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Lay Puts Hopes in Optimism

The Enron founder is likely to testify he never deceived but saw events in a positive light.

April 24, 2006|Carrie Johnson | Washington Post

HOUSTON — When Enron Corp. founder Kenneth L. Lay takes the stand today in his own defense, he will try to convince jurors that what prosecutors call fraud was really the misdirected power of positive thinking.

Lay, 64, faces half a dozen criminal charges stemming from the collapse of the Houston energy company he built. In essence, the government claims he put a misleadingly optimistic spin on Enron's mounting financial woes and urged employees to buy stock as an "incredible bargain" at the same time he knew things were unraveling.

Lay insists that he refused to dwell on problems and focused instead on good news in an honest belief that he could right the ship when it listed in late 2001. That, Lay's defense lawyers argue, is not enough to send a man to prison for what could be the rest of his life.

"There's no question in my mind that Ken Lay believed in his heart and soul that he could turn it around, and he would turn it around," said Terry Giles, a close friend and fellow winner of the Horatio Alger Award, a prize that honors people who rise from rags to riches. The award was founded by Norman Vincent Peale, author of "The Power of Positive Thinking."

Lay's outlook is rooted in his personal history. The son of a poor, itinerant preacher, he won a scholarship to the University of Missouri, made influential friends, earned a doctorate in economics and even did a tour in Washington as an Energy Department official. During Enron's waning years, he earned $220 million.

"He's not one to say, `No, this can't be done,' " said Philip Carroll, a neighbor of Lay's and a former Royal Dutch Shell executive who ran Iraq's oil industry after the U.S. invasion.

Before Enron's December 2001 filing for bankruptcy protection, Lay had it all. He was a friend to the Bush family, the primary mover behind efforts to keep professional baseball and football teams in Houston and a trusted emissary from the corporate world to African American and religious leaders.

Even after the collapse, many employees refused to believe that Lay had anything to do with Enron's downfall, although critics seized on disclosures that he quietly unloaded $70 million worth of Enron shares to pay personal loans at the same time he urged others to buy.

Lay still inspires near-reverence in some quarters. Defense witness Sarah Davis, a former employee in Enron's personnel unit, was almost moved to tears this month, when she told the jury she viewed Lay as "a gentleman and a general." Lay beamed at her from his seat at the defense table. Another defense witness, Cindy Olson, told the jury Thursday about Lay's tireless efforts to support the United Way, and the Boys and Girls Clubs.

Known for his easy manners, Lay sometimes has served as a sort of usher, holding open the courtroom door for streams of spectators, including his daughter Elizabeth Vittor, a lawyer and member of his defense team, and his wife, Linda. Both Lays have laughed freely at lighthearted moments during the trial. They clutch each other's hands as they navigate streams of cameras outside the courthouse.

But testimony in the case, which began Jan. 30, at times has reflected a harder side of the smooth corporate statesman.

For instance, jurors last month heard audio clips from an October 2001 earnings conference call in which Lay brushed off questions about Enron's troubled international operations, pet projects for which he often jetted across the globe. Lay's statements about one of the overseas water-supply businesses form the basis of a criminal charge against him.

"Now, I know you want to drive the stock price down, and you've done a good job at doing that, but I think that's that," Lay barked at a skeptical analyst. "Let's move on to the next question."

Pipeline worker Johnnie Nelson, a plain-spoken man who lost his retirement savings after Enron filed bankruptcy, told the jury last month that he once put Lay on a pedestal. Now Nelson says, "He violated my trust. That's all I know."

By many accounts, Lay appeared overwhelmed when he took the chief executive post from protege and fellow defendant Jeffrey K. Skilling in the summer of 2001, after Skilling resigned. Skilling had transformed Enron into a trading company with tens of thousands of employees, while Lay focused on strategic decisions and courted politicians. Skilling said as much on the witness stand.

"Ken was more interested in the external realm of talking to different sorts of people, regulators, businessmen in the international arena," Skilling testified. He drew a smile from Lay when the sometimes brutally blunt witness added, "I think most people would agree I was not particularly good at dealing with government officials."

Even his friends say conflicting pressures hit Lay from August to November 2001. Those issues included questions about the integrity of Chief Financial Officer Andrew S. Fastow; more than $1 billion in accounting write-downs; and complaints from two women who warned of misdeeds within Enron's ranks.

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