Former Enron CEO to Face Criminal Charges
By Carrie Johnson
Washington Post Staff Writer
Wednesday, July 7, 2004; 5:27 PM
A federal grand jury in Houston issued a sealed indictment against
former Enron Corp. chief executive Kenneth L. Lay on Wednesday, and
prosecutors are set to make the criminal charges public Thursday.
Lay, 62, who has been under intense scrutiny since Enron filed for
bankruptcy in December 2001, issued a statement after news reports of
the charges. "I have been advised that I have been indicted," he said.
"I have done nothing wrong and the indictment is not justified."
In recent months, the grand jury has heard evidence from a series of
former employees who said they alerted Lay to mounting financial
problems in the months before the company disclosed phony earnings and
billions in hidden debt. Lay, who founded Enron and served as its
longtime chairman, took over again as chief executive in August 2001,
after the sudden resignation of his handpicked successor, Jeffrey K.
Skilling.
The Lay indictment marks a major development in the government's most
prominent investigation into corporate fraud after the Internet bubble
burst in 2000. Skilling, who replaced Lay as chief executive for six
months, was indicted earlier this year.
The exact charges against Lay remained under seal Wednesday, but other
former leaders at the company have been accused of fraud, conspiracy
and insider trading offenses.
Lay said he will surrender to authorities Thursday morning. He is
expected to appear at a brief court proceeding before a magistrate
judge in Houston later in the day.
The Securities and Exchange Commission will bring related civil
charges against Lay, according to sources who spoke only on condition
of anonymity because of the ongoing 261/27-year-old investigation.
Investigators have probed a series of optimistic statements Lay made
to analysts and employees in the months before Enron's fall, which
cost thousands of workers their jobs and retirement savings. Lay also
sold millions of dollars of Enron stock back to the company between
August and December 2001, using a revolving line of credit as an "ATM
machine," in the words of one former board member.
Lay has strongly denied wrongdoing through his lawyer Michael Ramsey,
who told The Washington Post last month that Lay had been duped by
underlings and that he sold stock only to cover losses in volatile
technology investments. Moreover, Ramsey said, Lay held on to a
substantial amount of Enron shares as the stock price dropped, losing
potential profit in the process.
"We are very conversant with all the facts and all the documents,"
Ramsey said June 19. "I've seen nothing that will support a
prosecution."
Prosecutors, who are barred from talking about pending charges,
declined comment.
Skilling, a brilliant, abrasive former consultant, was indicted on 35
fraud and insider-trading charges in February. The government says
Skilling presided over a wide-ranging conspiracy that employed
accounting maneuvers, false statements and other methods to prop up
Enron's stock price in the years before it collapsed.
Legal experts said the trial could be among the most complex business
schemes ever to be presented to a jury. Unlike the case of former
Enron finance chief Andrew S. Fastow, who allegedly pocketed more than
$60 million in company money without the board's knowledge, many of
the accounting and legal issues reviewed by Skilling and Lay were
vetted by outside experts. That could make it more difficult for
prosecutors to convince a jury that the executives acted with intent
to defraud.
So far the Justice Department's Enron Task Force has charged 30 people
connected to the company with conspiracy and other crimes. Eleven
individuals have pleaded guilty or been found guilty after trial.
Among prosecutors' key cooperating witnesses on the Enron case are
Fastow, former treasurer Ben F. Glisan Jr., and former corporate
secretary Paula H. Rieker. All three pleaded guilty.
During Enron's heyday, when the firm reported revenue that ranked it
seventh on the Fortune 500 list of publicly traded companies, Lay
traveled the world to meet with power brokers and charity leaders. And
he cultivated close ties to the Bush administration. President Bush
nicknamed him "Kenny Boy."
More than anyone else, Lay was responsible for creating a vast energy
company with operations that spanned the globe. Now that empire is a
shell of its former self. The turnaround experts at Enron's helm are
negotiating to sell its biggest assets and to return to creditors
about 20 cents on the dollar in cash and stock in an international
enterprise. A federal judge in New York is considering a plan that
would allow the company to emerge from bankruptcy protection.
� 2004 The Washington Post Company
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