and involved more than 50 victims. Here, prosecutors seemed to have in mind federal sentencing guidelines that provide for longer prison time when the impact of a crime exceeds certain thresholds.
Mr. Lay and his attorneys, led by veteran Houston defense lawyer Michael Ramsey, quickly moved to try to disrupt the government’s conspiracy case. Mr. Ramsey said he would push to sever Mr. Lay’s trial from that of Messrs. Skilling and Causey and hoped to be in court by September – which would be an extraordinarily fast pace for a case of this magnitude.
In an interview yesterday, Mr. Ramsey said that winning a quick, separate trial for Mr. Lay “isn’t an automatic right” because the Justice Department included his client in an existing indictment. So the interests of other defendants come into play.
While Mr. Lay might not be the central figure in the alleged conspiracy, his indictment does represent a climactic moment in the Enron saga. During the 1990s, Mr. Lay was a leading spokesman for a heady era in U.S. business and a major political player with well-publicized friendships with President George W. Bush and his father, the former president. Enron embodied the drive by American business interests to deregulate vast swaths of the marketplace, and the company profited greatly from the loosening of rules in such areas as natural gas and electricity marketing.
At yesterday’s press conference, Mr. Lay suggested that his ties to the Bush family played a role in his indictment. Given the politically sensitive nature of the case, Mr. Lay said his lawyers told him it “would take more courage for a prosecutor to not indict me than to indict me.”
By early 2001, Mr. Lay was easing out of Enron on a triumphant note. Early that year, he conferred the CEO mantle on Mr. Skilling. While Mr. Lay retained the post of chairman, he said yesterday that he had had plans to leave the company by the end of 2001.
Then Mr. Skilling abruptly resigned. To calm investors and Wall Street, Mr. Lay agreed to reassume the CEO post. The indictment against Mr. Lay focuses on the period following this move. That’s also when the elaborate financial structures, used to hide financial problems for so long, became unstable and were threatening to come apart.
The indictment describes occasions in which Mr. Lay allegedly represented to securities analysts, credit-rating agencies and employees that the company was financially sound. The complaint asserts that he had, in fact, privately received substantial amounts of information from other Enron officials detailing the firm’s precarious condition. The indictment said that Mr. Lay helped construct strategies for forestalling even larger losses than those reported in the third quarter of 2001.
A crucial period involving Mr. Lay began with a Sept. 26 online forum he had with Enron employees, according to the indictment. He told employees the “third quarter is looking great” even though he knew that the company would soon be reporting a giant loss for the period because of a write-down of assets, the indictment said. He further knew that Enron’s balance sheet contained billions of dollars of “embedded losses” and “overvalued investments” and that the company “had been exploring such drastic solutions” as a merger with another company, the indictment said. The indictment contended that Mr. Lay followed up this conference with similarly misleading presentations to securities analysts and others in October and November.
Several private-practice attorneys, most of whom are former U.S. prosecutors, who reviewed the indictment said the government’s ability to win the case will depend upon how well the allegations are backed by evidence presented to jurors. “It reads like a compelling story, but right now that’s all it is – a story,” said Kirby Behre, a partner at Paul, Hastings, Janofry & Walker LLP in Washington. “Clearly there’s less evidence against Lay than the others.”
One possible obstacle is that at least part of the case involves fairly complex accounting rules. Among these: Should the company have taken a $700 million impairment charge on its investment in Britain’s Wessex Water company and did it improperly hide losses at its retail-services unit, Enron Energy Services, by lumping them in with profits at its wholesale energy unit.
Mr. Ramsey, Mr. Lay’s attorney, acknowledged that Enron had problems but said all major corporations have problems. He reiterated that Mr. Lay strongly felt that overall Enron was doing well and had a bright future.
Unlike the cases against Messrs. Skilling and Causey, Mr. Lay wasn’t criminally charged with insider trading of Enron stock, although the civil action brought by the SEC included such a charge.
The End of the Trail: Key moments in the Enron scandal
1985: Houston Natural Gas merges with InterNorth to form Enron.
Oct. 16, 2001: Enron reports $638 million third-quarter loss and discloses $1.2 billion reduction in the value of shareholders’ stake in the company, partly related to a web of partnerships run by Chief Financial Officer Andrew Fastow that had helped the company inflate profits and hide debt.
Oct. 24: Enron ousts CFO Fastow.
Oct. 31: Enron announces SEC inquiry has been upgraded to a formal investigation.
Dec. 2: Enron files for Chapter 11 bankruptcy protection, the largest in U.S. history at the time.
Jan. 23, 2002: Kenneth Lay resigns as chairman and CEO.
June 15: Andersen convicted of obstruction.
Oct. 16: Andersen sentenced to probation and fined $500,000; firm was already banned from auditing public companies.
Sept. 10, 2003: Former Enron Treasurer Ben Glisan Jr. pleads guilty to conspiracy, becomes first former Enron executive put behind bars. Glisan is sentenced to five years.
Jan. 14, 2004: Andrew Fastow pleads guilty to conspiracy in a deal that calls for a 10-year sentence and his help in the continuing investigation. Lea Fastow pleads guilty to filing false tax forms in a deal that calls for a five-month sentence.
Jan. 22: Former chief accountant Richard Causey pleads innocent to a six-count indictment including conspiracy and fraud charges.
Feb. 19: Skilling is indicted, pleads not guilty to 35 counts accusing him of widespread schemes to mislead government regulators and investors about company’s earnings.
May 6: Lea Fastow pleads guilty to a reduced charge of filing a false tax form, a misdemeanor, and is sentenced to one year in a federal prison, the maximum sentence.
July 8: Federal prosecutors unseal formal indictment of former Enron CEO Kenneth Lay; SEC files civil charges.
Sources: AP; WSJ research
