U.S. prosecutor rattles Lay

Devastating questions leave ex-Enron chief shaken and stuttering


HOUSTON -- A federal prosecutor rattled Kenneth L. Lay yesterday with devastating cross-examination, showing that the former Enron Corp. chairman has repeatedly tried to contact witnesses and potential witnesses during his trial, even after lawyers warned him to stop.

Shaken and stuttering, Lay denied that he sought to influence anyone's testimony or, as prosecutor John C. Hueston put it, was trying to "get his story straight."

"I don't have a `story,'" Lay declared. He said he merely wanted to make sure his own recollection of the facts was accurate.

Legal experts said that regardless of whether Lay violated any rules by trying to contact witnesses, his actions probably hurt his credibility with the jury and may have done collateral damage to his co-defendant, former Enron chief executive Jeffrey K. Skilling.

Houston trial lawyer Christopher J. Bebel, a former federal prosecutor, said that Lay's defense team had been doing a good job of picking apart the government's case. But "it seems all of that hard work may be washed away through these childish and irresponsible acts" by Lay, Bebel said.

Lay, 64, and Skilling, 52, face multiple counts of fraud and conspiracy arising from the 2001 collapse of Enron, an energy-trading colossus that once ranked among the nation's most admired companies.

Riveting cross-exam

The South Texas jury of eight women and four men, whose attention seemed to be fitful during the first 2 1/2 days of Lay's testimony, appeared riveted by the cross-examination, which began late yesterday.

In the most dramatic hour of the 13-week trial, Hueston first questioned Lay about the witnesses, then confronted him with evidence - which Lay acknowledged - that he probably had violated Enron's code of ethics by not seeking permission from his board of directors before investing $120,000 in a startup photo finishing company whose main customer was Enron.

Hueston also upbraided Lay for hypocrisy, noting that while he has complained of "character assassination" by the federal Enron Task Force, Lay stood by his chief lawyer's side outside the courthouse last month while the lawyer, Michael W. Ramsey, called a government witness "a monkey" who "contradicted the theory of intelligent design."

"I can't take full responsibility for what my lawyers say," Lay replied.

Hueston noted that the insults against former Enron Treasurer Ben F. Glisan Jr. came during sidewalk TV news conferences on successive days.

Yesterday's fireworks followed long bouts of tedium, as Lay, under questioning by defense lawyer George M. "Mac" Secrest, moved glumly through the federal indictment, denying the six allegations against him in minute detail and contradicting the testimony of a half-dozen government witnesses, including Glisan.

Secrest wrapped up by asking Lay whether he had tried his best to pay Enron back the $7.5 million he still owed on a company line of credit that had been one of his perks as chairman.

Lay said that, yes, he'd nearly reached a settlement with Enron in mid-2004, about the time of his indictment. Staring at the prosecutor, Lay added: "John Hueston blocked that deal."

Lay and Hueston have a history. Lay considers Hueston his personal scourge, akin to the relentless Inspector Javert of Les Miserables. Hueston, 42, a marathon runner and a former assistant U.S. attorney in Orange County, Calif., has dogged the defendant's footsteps for several years as a member of the Enron Task Force.

After an ornate, "Good afternoon, Mr. Lay," Hueston quickly began throwing bricks.

Had Lay had ever had a conversation with anyone about "getting your story straight?" Hueston asked. Lay denied it.

"Have you contacted witnesses to get your story straight?" Hueston asked.

"Uh, uh, uh - I don't know that I've contacted witnesses," Lay said.

Hueston asserted - and Lay soon acknowledged - that just after the end of testimony by the government's star witness, former Enron Chief Financial Officer Andrew S. Fastow, Lay began trying to reach two executives at the investment-banking firm of Goldman Sachs.

Merger weighed

Fastow testified that he and Lay had spoken with the Goldman executives in September 2001. At the time, Fastow said, Enron was already worried enough about its financial condition to discuss such options as selling its huge natural gas pipeline system - one of its most precious assets - or even soliciting merger bids from another big company.

Lay denied Fastow's account, testifying that the sole reason for the discussion was that the Goldman Sachs officials thought Enron's stock was undervalued by the financial markets and so the company might be vulnerable to an unwanted takeover bid.

The difference matters because Lay was making public statements at the time that Enron had never been stronger.

After Lay left several messages for the Goldman executives, according to Hueston, the firm's lawyers called Lay's legal team to warn him against further contact.

Nevertheless, Enron's founder in early April called a friend in Goldman Sachs' Houston office to pass on the message that Lay was anxious to reach the executives if they wanted to talk.

Again, Goldman's lawyers asked that Lay cut it out. Lay testified that he didn't recall the second warning.

"I was just trying to make sure I had my facts right," Lay said.

Thomas S. Mulligan writes for the Los Angeles Times.

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