ENRON'S Kenneth L. Lay
FIRSTROW, FROM LEFT, Ken L. Harrison, John A. Urquhart, Robert A. Belfer, Norman P. Blake, Jr., Robert K. Jaedicke, Ronnie C. Chan, Jeffrey K. Skilling, Kenneth L. Lay and Wendy L. Gramm. Second Row, from left, Bruce G. Willison, John H. Duncan, Joe H. Foy, Charls E. Walker, John Wakeham, Jerome J. Meyer, Herbert S. Winokur, Jr. and Charles A LeMaistre.
Kenneth Lay, Chairman and chief executive: Sold 1.8 million shares for $101 million
Blind Faith: How Deregulation and Enron's Influence Over Government Looted Billions from Americans
KENNETH L. LAY
Chairman and Chief Executive Officer
Kenneth L. Lay is Chairman and Chief Executive Officer of Enron Corp. He was named to that position in February 1986, following the merger of Houston Natural Gas and InterNorth, Inc. in July 1985. Previously, Lay was President of Continental Resources Company (formerly Florida Gas Company) and Executive Vice President of The Continental Group, the parent company of Continental Resources Company, before joining Transco Energy Company in May 1981, as President, Chief Operating Officer and a director. He joined Houston Natural Gas in June 1984 as Chairman and Chief Executive Officer.
A native of Missouri, Lay was a Phi Beta Kappa graduate in economics from the University of Missouri, where he also received a master's degree in economics. Upon graduation, he began his career in 1965 as a corporate economist with Exxon Company, U.S.A. Subsequently, he earned a Ph.D. in economics from the University of Houston.
Lay served as an officer in the U.S. Navy, and held the positions of Technical Assistant to a Commissioner of the Federal Energy Regulatory Commission and Deputy Under Secretary for Energy of the U.S. Department of Interior. Additionally, while in Washington, Lay was an assistant professor at George Washington University, teaching graduate courses in micro- and macroeconomic theory and government-business relations.
Currently, Lay serves on the Board of Directors of Compaq Computer Corporation, Eli Lilly and Company and Trust Company of the West. He is a member of the President's Council on Sustainable Development, The Business Council, the National Petroleum Council and the American Enterprise Institute. He is a member of the Board of Trustees of The H. John Heinz III Center for Science, Economics and the Environment. Previous key roles have included serving as Chairman of the Greater Houston Partnership, the University of Houston Board of Regents, the Houston Host Committee for the 1992 Republican National Convention and Co-Chairman of the 1990 Houston Economic Summit Host Committee.
Enron Chief Quits as Hearings Open
Lay Scheduled to Appear on Hill Feb. 4
By Dan Morgan and Peter Behr
Washington Post Staff Writers
Thursday, January 24, 2002;
Kenneth L. Lay resigned yesterday as chairman and chief executive of Enron Corp., caught between unrelenting pressures from the energy company's creditors and a circle of federal and congressional investigators pursuing the reasons for Enron's precipitous collapse late last year.
Lay, 59, who founded the Houston company in 1986 and presided over its surging growth as an energy trader in the late 1990s, submitted his resignation around noon in a conference phone call with the company's board of directors. He will remain on the board.
His resignation, on the eve of two congressional hearings, had been sought by a committee of major creditors who hold veto power over Enron's Chapter 11 bankruptcy reorganization efforts. "You work for the creditors. The creditors wanted someone else," said one Enron official.
Lay's departure came a day after FBI agents moved into Enron's headquarters tower to investigate charges of widespread shredding of corporate documents after government investigations of Enron had begun. Agents said they found a trash can containing shredded material and sealed off the area. Document destruction at Enron and its outside auditing firm, Arthur Andersen, will be a key focus of today's Capitol Hill hearings.
Yesterday, people familiar with an investigation into shredding of Enron-related documents at Andersen's Houston office said scores of employees were involved. Ken Johnson, spokesman for the House Energy and Commerce Committee, said it was "many" people, not just a few. Others familiar with the situation say all those involved were on Enron's audit team in the Houston office, or were technical employees directed by the Enron team.
A friend and major political backer of President Bush, Lay formed Enron by combining two natural gas pipeline companies and set about transforming it into a powerful supplier of gas and electricity. In the 1990s it created a vast, complex energy and commodity trading operation marked by increasingly elaborate outside partnership structures that are a central focus of the Enron investigations.
Lay is scheduled to make the first appearance by a senior Enron executive before congressional panels investigating his company's demise at a Senate hearing Feb. 4. He also is a lead defendant in lawsuits by Enron shareholders and former employees. Their lawyers charge that Lay and other company executives enriched themselves through sales of Enron stock while misleading investors and employees about the company's rapidly deteriorating financial condition last year.
"I want to see Enron survive, and for that to happen, we need someone at the helm who can focus 100 percent of his efforts on reorganizing the company and preserving value for our creditors and hardworking employees," Lay said in a statement.
After filing the largest bankruptcy petition in U.S. history Dec. 2, Enron is trying to sell assets, settle its debts and survive as an energy producer and distributor. Although the company laid off about 4,500 employees from its headquarters staff, it has about 19,000 employees worldwide at energy, pipeline and water supply installations, the company said.
"It was becoming increasingly difficult for Ken to concentrate fully on what is most important to Enron's stakeholder" the bankruptcy reorganization, said Enron spokesman Mark Palmer.
"Ken had considered the possibility that he might want or need to step down back before Christmas," said Enron's chief outside corporate lawyer, Thomas A. Roberts of Weil, Gotshal & Manges. A representative of Enron's creditors committee called Roberts on Tuesday to say that Lay should consider resigning and after Roberts and Lay discussed it, Lay resigned.
Today's hearings are being conducted by the Senate Governmental Affairs Committee, which is looking into financial and regulatory issues surrounding Enron's collapse, and the oversight subcommittee of the House Energy and Commerce Committee, which is looking into alleged document destruction by Arthur Andersen.
A White House spokeswoman, Jeanie Mamo, said the resignation does not change the president's focus. "It is on the criminal investigation, which will continue, and on the policy reviews to protect people's pensions," she said.
Governmental Affairs Committee Chairman Joseph I. Lieberman a pro-business Democrat from Connecticut with an eye on his party's 2004 presidential nomination has summoned former Securities and Exchange Commission chairman Arthur Levitt Jr. and other witnesses to testify about financial and regulatory issues.
Rep. W.J. "Billy" Tauzin, (R-La.) chairman of the House Energy and Commerce Committee, said yesterday he had moved the investigatory hearing ahead of one planned by the full committee to examine Enron's financial activities and relationships because it was urgent "to get to the bottom of this."
"We cannot do our work if people are going to destroy documents," he said.
Andersen recently admitted that the company's audit team last October destroyed thousands of documents and e-mails resulting from its audit of Enron after learning that the SEC was looking into Enron's accounting practices. Enron lawyers have said shredding also took place at the company's offices.
Rep. James C. Greenwood (R-Pa.), who chairs the subcommittee on oversight and investigations, said Andersen agreed late yesterday to provide a senior partner to answer questions about policies and procedures regarding documents. Andersen attorney Nancy Temple, and Michael Odum, who was on the Andersen team at Enron, will appear under subpoena.
Greenwood said they would be questioned about when they became aware that Enron or Andersen might face litigation or an SEC probe, and how this affected their handling of relevant documents.
David B. Duncan, who led Andersen's audit of Enron, has also been ordered to appear. His attorneys have told the committee he probably will refuse to testify by invoking his right against self-incrimination. Duncan previously spoke to committee investigators, but not under oath.
Lieberman has labeled the Enron story a "corporate scandal," and indicated he wants to use the hearings to explore the role of the SEC, the Department of Energy and other oversight agencies.
Under Lay, Enron was a leading political advocate for natural gas and electricity deregulation, courting allies in Washington and state capitals with intensive lobbying and generous contributions. Enron made $1.9 million in political contributions between 1999 and 2001, according to a campaign spending watchdog group, the majority of it to Republicans. Lay, other Enron executives and the company itself contributed more than $220,000 to Bush's presidential campaign.
As Enron was unraveling last fall, Lay tried to win help from the Bush administration, contacting Commerce Secretary Donald L. Evans and Treasury Secretary Paul H. O'Neill in October. The Cabinet officials said they turned down Lay's requests for assistance in holding off a pending downgrade of Enron's credit rating a critical issue for the heavily indebted company.
Lieberman has avoided direct criticism of the White House's ties to Lay and other Enron figures, saying he has seen no indication of illegal activity. That caution, say political observers, reflects many Democrats' concerns about the risks of appearing overly partisan, especially if congressional inquiries turn up no evidence of White House wrongdoing.
The central question Lay faces now is what he knew about Enron's deteriorating financial condition last year. Lay and other top executives professed that the company's future was bright at a time when its foreign energy projects were losing money and a crucial Internet networking venture was failing.
In August, Enron Vice President Sherron Watkins warned Lay directly that the company faced a threat of accounting scandals because of its use of outside partnerships and investment entities to conceal debts and exaggerate revenue, she said. Enron asked another outside law firm, Vinson & Elkins, to investigate the charges, but said nothing about Watkins's warning.
Two months later, Enron revealed the first of a worsening series of accounting violations and errors, the Securities and Exchange Commission launched an inquiry, and the company's final collapse began.
Thousands of Enron shareholders have lost retirement savings in Enron stock and Lay has become a focus of their anger.
"I believe he cares very much for the jobs that have been lost and the pain that's been done," Roberts said. "It's been extraordinarily difficult. He's held up very well." Like dozens of others in Congress serving on committees involved in the investigation, Lieberman has received political donations from accounting companies, including Arthur Andersen's political action committee. The New Democrat Network, a campaign group he co-founded to support the election of centrist Democrats, also has received $14,500 from the Andersen PAC and $15,000 from Enron's PAC since 1997, according to PoliticalMoneyLine, an independent monitoring group.
As a Republican loyalist, Tauzin is expected to keep attention focused on the corporate misdeeds of Enron and Andersen, and away from Enron's ties to the GOP. He has made clear he will not join Rep. Henry A. Waxman (D-Calif.) in using the investigations to highlight the ties between President Bush, some of his top aides and Enron.
Waxman "is carrying on a very partisan fight and trying to make this into a political deal," said Tauzin. "It isn't."
Over the years, campaign groups controlled by Tauzin have received large sums from the accounting industry, including Andersen. But those who have followed Tauzin's career say that won't necessarily affect how he proceeds.
Born in the tiny southern Louisiana town of Chackbay, he grew up in a populist political culture that often viewed big corporations with as much suspicion as big government. He was elected to Congress in 1980 as a Democrat, and switched to the GOP in 1995.
On the powerful Energy and Commerce Committee, Tauzin developed close connections to the telecommunications, energy and accounting industries. In the mid-1990s, for example, he worked for securities litigation reform that limited lawsuits against accounting firms. In 2000, he battled against a proposal by the SEC's Levitt for far-reaching reforms of the accounting industry that would have prevented firms from maintaining lucrative consulting contracts with companies they audit. Andersen had such contracts with Enron.
But the same year, Tauzin led an aggressive investigation of the role of Ford Motor Co. and Firestone in accidents involving Ford Explorer vehicles. That resulted in legislation strengthening tire safety rules.
"Friend or foe, our committee is going to go after anyone who has done something wrong," said Tauzin. "I'm not interested in the political friendships. We're going to treat everyone the same."
Tauzin's investigators were the first to arrive at Enron headquarters in Houston to gather documents. Among the items they found were an August 2000 letter from an Enron vice president warning company chairman Lay of numerous unaddressed accounting problems.
Tauzin said yesterday he would keep an open mind on whether it might be necessary to institute some of the changes in the accounting industry that Levitt proposed and he opposed in 2000.
"If the regulatory balance is wrong today, then we need to rebalance it," he said.
Sens. Christopher J. Dodd (D-Conn.) and Jon S. Corzine (D-N.J.), both members of the Banking Committee, said yesterday that they are creating legislation that would prevent accounting firms from offering both audit and consulting services to the same client. Sen. Barbara Boxer (D-Calif.) has said she will introduce similar legislation.