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Surprise of Enron Trial Is Lay's Surly Manner

Known for charm, the ex-chairman may have damaged his case with sarcasm and snippiness.

April 28, 2006|Thomas S. Mulligan | Times Staff Writer

HOUSTON — Who would have guessed that Kenny Boy could be a tougher sell to a jury than Capt. Queeg?

Enron Corp. founder Kenneth L. Lay -- Kenny Boy to his friend President Bush -- is renowned for his courtliness, his philanthropy, his rise from a dirt-poor boyhood in the Missouri Ozarks to a nine-digit fortune.

Codefendant Jeffrey K. Skilling, who invented Enron's most profitable business and ran the company during most of its heyday, also is known for getting in a bar fight while under indictment and for publicly calling an investment analyst by another name for a sphincter.

At the start of their federal fraud and conspiracy trial three months ago, the betting was that the volatile Skilling's performance on the witness stand might drag Lay down, not the other way around.

Former Chief Executive Skilling, 52, shares some of the obsessiveness of Queeg, the Navy skipper of "The Caine Mutiny." But unlike Queeg, Skilling didn't unravel on the stand. Where mastery of Enron's finances was at issue, he overpowered co-lead prosecutor Sean M. Berkowitz. When the nimble Berkowitz pushed certain buttons, Skilling showed flashes of anger and arrogance, but he generally kept his head.

For Lay, however, it's been a rockier ride. Although nobody knows what the 12 Texans in the jury box are thinking, during his first four days on the stand, Lay, 64, has shown some attributes that clash with his reputation as affable, openhanded and shrewd.

His worst moment came Wednesday, when prosecutor John C. Hueston jolted Lay with questions about his attempts to reach actual or potential witnesses in the case -- efforts that persisted even after Lay's lawyers told him to stop.

"You've got to question the judgment of the person," said Mark C. Zauderer of New York law firm Flemming Zulack Williamson Zauderer. "No lawyer would have his client in the dock calling potential witnesses. It could be very suspect in the minds of the jury."

Lay probably didn't help matters by responding to Hueston's blitz with sarcasm. The jury of eight women and four men has hardly been immune to humor during the trial -- even Skilling's mordant wit sometimes connected -- but nobody cracked a smile at Lay's comebacks Wednesday.

Noting Lay's $120,000 investment in a company whose main customer was Enron, Hueston asked whether he had made conflict-of-interest filings required by Enron's code of conduct.

"I don't know," Lay shot back. "Have you checked it? I imagine you have. You guys are pretty thorough."

After describing himself in early testimony as "more of a delegator" than a micromanager, Lay quickly proved himself adept at delegating blame. If something worked out, it was his idea. If it blew up, it was somebody else's.

Asked to name his biggest mistakes at Enron, Lay unhesitatingly listed "hiring Andy Fastow" and promoting him to chief financial officer.

Andrew S. Fastow turned out to be a crook who secretly stole millions from Enron and allegedly helped cook the books. Lay didn't mention it, but he had to know the jury would recall that hiring and promoting Fastow was entirely Skilling's doing.

It wasn't the only time Lay subtly undercut his codefendant. He cited Skilling's surprise resignation in August 2001 as a source of uncertainty in the financial markets that set the stage for the investor and creditor panic that Lay said ultimately brought Enron down.

Moreover, by praising Skilling as an executive who "really gets into the details, the guts of how things work," Lay may have signaled that Skilling, far more than Lay, would have grasped the intricacies of Enron's accounting and financial reporting -- the things at the heart of the criminal case.

Lay blamed two aides for what turned out to be one of the biggest PR gaffes of the century: rebuffing the Wall Street Journal in the fall of 2001 when the paper had questions about Fastow and his mysterious LJM partnerships -- complex financial structures that the government says let Enron hide problem assets and falsely pump up profit.

With Enron offering only a brief statement written by its lawyers, the company lost any control over the debate and was powerless when the resulting stories eviscerated its stock. A livid Skilling even called from retirement to ask why Enron wasn't defending itself.

In Lay's view, his own instincts had been right all along. Stonewalling the Journal, he testified, went "against every bone in my body."

One of the witnesses whom Lay admitted trying to reach was a former Enron risk manager named Wincenty "Vince" Kaminski. Jurors would remember him as a professor type with a Polish accent and a healthy ego who testified that he tried vainly to warn higher-ups that Fastow's LJM partnerships were a stupid idea and that Enron shouldn't be involved with them.

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