Lawmakers heap scorn on former Enron chairman

AP Business WriterWASHINGTON (AP) -- Senators heaped scorn Tuesday on Kenneth Lay, the presidential pal who built Enron into a darling of Wall Street only to see it collapse in scandal. Lay bears "significant responsibility" for a lack of controls of Enron to prevent abuses, said a company director who investigated the failure.

Lay, the long-sought star witness in the congressional investigations of his company, sat glumly in a crowded hearing room as lawmakers denounced his conduct. The former Enron chairman, appearing under subpoena, was maintaining his silence and declining to answer questions at the hearing before the Senate Commerce Committee.

"Mr. Lay, I regret that you have chosen not to explain to this committee, to the American public and to your former employees how you, and others in senior management and on the board of Enron, apparently failed so completely to fulfill your responsibilities," said Sen. John McCain of Arizona, senior Republican on the committee.

Sen. Peter Fitzgerald, R-Ill., said Lay's conduct made him worse than a "carnival barker."

"It's incredible to me how long you kept it going," Fitzgerald said. He chastised Lay for not acting on the warning to him last August by Enron executive Sherron Watkins that the company faced potential accounting scandals.

"You will take the Fifth and then you'll walk out that door," Fitzgerald told Lay. "And when you walk out that door it will be a stunning coda to the collapse of Enron."

Sen. Byron Dorgan, D-N.D., said he, too, is disappointed by Lay's decision not to testify. "Mr. Lay has a story to tell," he said.

William Powers, an Enron director and dean of the University of Texas Law School, who led an internal company investigation, said in prepared testimony that Lay approved partnership arrangements by senior executives.

Lay "bears significant responsibility for those flawed decisions, as well as for Enron's failure to implement sufficiently rigorous procedural controls to prevent the abuses," Powers said.

Lay was the most visible symbol of Enron Corp., which was ranked as the nation's seventh-largest company before it crumbled into bankruptcy on Dec. 2.

He joins five other men -- including Enron's former chief financial officer -- who have cited the Fifth Amendment right against self-incrimination and declined to testify in Congress' deepening inquiry. Lawmakers reject the idea of offering immunity from prosecution to get them talking, at least for now.

Lawmakers say Lay sat atop a house of cards as a clique of executives enriched themselves at the expense of employees and investors. A complex web of thousands of partnerships was used to keep some $500 million in debt off Enron's books and hidden from investors and federal securities regulators -- pumping up the stock price. Officials of Houston-based Enron reaped tens of millions of dollars from the partnerships.

Lay was a man with unrivaled access to Washington policy-makers, who met privately on energy policy with Vice President Dick Cheney last spring.

Lay, who gave employees $50 bills when Enron's stock reached $50, promoted his company's prospects with an evangelist's fervor and he was still urging Enron workers to buy shares a month after he was warned of potential accounting scandals.

Employees and retirees lost millions as Enron's stock price plunged -- from around $83 a year ago to less than a dollar in late November -- and they were stripped of the bulk of their retirement savings in accounts loaded with company stock. Investors large and small around the country were burned.

President Bush, lawmakers and politicians of both parties who welcomed Lay's generous political donations now keep their distance.

Seeking Lay out are investigators from the Justice Department, which is pursuing a criminal investigation of Enron, and the Securities and Exchange Commission in its civil inquiry. Investigators also are looking into the role of Enron's longtime auditor, the Arthur Andersen accounting firm -- which has acknowledged massive destruction by its employees of Enron-related documents.

Lay's decision to assert his Fifth Amendment protection, announced Sunday night, came a week after he had backed out of voluntary appearances before the Senate Commerce Committee and the House Financial Services Committee. Subpoenas were issued by the two panels last week. He is scheduled to appear Thursday before the Financial Services subcommittee on capital markets.

His decision followed statements by key lawmakers that they did not believe Skilling's sworn testimony last Thursday -- that he knew few details of the partnerships -- before an investigative panel of the House Energy and Commerce Committee. Rep. Billy Tauzin, R-La., the full committee chairman, even suggested that Skilling could face formal accusations of perjury.