Lay sold $70 million in stock back to Enron

Profit is unclear

chairman was urging others to buy shares

February 16, 2002|By NEW YORK TIMES NEWS SERVICE

Kenneth L. Lay sold $100 million in Enron stock last year, the company disclosed yesterday, a large part of that shares sold back to the company after he had been warned by Sherron S. Watkins that Enron might collapse "in a wave of accounting scandals."

The sales, disclosed in a report by Lay to the Securities and Exchange Commission, included $20 million of shares sold Aug. 21 to Sept. 4. Watkins, an Enron executive, sent her first letter to Lay on Aug. 15 and met with him Aug. 22.

It is not clear how much profit Lay made on his stock sales, many of which came while he was encouraging Enron employees to purchase shares.

Despite the stock sales, family members said yesterday that Lay, 59, faced serious financial difficulties as he struggled to repay loans taken out to make investments, many of which have lost value.

Lay, Enron's former chairman and chief executive, had previously disclosed selling $29.9 million in shares on public markets from January through the end of July. The new disclosures showed he received $70.1 million from selling Enron stock back to the company from February through October.

A spokeswoman for Lay, Kelly Kimberly, said that Lay had "remained confident in Enron's stock through late 2001" and said "the vast majority" of the money he received from Enron was used to pay loans that had been secured by his stake in Enron.

She said the sales were unrelated to developments at Enron, including Watkins' letter.

Kimberly added that Lay and his wife did not expect to have to file for bankruptcy. "While they are experiencing liquidity problems, they believe they will be able to work through them," she said of the Lays.

The Lay family members, who spoke on the condition of anonymity, said that no money was being hidden offshore and that Lay's wife, Linda, was being honest when she said on the NBC Today show last month: "It's gone. There's nothing left. Everything we had mostly was in Enron stock."

While corporate executives are required to disclose most stock sales by the 10th day of the month after the sale, disclosure of shares sold back to the company is not required until the next year. Thus most of Lay's sales remained unknown as Enron was collapsing last year.

Lay's sales after meeting with Watkins came during a period when he was trying to reassure investors and Enron employees that there were no problems at Enron despite a falling share price and the resignation Aug. 14 of Jeffrey K. Skilling, who had been Enron's chief executive.

On Aug. 21, the day Lay sold $4 million worth of stock back to the company, Lay told employees that one of his highest priorities was to restore investor confidence, adding that "should result in a significantly higher stock price."

On Sept. 26, in an online chat with Enron employees, Lay said Enron stock was a good buy and added that he had bought stock within the past two months. Based on publicly available reports, that appeared to be true: he had exercised stock options without reporting stock sales.

But it is now clear that he had sold many more shares than he had acquired during the period.

Kimberly said yesterday that Lay continued to hold some shares he had received from exercising options last summer. If so, that means he sold other shares he already owned.

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