Panel to vote on subpoena of Enron ex-chief

Senate committee seeking to compel appearance by Lay

He resigns directorship

February 05, 2002|By Marego Athans | Marego Athans,SUN NATIONAL STAFF

WASHINGTON - Stood up by former Enron Chairman Kenneth L. Lay as they prepared to grill him on the collapse of the energy behemoth, Senate lawmakers shot back yesterday with preparations for a subpoena aimed at forcing his testimony.

The Senate Commerce Committee plans to vote today on a subpoena that would compel Lay to face questions about events leading to the largest bankruptcy in U.S. history, which robbed thousands of workers of their retirement funds while top managers earned millions from off-the-books partnerships and stock sales.

"It's not possible to figure out what caused the ship to capsize if you can't talk to the captain," Sen. Ron Wyden, an Oregon Democrat, said.

Lay resigned from Enron's board of directors yesterday, severing his final ties with a company he ran for 16 years, transforming it from an obscure pipeline company into the world's largest energy trader.

"I want to see Enron survive and successfully emerge from reorganization," Lay said in a statement from Houston, where Enron is headquartered. "Due to the multiple inquiries and investigations, some of which are focused on me personally, I believe that my involvement has become a distraction to achieving this goal."

Lay abruptly canceled his trip to Washington on Sunday night, citing "inflammatory" remarks on television news shows by several members of Congress who accused Lay and other Enron executives of criminal acts.

"Maybe somebody ought to go to the pokey," said Rep. Billy Tauzin, a Louisiana Republican who is chairman of the House Energy and Commerce Committee, which had planned to hear Lay's testimony this month.

Lay's lawyer, Earl Silbert, wrote in letters to Senate and House committees that the lawmakers appeared to have already made up their minds, and the hearings promised to be "prosecutorial" in tone. Silbert wrote that Lay "firmly rejected any allegations that he engaged in wrongful or criminal conduct."

But Sen. Byron L. Dorgan, a North Dakota Democrat, said yesterday that Lay was looking for an escape after Enron's board of directors released a devastating report Saturday detailing management and accounting abuses that allowed the creation of about 3,000 off-the-books partnerships that created fictitious profits and masked debts of at least $1 billion.

The disclosure of the massive debt in November triggered a precipitous slide in Enron's stock, which led swiftly to the firm's bankruptcy filing Dec. 2 and wiped out billions of dollars of assets, many held by pension funds and small investors. Meanwhile, 29 Enron executives and directors had cashed in $1.1 billion worth of shares since 1999, including Lay, who received more than $101 million.

"He should never have expected it would be a walk in the park," Dorgan said of Lay's promised testimony. "This is about people losing their life savings, and a few people [getting] very, very rich."

Several senators took the opportunity yesterday to denounce Lay and Enron on behalf of constituents. Sen. Barbara Boxer, a California Democrat, said last year's power crisis in California was largely the result of artificially inflated energy prices that kept Enron afloat while Lay and other top executives were unloading stock.

"I'm disappointed and saddened on behalf of the people of my state that I didn't get to talk to Mr. Lay about this," she said.

Even if he were subpoenaed, Lay could refuse to answer questions by invoking his Fifth Amendment right against self-incrimination, which other former Enron executives have said they would do. David Duncan, the fired Arthur Andersen accountant who audited Enron's books and oversaw the shredding of corporate documents, has already taken the Fifth before Tauzin's committee.

Enron's former chief financial officer, Andrew Fastow, the architect of the partnerships, and former Enron executive Michael Kopper have indicated through attorneys that they will refuse to answer questions from Congress.

The House Financial Services Committee had also expected to hear from Lay yesterday. Despite his failure to appear, it began its hearing into Enron's failure.

William C. Powers, an Enron director and dean of the University of Texas Law School who authored the report issued Saturday, told the panel that he had found "a systematic and pervasive attempt by Enron's management to misrepresent the company's financial condition."

"There's no question that virtually everyone from the board of directors down" understood that Enron's use of its complex web of partnerships was to "offset its investment losses with its own stock," he said.

Powers said there was a "default of leadership and management" that began at the top, including Lay and former Enron Chief Operating Officer Jeffrey Skilling, while Enron's board of directors failed to provide leadership and oversight. The committee voted to authorize, if necessary, a subpoena compelling Lay to appear for testimony.

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