He’s still chairman of the board, if only in his mind.
Enron Corp. founder Kenneth Lay on Monday declared his innocence to jurors in his fraud and conspiracy trial Monday in a relaxed tone much like that he used when speaking to thousands of former employees who once trusted and admired him: Conversational and a bit folksy, with an edge when his company was maligned.
Lay launched the 13th week of his trial as his most critical witness, portraying himself as the desperate captain of a ship torpedoed not by fraud, but by the betrayal of a finance chief, colluding short-sellers in a bear market and bad publicity that obliterated market confidence.
The 64-year-old minister’s son with his trademark Midwestern drawl said he didn’t perpetuate a conspiracy to mislead investors and employees about Enron’s health in the months before it flamed out because there had been no conspiracy.
Lay’s eyes narrowed when he declared it “absolutely ludicrous” that he would “pick up the mantle of a conspiracy and carry it forward” when he resumed as chief executive in addition to chairman upon the abrupt mid-August 2001 resignation of his co-defendant, former CEO Jeffrey Skilling.
Prosecutors allege both men repeatedly lied about Enron’s strength when they knew their optimism and accounting tricks hid weak business ventures and poor assets.
Not true, Lay insisted, telling jurors he believed the message he delivered to employees and investors upon resuming as CEO as well as chairman in Skilling’s wake: Enron was strong and had a great future.
Less than four months later, his optimism drowned along with Enron when the company spiraled into bankruptcy proceedings, leaving thousands out of work with retirement funds that had been packed with the energy giant’s shares.
Lay earnestly insisted that his heartbreak over that gut-wrenching aftermath seared deeper than losing a loved one.
“I’m sure there’s absolutely nothing in my life, including the loss of life of many of my loved ones, that even comes close to the same level of pain, and the same enduring pain, that has caused,” Lay said.
But jurors who have watched him at the defense table since the trial began about three months ago appeared unimpressed and, at times, bored. His few attempts at humor largely fell flat, except with his wife, ex-wife and children a front row.
When his lawyer George Secrest asked him what his birth date was, he deadpanned, “I appreciate the fact that you do acknowledge I was born,” which drew a few feeble smiles from jurors.
“I am very anxious and doing everything I can to get out the truth about what happened at Enron,” Lay said.
“Mr. Lay, that day has arrived,” Secrest said.
“That’s great,” Lay replied.
When Secrest asked Lay to identify his worst mistake while running Enron, Lay’s rapid answer was the hiring of former Chief Financial Officer Andrew Fastow, who has admitted stealing tens of millions of dollars from the company while helping Enron manipulate earnings. Fastow was a key prosecution witness.
“It all began with the deceit of Andy Fastow,” Lay said with a stern voice.
Fastow testified that both Lay and Skilling knew the company was ailing in 2001 even as they touted its health publicly. Lay denied telling any lies, and vehemently denied that Fastow met with him privately the day after Skilling resigned to tell him Enron was in serious trouble because of billions of dollars in looming writedowns.
“No, that did not happen. Period,” Lay said loudly.
Then Enron was plagued by short sellers who he said were betting on Enron’s failure and an October 2001 series of negative stories in The Wall Street Journal questioning the propriety of partnerships Fastow had created and run to conduct deals with Enron.
In addition, the economy was reeling from the telecom meltdown and the 2001 terror attacks, which ignited a firestorm for the energy giant.
Lay compared that firestorm to a classic run on the bank, with investors and creditors pulling out cash. He maintained the company was fundamentally sound as late as six weeks before it entered bankruptcy protection in December 2001.
Though Secrest was the lawyer, Lay appeared to dominate the questioning as he sought to show jurors who he is beyond the defendant who has sat next to his lawyer daughter, Elizabeth Vittor, for nearly three months.
He described his humble roots in rural Missouri, born to parents with no education beyond high school. He said he had moral strength and religious faith, noting he has “always tried to live by all the rules and all the laws.”
He went to college, served as a naval officer, then pursued the energy business that made him and his family fabulously wealthy.
Lay founded Enron in 1985 when his Houston Natural Gas merged with InterNorth in Omaha, Neb., a natural gas pipeline company more than twice as large. He became CEO a year later.
He made no apologies for his success.
“I’ve not only pursued the American dream, I’ve achieved it,” he told Secrest from the stand. “I suppose we could say the last few years, I’ve also achieved the American nightmare.”
Outside court, Lay told reporters he was pleased to begin addressing “a lot of the lies about me, about Mr. Skilling and about Enron. And we’re going to keep doing that.”
Lay’s testimony, expected to last at least through Wednesday, follows two weeks in which Skilling declared his own innocence on the witness stand. Skilling’s testimony included some prickly exchanges with a prosecutor on cross-examination.
Character witnesses and expert witnesses are expected to follow Lay, and the defense could wrap up by the end of next week. The government will have the chance to present a rebuttal case before jurors hear closing arguments and begin deliberating.
Lay faces six counts of fraud and conspiracy. Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors. The conspiracy count accuses both men of leading an effort to portray Enron as healthy when they knew accounting tricks hid bad news and failing business ventures.
In a separate case, Lay is accused of obtaining $75 million in loans from three banks and reneging on an agreement with lenders that he would not use the money to buy Enron stock on margin. That case will be tried without a jury before U.S. District Judge Sim Lake, who is also presiding over the Lay-Skilling trial, while the jurors in the conspiracy case deliberate.