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Houston Leaders Back CEO Lay--for Now

Community: Many in Enron's hometown are not ready to alienate one of the city's most generous benefactors.


HOUSTON — While politicians in Washington distance themselves from Enron Chairman and Chief Executive Kenneth L. Lay, leaders in the energy company's hometown say they aren't turning their backs on the embattled executive. At least, that is, for now.

Snubbing Lay likely would mean alienating one of the city's most generous benefactors--something that many leading Houstonians don't seem prepared to do.

That goes for political candidates too, said Bob Stein, a political scientist at Rice University. "So far, the feeling is, 'If I got money from Ken Lay, I ain't giving it back. I didn't do anything wrong.' "

Stein, who is helping recruit candidates for an endowed chair in Lay's name in Rice's business department, added, "This is the Ken Lay chair. I can tell you my president and my provost have no problem going on recruiting."

Lay and his wife, Linda, are still on the Houston charity circuit. They are among the numerous co-chairs of the annual "A Celebration of Reading" fund-raiser chaired by former President Bush and Barbara Bush, scheduled for April.

And the Lays are the honorary chairs of the Holocaust Museum Houston dinner in March.

Still, some signs of fraying have emerged in the Lays' social network. The Lays stepped aside as honorees of the nonprofit I Have a Dream organization's gala in April, which raises money to help low-income children stay in school and take advantage of tutoring and mentoring programs.

Kaitlyn Bloomquist, a spokeswoman for the charity, said the Lays were concerned about "the prospect of asking for financial support [for the charity] at this time."

Meanwhile, it was announced Friday that Lay had resigned effective Dec. 31 from the board of Compaq Computer Corp., another corporate giant based in Houston. Lay had been on the computer maker's board for 15 years. A company spokesman said he had no information about why Lay quit.

In Houston, there is a "reservoir of goodwill for Ken Lay because the company has been a philanthropic and civic leader for years," said Richard Murray, a political scientist at the University of Houston.

Still, "I suspect he'll be ordering out more for food. Too many people have been hurt profoundly," Murray said, referring to thousands of employees who have lost jobs and had retirement investments nearly wiped out by Enron's bankruptcy filing.

Texas politicians who have benefited from Lay or Enron's wide-ranging contributions probably will feel some heat too. That includes Gov. Rick Perry, who, after President Bush, is the biggest Texas recipient of political donations from Enron, its executives and politician action committee, according to Texans for Public Justice, a watchdog group.

Likewise, political scientists say the Enron collapse has killed Lay's political aspirations and those of another prominent businessman, Marc Shapiro, who oversees finance and risk management at J.P. Morgan Chase, which provided billions to Enron. Lay and Shapiro once were thought to have a good shot at the Houston mayor's seat in 2003, Murray said.

Jim C. Kollaer, president of the Greater Houston Partnership, the city's chamber of commerce, said Houstonians generally feel empathy for Lay. But he and others acknowledged that creditors and ex-employees probably feel differently.

Kollaer said that though he normally runs into Lay frequently at social events around town, he hasn't seen Lay socially since the company sought Chapter 11 Bankruptcy Court protection last month.

Traditionally, Stein said, most Texans haven't been troubled by cozy relationships between business and politicians.

"Texans are much less moralistic about the kind of things we expect or tolerate," he said. "It's just business." And with Houston's boom and bust economy, bankruptcies are built into the culture here.

Still, Stein said, the Enron bust and the controversy surrounding Lay might arouse ill will.

"Every day brings a new story about someone who was laid off from Enron and just had a baby and can't get insurance," he said. "This one is different. A lot of people were affected personally."

Lydia Baehr, a spokeswoman for the Society for the Performing Arts in Houston, said, "I think everyone's willing to give Ken Lay the benefit of the doubt until proven guilty. He was such a huge supporter of the arts in Houston."

Baehr offered her thoughts from the partly darkened 37th floor of the Enron building in downtown Houston. Enron allowed the Society of the Performing Arts to move in temporarily after its offices were flooded during a tropical storm last year. "We don't know what's going to happen to Enron and what's going to happen to us," she said.


Hart reported from Houston, Silverstein from Los Angeles.

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