HOUSTON – Enron Corp. founder Kenneth Lay declared his innocence Monday on the witness stand, somberly saying the company’s legacy of lost jobs and wrecked retirement savings pained him even more than the loss of a loved one.
Lay blamed the implosion of Enron, once the nation’s seventh-largest company, on a series of devastating circumstances that included theft by the chief financial officer, negative press, a bear market and investor anxiety after the Sept. 11, 2001, attacks.
“I don’t think there ever was a conspiracy of any kind,” he said.
His testimony, defending against criminal fraud and conspiracy charges that could send him to prison for the rest of his life, represented an extraordinary moment in an era in which Lay and Enron, fairly or not, have come to be seen as symbols of corporate scandal.
Lay, 64, a former chairman and chief executive of the company, said he was eager to tell the truth about what happened at Enron, a story he said was distorted by overzealous federal investigators and bad publicity.
Under questioning from a defense lawyer, he made a point of accepting “full responsibility for everything that happened at Enron” and acknowledged the thousands of jobs and billions of investor dollars that were vaporized in its collapse.
“I’m sure there’s absolutely nothing in my life, including the loss of life of many of my loved ones, that even comes close to the same level of pain, and the same enduring pain, that has caused,” he said.
He explicitly denied committing fraud, participating in a criminal conspiracy or knowingly misleading investors and employees about the financial health of the company.
Lay spoke in conversational and even folksy terms, appearing more relaxed than his co-defendant, former Enron CEO Jeffrey Skilling, who testified earlier this month and played the brilliant strategist to Lay’s affable visionary.
When his lawyer, George Secrest, asked Lay what his worst mistake was as head of Enron, Lay said the answer was easy – hiring Andrew Fastow, who has admitted stealing tens of millions of dollars from the company.
“It all began with the deceit of Andy Fastow,” Lay said of the former CFO.
Fastow was a pivotal piece of the government’s case against Lay and Skilling, insisting both men knew the company was in poor health in 2001 even as they were making public statements to the contrary. Fastow has agreed to serve 10 years in prison after pleading guilty to two counts of conspiracy.
In Lay’s version of events, Fastow’s theft was the beginning of the end for Enron. Lay also blamed short sellers, who were in effect betting on Enron’s failure, and a series of negative stories in The Wall Street Journal in late 2001.
Set against an economy already reeling from the bursting of the technology-stock bubble in the late 1990s and the 2001 terror attacks, Enron was faced with “a firestorm that we couldn’t stop,” Lay told jurors.
Lay also directly refuted Fastow’s claim that the CFO had given him a rundown in 2001 of huge, looming write-offs, a massive accounting error and deterioration of fragile financial structures Enron allegedly used to mask losses.
Lay said: “That did not happen, period.”
Character witnesses and expert witnesses are expected to follow Lay, and the defense could wrap up by the end of next week. The government will have the chance to present a rebuttal case before jurors hear closing arguments and begin deliberating.
Lay faces six counts of fraud and conspiracy. Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors. The conspiracy count accuses both men of leading an effort to portray Enron as healthy when they knew accounting tricks hid bad news and failing business ventures.
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