Lay, vilified by lawmakers, says he’s sorry about Enron debacle, declines to testify
WASHINGTON (AP) — Vilified by lawmakers as a con man who betrayed Americans’ trust, former Enron chairman Kenneth Lay expressed “profound sadness” Tuesday about the impact of Enron’s financial collapse on investors and employees but rejected pleas to testify about it.
He conceded his silence may cause some to believe “I have something to hide.”
Lay told a packed Senate hearing that he was “deeply troubled” by asserting his constitutional right under the Fifth Amendment not to answer questions about the financial dealings that led to Enron’s bankruptcy — a collapse that devastated thousands of workers and investors and rattled Wall Street.
“It may be perceived by some that I have something to hide,” Lay told the Senate Commerce Committee. He said he would make a similar declaration should he be directed to appear at any future congressional hearings.
Lay became the fifth executive — plus a senior auditor at the Arthur Andersen accounting firm — to declare his silence by pleading the Fifth. Among them was Andrew Fastow, Enron’s former chief financial officer who was at the heart of a series of complex partnerships that investigators say led to Enron’s downfall in the largest corporate bankruptcy ever.
William Powers, the University of Texas law school dean who headed Enron’s internal investigation into the collapse, told the committee “there’s substantial evidence” that former Enron chief executive Jeff Skilling “was involved” in some of the partnership dealings, beyond what he acknowledged in congressional testimony last week.
Skilling’s attorney, Bruce Hiler, said later that Powers’ views “are not supported.” Skilling said he did not know details of certain transactions between Enron and one of the partnerships allegedly used by the company to hide debt and disguise losses. Skilling’s claim was met by disbelief from lawmakers, and senators had wanted to ask Lay what Skilling may have told him.
Appearing under subpoena, Lay sat stoically for more than an hour as one senator after another chastised him, declaring he had violated Americans’ basic trust by allowing his company to mislead investors. If he didn’t know, he was dramatically out of touch; if he knew, he should have done something about it, they maintained.
Sen. Peter Fitzgerald, R-Ill., said many of Enron’s partnerships resembled a pyramid scheme marked by insider agreements, phony declarations of profits and losses and complex attempts to hide billions of dollars in corporate debt to inflate Enron’s profits.
Fitzgerald compared Lay — the longtime friend of President Bush and his family, and one of the Republican Party’s biggest financial benefactors — a “carnival barker” and “the most accomplished confidence man since Charles Ponzi,” an investment swindler from whom the term “Ponzi scheme” is derived.
“Obviously Mr. Lay, the anger here is palpable,” said Sen. John Kerry, D-Mass.
Powers told the committee that it was clear that Lay approved of the partnership arrangements and knew they were being used to keep debt off the balance sheet. He also said Lay approved Fastow’s serving a dual role as head of a partnership while still Enron’s chief financial officer, contrary to Enron’s code of ethics, and that he sat in on at least one meeting in which a partnership transaction was discussed.
Senators noted that Enron vice president Sherron Watkins, who is scheduled to testify before a House hearing on Thursday, long had deep concerns about the partnerships and met with Lay about her worries, which she detailed in a memo last August. Watkins’ lawyer, Philip Hilder, has said Watkins had additional meetings with Lay in October.
“How could you and others have not known the potential and serious financial ramifications that these partnerships posed to the company?” Sen. Olympia Snowe, R-Maine, asked Lay, knowing that the former Enron chief, who resigned his chairmanship on Jan. 23, would not respond.
Later Powers said that Lay in interviews with investigators had said he thought the partnerships and transactions involving them “were OK because Andersen (Enron’s outside accounting firm) signed off on them.”
As one senator after another criticized him, Lay sat in a front-row seat of the hearing room, hands clasping his knees, staring forward and appearing at times to be holding in his emotions. His daughter sat a row behind. Lay’s wife, Linda, who in recent weeks publicly has defended him and said he was largely misled by underlings, was not at the hearing.
Lay’s attorney, Earl Silbert, said that Lay had “agonized very deeply” about not testifying, but that Silbert had insisted that his client plead the Fifth Amendment that protects him against self incrimination.
In the hallway after the session, Katherine Benedict, 34, a former Enron worker who sat in on the hearing, said she was saddened and disappointed that Lay did not provide more of an explanation.
“We had such reverence for him and such respect for him as our leader,” said Benedict, a former Enron marketing specialist who lost $5,000 in her retirement account when Enron stock became virtually worthless. Eventually, she predicted, Lay will have to tell his story in court.