Feisty Ken Lay makes defiant defence of role in Enron collapse

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The Independent Online

Ken Lay, the former chairman of the energy giant Enron, made a last-ditch attempt to keep himself out of prison yesterday as he gave aggressive testimony in his fraud trial.

As US government prosecutors piled pressure on the one-time business hero, Mr Lay lashed out.

On the third day of cross-examination at the federal court in Houston, Texas, lawyers for the US government sought to show that he had ignored warnings from staff in the run-up to the company's dramatic collapse in late 2001.

A feisty Mr Lay told prosecutor John Hueston that it was easy to second guess his decisions long after events had unfolded. "The corpse is on the gurney now," he said, "and you're carving it up any way you want to carve it up. I didn't have that luxury when I was right in the middle of battle."

Mr Lay returned to run the business he had transformed from a sleepy energy company to an internet trading giant after the sudden departure of chief executive Jeff Skilling in the summer of 2001.

In October of that year he was confronted with e-mails from staff that raised serious questions about Enron's accounting procedures and ethics.

One veteran employee told Mr Lay: "I've lost all respect for Enron senior management."

Mr Lay, long regarded as an amiable, avuncular figure in Houston, has surprised observers with the aggressiveness of his approach. He claims the Wall Street Journal was on "a witch hunt" to destroy the company he loved.

Mr Skilling, an earlier witness, did a better job of keeping his legendary temper in check even when pushed by top US lawyers.

As Mr Hueston sought to needle Mr Lay yesterday, he asked the former chairman why he had praised Drexel Burnham Lambert, the Wall Street junk-bond firm that went bust in 1990 after admitting illegal trading.

Mr Lay replied: "Failure is not equated with criminal activity, or does not need to be equated with criminal activity. They had a run on the bank based on a number of events that occurred."

Both he and Mr Skilling have used the phrase "run on the bank" to explain how Enron could have gone from being one of the biggest businesses in the US to a bankrupt shell in just two months.

The pair claim that short sellers - investors who bet against the share price - as well as a vindictive media, raised enough questions to prompt a panic from shareholders.

He called the short sellers "vultures", though this turned out to be an unfortunate word when it emerged that Mr Lay's own son was among those shorting the stock. "He wasn't a vulture, was he?" Mr Hueston asked Mr Lay.

Both Mr Lay and Mr Skilling claim that the only fraud that was committed was by underlings, especially the former finance chief Andy Fastow, who has already pleaded guilty.

Asked yesterday why he did not question Mr Fastow directly, Mr Lay replied simply: "I was getting information from all sides."

Mr Lay has tried to present himself as a delegator rather than a micromanager aware of every part of Enron's sprawling business.

Mr Lay faces six charges of fraud and conspiracy, mostly relating to the period when he returned to running the company.

Mr Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors.

The pair could, in theory, get between 20 and 30 years behind bars each if found guilty by the jury of eight women and four men.

Enron was once the seventh biggest company in the US, with a market value at its peak of $70bn (£38bn).

It was extremely well connected politically, with ties to the Labour Party and to George Bush's Republicans.

The case continues.

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