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Enron’s woman of conviction

In their 24 years together, Linda Phillips has been an omnipresent sidekick of disgraced Enron CEO Ken Lay, none more so than when her husband's company was brought low by scandal.
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true">The Washington Post</a

Silence doesn't suit her.

Retreat isn't the natural inclination of a woman who went from secretary to socialite, who once overnighted as a guest in the White House and flitted among her seven homes aboard private jets with the mogul husband she still calls Kenny Boy.

But for Linda Lay, these are days of curtains-drawn seclusion, a summer of waiting for her husband to be sentenced. Since Kenneth Lay's fraud conviction last month in Houston, the notoriously ostentatious oil couple has been hiding out near Aspen, Colo., renting where they once owned four separate properties, praying where they once partied.

Trying to set aside, in the words of a longtime family friend, "the very deep pall that hangs over them. It's almost like a death."

In the course of Kenneth Lay's four-month trial in Texas, Linda appeared walking hand-in-hand with her husband to the courthouse, writing biblical passages on a yellow legal pad, shaking her honey-blond hair and muttering in disagreement with damaging testimony.

And, finally, clutching a sleeve and pressing her face into Ken's shoulder as she heard a series of guilty verdicts that could send him to prison for the rest of his life.

In their 24 years together, Linda has been an omnipresent sidekick, jetting with her husband from Houston and Paris to India and beyond when he ruled the energy sector and ran Enron Corp. But she also stood by her man after the company was brought low by scandal -- and her husband became a caricature of greed. She listened impassively as their social triumphs were rendered into damning testimony. In the front row she sat, never missing a day, never wearing black, always positioned so her husband could swivel just slightly in his chair at the defense table to catch her eye for a supportive glance or reassuring smile. She joked lightly with a media that scrutinized her down to the jewels in her wristwatch.

Juror Dana Fernandez, a clerk in the Harris County criminal courts for more than two decades, says panel members noticed early on that Lay's daughter and wife were showing up every day of the trial, and came to expect the smiles they routinely offered as jurors entered the courtroom.

For nearly a generation, the Lay family has been inextricably linked to Enron, first as a company where both husband and wife collected paychecks, and then as their blended family of five children and a dozen grandchildren became the preeminent beneficiaries of Enron's largesse. Ken collected $220 million in cash and stock during Enron's last three years; exactly what's left, and where it is, remains a subject of debate and litigation. The government is expected to move to seize assets sometime later this year.

More than an accessory
Linda Lay is a second wife: her hair always perfectly in place, her figure trim at 61, her St. John knit outfits reflecting wealth in muted hues. But she is far from an adornment, as she is sometimes characterized in the media coverage of Enron's demise.

Friends say Linda has a mind of her own and does not hesitate to share her views when she thinks it will benefit her husband. She sometimes bristled when she disagreed with opinions voiced during pretrial strategy sessions, put her foot down in favor of attending church and family events during the course of the trial rather than pulling all-nighters with defense lawyers, and typed and edited a speech her husband gave blasting the prosecution last December.

"She's really Ken's rock," says friend Terry Giles. "She's nice and as sweet and as wonderful as you'd hope she'd be, but she's tough. . . . A lot of folks may have underestimated Linda."

In an unusual move, Lay called out to his wife from the witness stand several times, joking that her $200,000 birthday celebration on a yacht named Amnesia dwarfed his planned $12,000 birthday party at a five-star Mexican resort. He asked her rhetorical questions as she grinned and nodded in response. And when he finally exited the courthouse after his chilling fall from grace, Lay took the time to praise his "warm, loving and Christian wife" in front of the television cameras competing for a view of his face. She gazed back at the cameras with swollen eyes.

Even more bold, Lay bucked tradition -- and the advice of his lawyer -- and heard the verdict against him not from a seat at the defense table but instead standing beside his sobbing wife, who wiped her blue eyes with a tissue as the judge let loose with "guilty" after "guilty."

The power of love
A secretary to Lay for a time when they both worked for Florida Gas Co., the former Linda Phillips eventually moved to Houston and came to work as an assistant for another Enron executive. After raising three children on her own after a divorce, she married Lay in 1982 and started investing in real estate, including multimillion dollar properties in Aspen and Galveston, Tex., that the family has since sold. She also managed the family's charitable foundation, deciding on her own, her husband testified, to sell 500,000 shares of Enron stock before the company announced its merger with Dynegy Inc. had collapsed in late 2001. Linda Lay has never been charged with wrongdoing stemming from Enron's misfortune.

Linda didn't take the stand during her husband's trial but left no room for doubt about her loyalty, even applauding when a defense lawyer used his closing argument to accuse the prosecutor of lying about her husband. She refused to dispense sound bites or grant interviews about the case but proved to be a keen observer herself, providing a running commentary on everything from journalists' wardrobes ("You look nice today") to snacking habits ("Sugar, sugar," she chided one hungry scribe devouring a doughnut and soda for lunch).

Even in Courtroom 9B, she could not resist playing hostess. Defense witnesses were routinely sent on their way after testifying with pats on the back or hugs from Linda.

Sob stories questioned
Aside from much-photographed walks to and from the courthouse, which spurred one angry onlooker to call the couple Barbie and Ken, Linda is perhaps most remembered in Houston for an ill-received appearance on the "Today" show in January 2002, weeks after Enron filed for bankruptcy and cut thousands of jobs.

She cried as she told an interviewer that the couple had been wiped out financially. "It's gone. There's nothing left," she said. Later, her husband would testify that they were $250,000 in the hole.

For Linda, though, the reviews were swift -- and devastating.

Fox News personality Bill O'Reilly wrote in a commentary that Linda wore "what looked to be a $13,000 watch" as she cried poor. "Tonight Show" host Jay Leno lampooned the couple. "She went on to say they've lost all their money," Leno said. "Luckily, they've still got plenty of everybody else's money."

The ridicule reportedly seeped into their private circle, as well, and the social patron once lauded for donating $25 million to charity became a near-pariah, the plunderer's wife.

The Rev. Bill Lawson, a prominent figure in Houston's civil rights community, says some friends have distanced themselves from Lay, a former Houston power broker who in better times seamlessly crisscrossed the social, business and political arenas.

"Ken Lay did have very strong family support. There were other people who did support him, but from a distance," Lawson says. "I guess it was not politically correct."

Just last week, a YMCA near Houston, which had been named after Lay, removed his name from its offices, then stripped it off the building at Lay's request after he resigned from the board of directors, the Houston Chronicle reported.

A family affair
Months after Enron imploded, Linda and her daughter Robyn, who during the trial often sat next to her mother with an arm wrapped protectively around her shoulders, opened an upscale resale shop, Jus' Stuff. The consignment store sold armoires, china and pricey knickknacks that Linda claimed came from her own penthouse or vacation homes, or from the households of her socialite friends. The shop, which opened in the summer of 2002, angered many people who had lost retirement savings and job security because of Enron's demise.

"How can the Lays live with themselves knowing they caused the downfall of so many families?" asked a letter writer to the Houston Chronicle after the newspaper published a story saying the retail business was for sale. It closed in 2004.

Steve Wende, pastor of Houston's First United Methodist Church, where Ken and Linda attend services, said the Lays have resisted the temptation to fight back against people who have "demonized" the family.

"The Lays in general tend to be strong people," Wende said. "The women are independent, they have their own minds. . . . Their support for Ken was not a dependence on him."

For the Lays, Enron always was a family affair. Daughter Elizabeth, a lawyer who helped coordinate her father's defense just weeks after giving birth to her second child, once worked at a subsidiary business. Son Mark served as a vice president leading its paper division. Linda's son, Robert "Beau" Herrold, managed Lay's finances. A son-in-law worked for the family's charitable foundation. And Ken and Linda often took a set of relatives along when they flew overseas on business, according to trial testimony, which included itineraries of the Lay's personal and business trips. One such document reminded staff to prepare fruit and cheese trays and hot dinners.

Circling the wagons
The interlocking relationship between the Lay family and the company he founded came full circle after the verdict, when Linda and three of the children stepped forward, red-eyed from crying, to pledge the deeds to their homes on the promise Ken Lay would not flee the country before his Sept. 11 sentencing. Each of them solemnly raised their right hand.

Giles, a friend and a lawyer who spoke briefly with the Lays after the conviction, says they are "in shock."

"If there is a family in America that can survive this, they can," Giles said. "Whether or not anybody can ultimately withstand this kind of pressure, that's another question."

Lawson, pastor emeritus of the Wheeler Avenue Baptist Church, entered the courtroom to console the Lays immediately after the jury's decision. All five children gathered around their father after the verdict to pray, he recalls. "Probably that was a model of how a family ought to operate in a time of crisis," he says.

When Lay flew back to Houston this week, Linda left their mountain hideaway to accompany her husband back to the place that delivered what he considers the greatest "shock" of their lives. He was, once again, a famous man with an important appointment to keep.

In the federal courthouse, the probation officer conducting a pre-sentencing evaluation awaited.

Staff researcher Richard Drezen contributed to this report.