Former Enron Chairman Blames Others for Collapse

RENEE MONTAGNE, host:

In Houston, the former chairman of Enron, Ken Lay, has taken the stand in his own defense. He faces six counts of conspiracy and fraud and is accused of lying about the company's finances in 2001, just as Enron was spiraling downward. Ken Lay testified that he was devastated by the company's collapse and the havoc it wreaked on his former employees. He also called the charges of conspiracy ludicrous.

From Houston, NPR's Wade Goodwyn reports.

WADE GOODWYN reporting:

If Ken Lay is to survive this prosecution with his innocence intact, an important element is likely to be his connection with his Houston jury over the next few days. And unlike his colleague, former CEO Jeff Skilling, Lay faces a much more limited indictment that focuses only on the last four months of Enron's life. Still, the statements he made to employees and analysts during that time, reassuring them after Skilling abruptly abandoned his post, could send Ken Lay to federal prison for the rest of his life.

Lay began his testimony by drawing for the jury a self-portrait of a poor Missouri farm boy made good. Did you work hard your whole life? Max Secrest, his lawyer asked.

Yes, I guess that most people would say that I've worked hard my whole life. I've enjoyed working hard my whole life, Lay said.

Would you say you pursued the American dream? His lawyer asked.

I've not only pursued the American dream, I achieved it, Lay said without boast. But some people would say that in the last few years, I've lived the American nightmare.

Secrest continued, trying to anticipate the questions the jury might want to ask his client. Are you without blame, Mr. Lay?

I have to be careful about what I accept blame for, Lay replied. A subtle reminder how much is at stake.

Mostly, the former chief executive denied that he and Skilling had any responsibility for Enron's collapse. The biggest mistake I ever made was hiring Andy Fastow, Lay said. The second biggest mistake I ever made was promoting him to chief financial officer.

Fastow, who stole tens of millions from Enron, was Lay's favorite whipping boy. It all started with the deceit of Andy Fastow, Lay grumbled. But The Wall Street Journal was close behind. Lay blamed the investigative reporting of two Journal correspondents, six weeks before Enron went bankrupt, for helping to spread panic about his company. A couple of reporters there, Lay said. A whole series of articles in mid-October of 2001; it didn't take long for a run to occur.

Lay depicted Enron as a victim of a classic run on the bank. A healthy company ruined by a panicked Wall Street fed lies by a wrongheaded newspaper. Knowing that prosecutors are waiting with a hailstorm of questions about Enron whistleblower Sherron Watkins, Lay took the opportunity to give his side first. In August of 2001, Watkins wrote Lay a detailed memo outlining accounting discrepancies at the highest levels of the company. But Lay said his management style was to give little weight to anonymous communication, and her memo was anonymous.

When Watkins came out of the closet a couple of days later and met with Lay to warn him that Enron was about to implode in a wave of accounting scandals, Lay testified that he was nice to her and passed her concerns on to the company's lawyers. But prosecutors are unlikely to leave it at that when it's their turn on Wednesday.

Ken Lay testified that he was a hands-off manager, who believed in hiring the best people and letting them spread their wings. He said he was out of the office, traveling at least half of the time during that last year. Lay said it was Arthur Andersen's job to scrub Enron's financial sheets, and Vincent and Elkins' job to make certain everything was legal.

Finally, he bemoaned the fact that Skilling and Enron's board of directors had managed to talk him into taking back the CEO position, when Skilling decided it was time for him to leave. If I hadn't done that, I wouldn't be sitting here right now, Lay said. Indeed, every charge he faces involves his conduct after that fateful choice.

Wade Goodwyn, NPR News, Houston. Transcript provided by NPR, Copyright NPR.