The federal indictment, unsealed Thursday, charges Lay of participating in a conspiracy to manipulate Enron's earnings reports to hide the company's financial losses. It also accuses him of making false and misleading public statements to employees, investors and security analysts officers about the company's financial performance.
The indictment adds 11 counts against Lay to the government's charges already filed against former CEO Jeff Skilling and ex-chief accounting officer Rick Causey. Skilling, indicted in February 2001, and Causey have both pleaded not guilty to more than three dozen counts of insider trading, fraud and lying on Enron financial statements.
The indictment specifically names Lay in the 11 counts: one count of conspiracy, two of wire fraud, four of securities fraud, one bank fraud and three of making false statements to banks. All three former executives are also accused of unlawfully enriching themselves through salaries, bonuses, grants of stock and stock options.
After Lay turned himself in, federal authorities escorted the 62 year old in handcuffs to a federal courthouse, where he entered his plea of not guilty before U.S. Magistrate Judge Mary Milloy around noon local time Thursday.
Lay -- once a highly respected civic and business leader in Texas who counted the Bush family among his high-profile friends -- has steadfastly maintained he committed no criminal acts.
"I have done nothing wrong, and the indictment is not justified," Lay said in a statement Wednesday after learning of the indictment.
The indictment against Lay marks a major development in the government's investigation into Enron's corporate fraud after its collapse in December 2001. The Enron grand jury, impaneled in March 2002, has already indicted multiple former Enron employees and bankers.
In January, Enron's former Chief Financial Officer Andrew Fastow pleaded guilty to two conspiracy counts and agreed to cooperate with the government's Enron Task Force prosecutors. He is widely expected to be a star witness for the government against Lay and Skilling.
Lay, once highly regarded as a pioneer of the deregulated energy industry, was credited with transforming Enron into the world's leading energy trading firm, claiming $101 billion in annual revenues at its height.
But the company's sudden bankruptcy put more than 4,000 workers out of work and led to congressional hearings that started momentum for reform of accounting and finance rules. Lay is now the 30th and highest-profile individual charged in the government's investigation into Enron.
In a separate action, the Securities and Exchange Commission filed civil charges Thursday against Lay, accusing him of fraud and insider trading and seeking recovery of more than $90 million in what the agency said were illegal proceeds from stock sales.