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Prosecutors begin cross-examining Ken Lay

Enron Corp. founder Kenneth Lay, who told jurors about the huge successes of the company’s heyday and of the millions of dollars he freely gave to charity, faced cross-examination by a federal prosecutor Wednesday in his fraud trial. The result was explosive.
/ Source: The Associated Press

Now playing at the Enron trial: Dr. Jekyll and Mr. Lay.

Enron Corp. founder Kenneth Lay, who told jurors about the huge successes of the company’s heyday and of the millions of dollars he freely gave to charity, faced cross-examination by a federal prosecutor Wednesday in his fraud trial.

The result was explosive.

Lay scowled, bickered, quibbled and interrupted his way through extraordinarily contentious questioning by John Hueston of the government’s Enron Task Force, who all but accused him of witness tampering in his own trial.

Hueston said Lay had sent word through a mutual friend that he wanted to speak with Vince Kaminski, former top risk analyst at Enron — nine days before Kaminski took the stand against him as a government witness.

“I was more interested in talking to Vince Kaminski about some general risk-management issues,” Lay offered.

Later, Hueston scolded Lay for standing by while his own lawyer publicly called Ben Glisan Jr., the former Enron treasurer and a government witness, a “monkey” who “contradicted the theory of intelligent design.”

Then, just moments later, Lay admitted he had sidled up to Glisan himself during the trial and offered him words of encouragement: “I did tell him I was sorry he was going through what he was going through.”

The cross-examination seemed to snap jurors awake after almost three days of questioning by a Lay defense lawyer that included long recitations of minutes of years-ago meetings.

From the start, the prosecution questioning crackled with tension.

Hueston took a marker and wrote on an easel pad the words Lay’s lawyer used during an opening statement: “By our deeds we are known.” Hueston then asked whether Lay, who had been chairman and chief executive, had repaid a single dollar of a $7.5 million loan he took out from Enron in late 2001.

“We tried to, and you blocked it,” Lay said.

The prosecutor pressed for an answer again.

“Mr. Hueston, you know you blocked it.”

Hueston asked once more.

“Mr. Hueston,” Lay told him, “I was sworn to tell the truth and the whole truth. Not the partial truth.”

The cross-examination underlined the enormous risk corporate executives assume when they take the witness stand in their own defense.

Bernard Ebbers, former chief executive of WorldCom Inc., and Frank Quattrone, once a high-profile investment banker, both were convicted in their own corporate-scandal trials after bruising cross-examination battles.

Ebbers is appealing his fraud conviction, and earlier this year a federal appeals court threw out Quattrone’s obstruction conviction based on improper instructions by the trial judge.

But neither man’s cross-examination came close to the animosity that rippled through Hueston’s questioning of Lay on Wednesday.

Hueston confronted Lay with the revelation that lawyers for brokerage firm Goldman Sachs & Co. had to ask Lay’s lawyers twice, as recently as April 4, to get the Enron founder to stop calling Goldman officials who were potential witnesses at the trial.

At issue is a late 2001 meeting Lay and former Enron Chief Financial Officer Andrew Fastow had with Goldman officials, at a time when Enron’s stock was declining dramatically.

Fastow testified he and Lay talked to Goldman about restructuring an unhealthy Enron — all while Lay was singing its praises to the public. Lay said the meeting happened because Goldman was worried Enron’s underpriced stock made it a takeover target.

In the opening moments of his cross-examination, Hueston revealed that Lay had — while the trial was under way — tried to contact potential witnesses with knowledge of the Goldman meeting.

“I was just trying to make sure that all my facts were as accurate as they could be,” Lay said.

It was a remarkable turn for Lay, who was famous in Houston for his affable persona.

In three days of questioning by his own lawyer George Secrest, Lay portrayed himself as a family man of deep moral integrity and religious faith who committed no crimes during his tenure at Enron, a company he says he loved.

Lay also likened the pain caused by the billions of dollars and thousands of jobs lost in Enron’s collapse to the loss of a loved one. He blames the collapse on bad press, a nervous market and Fastow’s theft from the company.

Earlier in the day, jurors had heard about Lay’s contributions to the University of Houston, Rice University and stadiums for the three Houston professional teams — baseball’s Astros, football’s Texans and basketball’s Rockets. Houston’s new baseball stadium was called Enron Field until after Enron filed for bankruptcy protection in December 2001 and could no longer pay for the naming rights.

Lay, 64, and former Enron Chief Executive Jeffrey Skilling are accused of misleading investors and employees by talking up the company when it was in poor health and by knowing about accounting tricks used to mask huge losses at the company.

Skilling — who is the one of the pair known for a short temper — testified in his defense earlier in the trial. He shared some contentious exchanges with prosecutor Sean Berkowitz, but nothing on the order of the Lay-Hueston back-and-forth on Wednesday.

Skilling, who resigned after just months as CEO in August 2001, sat impassively at the defense table throughout his former boss’s testimony and cross examination this week.

U.S. District Judge Sim Lake has indicated to lawyers this week that he is frustrated with the slow pace of the trial, and he gave jurors five options for ways to fit in more testimony.

They ultimately chose to start their days a half-hour earlier, at 8 a.m., and to shorten their lunch break. In a note to the judge, the jurors called their decision a “unanimous bear hug.”

The “bear hug” term was a reference to a term mentioned repeatedly in the trial for a secret agreement Fastow claims he had with Skilling. Upon hearing it, the courtroom broke into laughter.

Lay grinned widely and applauded the jury.