Grand jury indicts Lay in collapse of Enron
By Carrie Johnson
The Washington Post
WASHINGTON — A federal grand jury in Houston issued a sealed indictment against former Enron Corp. chief executive Kenneth L. Lay yesterday and prosecutors are set to make the criminal charges public today.
Lay, 62, who has been under intense scrutiny since Enron's demise in December 2001, issued a statement after news reports of the charges.
"I have been advised that I have been indicted," he said. "I have done nothing wrong, and the indictment is not justified."
In recent months, the grand jury has heard evidence from a series of former employees who said they alerted Lay to mounting financial problems in the months before the company filed for bankruptcy protection.
Lay, who founded Enron and served as its longtime chairman, took over again as chief executive in August 2001, after the sudden resignation of his handpicked successor, Jeffrey K. Skilling.
The Lay indictment marks a major development in the government's most prominent investigation into corporate fraud after the Internet bubble burst in 2000. Skilling, who replaced Lay as CEO for six months, was indicted earlier this year.
The exact charges against Lay could not be determined yesterday, but other former leaders at the company have been accused of fraud, conspiracy and insider trading offenses.
Lay said he will surrender to authorities this morning. He is expected to appear at a brief court proceeding before a magistrate judge in Houston later in the day.
The Securities and Exchange Commission will bring related civil charges against Lay, sources involved in the 2à-year-old investigation said.
"Duped," Lay says
Investigators have probed a series of optimistic statements Lay made to analysts and employees in the months before Enron's fall, which cost thousands of workers their jobs and retirement savings.
Lay also sold millions of dollars of Enron stock back to the company between August and December 2001, using a revolving line of credit as an "ATM machine," in the words of one former board member.
Lay has strongly denied wrongdoing through his lawyer Michael Ramsey, who told The Washington Post last month that Lay had been duped by underlings and that he sold stock only to cover losses in volatile technology investments. Moreover, Ramsey said, Lay held on to a substantial amount of Enron shares as the stock price dropped, losing potential profits in the process.
"We are very conversant with all the facts and all the documents," Ramsey said June 19. "I've seen nothing that will support a prosecution."
Prosecutors, who are barred from talking about pending charges, declined comment.
Skilling, a brilliant, abrasive former consultant, was indicted on 35 fraud and insider trading charges in February.
The government contends that Skilling presided over a wide-ranging conspiracy that employed accounting maneuvers, false statements and other methods to prop up Enron's stock price in the years before it collapsed.
30 charged so far
So far the Justice Department's Enron Task Force has charged 30 people connected to the company with conspiracy and other crimes.
Eleven individuals have pleaded guilty or been found guilty after trial. Among prosecutors' key cooperating witnesses on the Enron case are former Enron chief financial officer Andrew Fastow, former treasurer Ben F. Glisan, and former corporate secretary Paula H. Rieker. All three pleaded guilty.
The energy company's collapse in late 2001 wiped out the retirement savings and jobs of thousands of employees and led a parade of corporate accounting scandals that set off investigations from California to Washington, D.C.
Lay's indictment supports the Bush administration's pledge two years ago that it would not tolerate corporate wrongdoing. Lay enjoyed a close relationship with the first President Bush and was a fund-raiser for the current President Bush's campaign against Al Gore in 2000.
According to the Center for Public Integrity, Enron executives contributed more than $600,000 to Bush campaigns, making Enron the second-largest contributor to the president's political career, behind credit card giant MBNA.
USA Today contributed to this report.
