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Background: Enron’s Top Man

Margaret Warner reports on former Enron CEO Kenneth Lay's congressional appearance.

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  • MARGARET WARNER:

    Former Enron chairman and C.E.O. Kenneth Lay was forced to appear before the Senate Commerce Committee today under a subpoena.

  • SPOKESPERSON:

    The meeting will come to order.

  • MARGARET WARNER:

    Lay sat expressionless while the Senators unleashed 90 minutes of attack over his role in the Enron debacle.

  • SEN. PETER FITZGERALD:

    I'd say you were a carnival barker, except that wouldn't be fair to carnival barkers. A carnie will at least tell you up front that he's running a shell game. You, Mr. Lay, were running what purported to be the seventh largest corporation in America. What's incredible to me is how long you kept it going, and how almost nobody called you on it.

  • SEN. JEAN CARNAHAN:

    I find ignorance a difficult defense. You and the top executives at Enron were paid enormous sums of money, presumably because of your financial and management expertise. It was your job to understand what the company was doing; it was your job to approve or disapprove of its course.

  • MARGARET WARNER:

    When Ken Lay finally spoke, what he had to say was no surprise.

    KENNETH LAY, Former Chairman and CEO, Enron: Mr. Chairman, I come here today with a profound sadness about what has happened to Enron, its current and former employees, retirees, shareholders and other stakeholders. I've also wanted to respond to the best of my knowledge and recollection to the questions you and your colleagues have about the collapse of Enron. I have, however, been instructed by my counsel not to testify, based on my Fifth Amendment constitutional rights. I am deeply troubled about asserting these rights, because it may be perceived by some that I have something to hide. But after agonizing consideration, I cannot disregard my counsel's instruction.

  • MARGARET WARNER:

    It's been a long road for the 59-year-old Lay, who grew up poor in rural Missouri, merged two pipeline companies to create the new Enron in 1985, then transformed Enron into an energy trading giant and America's seventh largest company. In the process, Lay became a wealthy man, reportedly earning $300 million from salary, bonuses and stock sales in the last ten years. As Enron's fortunes grew, so did its profile. Lay and Enron donated millions of dollars to Houston arts and charities, and led the fundraising effort for Houston's Enron Field. Lay courted and financed politicians as well. He called the first President Bush a friend, played golf with President Clinton, and was one of George W. Bush's top campaign fundraisers, the "Pioneers." In February of last year, Lay named his protégé, Enron president Jeff Skilling, to replace him as CEO. Lay remained as chairman. But in August, Skilling resigned for what he said were personal reasons. And the next day, Lay received a letter from senior employee Sherron Watkins, warning that Enron could, "implode in a wave of accounting scandals."

  • SHERRON WATKINS, VP Corporate Development, Enron:

    I thought Ken Lay ought to know the facts, and look into them.

  • MARGARET WARNER:

    Resuming as CEO, Lay presided over the final months of Enron's collapse into bankruptcy. At a company staff meeting last October, Lay said he was heartbroken that so many Enron workers had lost their retirement savings, and he read aloud this question from an angry employee.

  • KENNETH LAY:

    "I would like to know if you are on crack. (Laughter) If so, that would explain a lot; if not, you may want to start because it's going to be a long time before we trust you again." I think that's probably not a very happy employee, and that's understandable.

  • MARGARET WARNER:

    An internal company investigation led by Enron director and University of Texas Law School Dean William Powers, criticized lay and Skilling for permitting a system in which Enron chief financial officer Andy Fastow also ran off-the- books partnerships. The Powers Report said that Lay: "bears significant responsibility for those flawed decisions, as well as for Enron's failure to implement sufficiently rigorous procedural controls to prevent the abuses that flowed from this inherent conflict of interest." Late last month, Lay's wife Linda defended her husband, telling a television interviewer, "There were things that he wasn't told," and she said their family was suffering, too.

  • LINDA LAY:

    We're fighting for liquidity. We don't want to go bankrupt. Other than the home we live in, everything we own is for sale.

  • MARGARET WARNER:

    But there's been little sympathy from former Enron employees.

  • WOMAN:

    Good. Let them liquidate everything that they have because then they'll see how we feel– just exactly how we feel. I've got a son, a freshman in college– what am I to do?

  • MARGARET WARNER:

    Lay has been subpoenaed to appear before a House subcommittee on Thursday. He's expected to take the fifth then, too.

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