Enron chairman takes stand to tell of an 'American nightmare'

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The Independent Online

Running Enron turned from the American dream into "an American nightmare", Kenneth Lay told the Texan jury who will decide if he spends the next 10 years behind bars.

The former Enron chairman mounted the witness stand yesterday to face questions for the first time on the energy trading company's spectacular plunge into bankruptcy four and a half years ago.

And while prosecutors contend he lied to Wall Street to cover up the company's imminent failure, Mr Lay insisted on his integrity and told jurors he was devastated by Enron's collapse and the misery it caused its 20,000 redundant employees. "I would never have thought ever that I would be in criminal court defending charges," he said.

Defenders hope Mr Lay's firm denials and affable personality will sway a jury that was last week listening to the more prickly testimony of Jeff Skilling, Enron's former chief executive. Mr Skilling faces 28 charges, Mr Lay six.

Enron's failure was "a classic run on the bank", triggered by the illegal activities of a few rotten apples, the pair are arguing. Fraud at the company stretched little further than Andrew Fastow, the former finance chief, and his inner circle. Hiring Mr Fastow was "the worst mistake of my life", Mr Lay said. Promoting him to chief financial officer was the second worst.

Mr Fastow testified in March that he got rich from the string of complicated deals designed to boost Enron's earnings, but that his bosses were fully aware of the state of the company's finances.

Mr Lay took jurors through his early career and the pride he felt as Enron grew into the seventh-largest company in the US, worth $70bn (£39bn) at its peak just a year before the end. And he compared the collapse of Enron to the loss of a loved one.

He was supported in court by his wife, Linda, who has spoken widely about the trauma of losing their Enron wealth, and who opened a second-hand store to sell expensive furniture from their Texas home.

Mr Lay's first wife, Judy Ayers, was also in court, along with their daughter Liz, a lawyer who works on his defence team, and their son Mark. Dressed in a grey suit, with a blue shirt and red tie, 64-year-old Mr Lay was firm and well-spoken on the stand, setting out his view of Enron as a financially robust company undone by a collapse in confidence among its trading partners.

The collapse in confidence was a "firestorm we couldn't stop", he said. It was stoked by a conspiracy of short sellers who were profiting from the share price decline, and by reporters at the Wall Street Journal, who were being fed details of Mr Fastow's activities.

When Mr Skilling resigned in August 2001, Mr Lay stepped back into his old job of chief executive but not, as the prosecution suggests, to cover up Enron's disintegrating finances. "I do not think there was a conspiracy. Let me be entirely clear: the last thing I would do is step back in as CEO and pick up a conspiracy," Mr Lay said.

Legal observers say Mr Lay's famed charm will be his best asset on the stand. The son of a Baptist minister in Missouri, he dreamed of being rich and successful. At the helm of Enron in its pomp, he revelled in his role as a philanthropist and advocate for Texan business, and was a friend and adviser toPresident George Bush Snr and his son, President George W Bush.

The charges against Mr Lay are that he knowingly painted a rosier picture of Enron's health than he knew to be the case. Mr Lay says he never lied, but agreed he was an "optimistic" business leader. "Most people don't like to follow pessimistic leaders," he said.

Next month, Mr Lay will face a second trial on four fraud counts related to his personal banking affairs.