Former Enron chairman says he's sorry

Wednesday, February 13, 2002

WASHINGTON -- Vilified by lawmakers as a con man who betrayed Americans' trust, former Enron chairman Kenneth Lay expressed "profound sadness" Tuesday about the impact of Enron's financial collapse on investors and employees but rejected pleas to testify about it.

He conceded his silence may cause some to believe "I have something to hide."

Lay told a packed Senate hearing that he was "deeply troubled" by asserting his constitutional right under the Fifth Amendment not to answer questions about the financial dealings that led to Enron's bankruptcy -- a collapse that devastated thousands of workers and investors and rattled Wall Street.

"It may be perceived by some that I have something to hide," Lay told the Senate Commerce Committee. He said he would make a similar declaration should he be directed to appear at any future congressional hearings.

Lay became the fifth executive -- plus a senior auditor at the Arthur Andersen accounting firm -- to declare his silence by pleading the Fifth. Among them was Andrew Fastow, Enron's former chief financial officer who was at the heart of a series of complex partnerships that investigators say led to Enron's downfall in the largest corporate bankruptcy ever.

Last week, former Enron chief executive Jeffrey Skilling said he had only vague knowledge about the Enron partnerships that were allegedly used for little but to hide debt and disguise Enron losses.

Skilling's claim was met by skepticism from lawmakers, and senators had wanted to ask Lay what Skilling may have told him.

Pyramid scheme

Appearing under subpoena, Lay sat stoically for more than an hour as one senator after another chastised him, declaring he had violated Americans' basic trust by allowing his company to mislead investors.

Sen. Peter Fitzgerald, R-Ill., said many of Enron's partnerships resembled a pyramid scheme marked by insider agreements, phony declarations of profits and losses and complex attempts to hide billions of dollars in corporate debt to inflate Enron's profits.

Fitzgerald compared Lay -- the longtime friend of President George W. Bush and the Bush family, and one of the Republican Party's biggest financial benefactors -- to an "accomplished confidence man ... a carnival barker."

In separate testimony, William Powers, the University of Texas law school dean who headed Enron's internal investigation into the collapse, told the committee that it was clear that Lay approved of the partnership arrangements and knew they were being used to keep debt off the balance sheet.

He also said Lay approved Fastow serving a dual role as head of a partnership while still Enron's chief financial officer, contrary to Enron's code of ethics, and that he sat in on at least one meeting in which a partnership transaction was discussed.

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