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(07/06/06 12:14am)
HOUSTON -- Enron Corp. founder Kenneth Lay, who was convicted of helping perpetuate one of the most sprawling business frauds in U.S. history, has died of a heart attack in \nColorado. He was 64.\nA secretary at his church and another secretary for his lead criminal lawyer, Michael Ramsey, on Monday both \nconfirmed the death. Lay frequently vacationed in Colorado.\nLay, who faced life in prison, was scheduled to be sentenced Oct. 23.\nNicknamed "Kenny Boy" by President Bush, Lay led Enron's meteoric rise from a staid natural gas pipeline \ncompany formed by a 1985 merger to an energy and trading conglomerate that reached No. 7 on the Fortune 500 in 2000 and claimed $101 billion in annual revenues.\nLay, who lived in Houston, was convicted May 25 along with former Enron CEO Jeffrey Skilling of defrauding investors and employees by repeatedly lying about Enron's financial strength in the months before the company plummeted into bankruptcy protection in December 2001. Lay was also convicted in a separate non-jury trial of bank fraud and making false statements to banks, charges related to his personal finances.\nPastor Steve Wende of First United Methodist Church of Houston, said in a statement that church member Lay died unexpectedly of a "massive coronary."\nWende said Lay and his wife, Linda, were in Aspen, Colo., for the week "and his death was totally unexpected. Apparently, his heart \nsimply gave out."\nBurt Palmer, the church's executive \npastor, told The Associated Press that the Lays attended church in Houston on Sunday. "The church continues to love them and help them walk through this difficult time," he said.\nPat Worcester, executive assistant to CEO at Aspen Valley Hospital, said Lay was admitted into the emergency room at 3:10 a.m. Wednesday. She said the hospital would release a statement later.\nReached by telephone at his home in Houston, Skilling told The Associated Press that he was aware of Lay's death, but declined further comment.\nLay had built Enron into a high-profile, widely admired company, the seventh-largest publicly traded in the country. But Enron collapsed after it was revealed the company's \nfinances were based on a web of fraudulent partnerships and schemes, not the profits that it reported to investors and the public.\nWhen Lay and Skilling went on trial in U.S. District Court Jan. 30, it had been expected that Lay, who enjoyed great popularity throughout Houston as chairman of the energy company, might be able to charm the jury. But during his testimony, Lay ended up coming across as irritable and combative.\nHe also sounded arrogant, defending his extravagant lifestyle, including a $200,000 yacht for wife Linda's birthday party, despite $100 million in personal debt and saying "it was difficult to turn off that lifestyle like a spigot."\nBoth he and Skilling maintained that there had been no wrongdoing at Enron, and that the company had been brought down by negative publicity that undermined investors' confidence.\nHis defense didn't help his case with jurors.\n"I wanted very badly to believe what they were saying," juror Wendy Vaughan said after the verdicts were announced. "There were places in the testimony I felt their character was questionable."\nLay was born in Tyrone, Mo. and spent his childhood helping his family make ends meet. His father ran a general store and sold stoves until he became a minister. Lay delivered newspapers and mowed lawns to pitch in. He attended the University of Missouri, found his calling in economics, and went to work at Exxon Mobil Corp. predecessor Humble Oil & Refining upon graduation.\nHe joined the Navy, served his time at the Pentagon, and then served as undersecretary for the Department of the Interior before he returned to business. He became an executive at Florida Gas, then Transco Energy in Houston, and later became CEO of Houston Natural Gas. In 1985, HNG merged with InterNorth in Omaha, Neb. to form Enron, and Lay became chairman and CEO of the combined company the next year.
(04/26/06 3:48am)
HOUSTON -- Enron Corp. founder Kenneth Lay blamed the media Tuesday for undercutting his company's strengths in the weeks before it crashed by highlighting problems at Enron that he said were already cleaned up.\nYet he said more problems, including restatement of previously announced earnings that wiped out nearly $600 million in profit for the previous four years, further pushed Enron toward bankruptcy protection as investor confidence eroded in October and November of 2001.\nThe restatement is unrelated to criminal counts against Lay, but he noted that it added to the firestorm he said was ignited by the media.\n"Obviously, that was a devastating blow to the financial markets and us," an agitated and sometimes bristling Lay told jurors in his fraud and conspiracy trial.\nThe former chairman and chief executive appeared to be trying to control the examination by defense lawyer George Secrest in his second day on the stand, saying, "I'm not sure where you're going with that," when Secrest asked him to differentiate strategic from non-strategic assets. Lay then affably explained that a strategic asset is considered to be strategic to a certain business.\n"He and (former Enron Chief Executive Jeffrey) Skilling could not be more different in their demeanor," said Philip Hilder, a former federal prosecutor who represents several ex-Enron executives, outside of court. Skilling, Lay's co-defendant in the federal criminal trial, finished nearly eight days on the witness stand last week.\nHilder's ex-Enron clients include Sherron Watkins, a former executive who won fame for trying to warn Lay of the financial peril facing the company days after he stepped back into the CEO role, following Skilling's abrupt resignation in August 2001.\nHilder said Lay appeared to be "taking control of the questioning and charting his own course" to "reinforce his version of reality," while Skilling let his lead attorney, Daniel Petrocelli, guide his testimony.\nThe government says Lay and Skilling conspired with each other and their staff to hide accounting tricks and flailing business ventures until the company collapsed into bankruptcy proceedings in December 2001.\nBoth defendants say there was no fraud at Enron other than that committed by former Chief Financial Officer Andrew Fastow and a few others, who skimmed millions from secret scams. Lay, who began testifying Monday, continued to insist Tuesday that Enron cratered in a storm of bad press, a skittish post-Sept. 11 market and Fastow's greed.\nFastow told jurors during his testimony as a prosecution witness earlier in the three-month trial that he met with Lay the day after Skilling resigned and warned of billions of dollars in looming writedowns of overvalued assets. Lay, who has pegged Fastow as a traitor, a liar and a crook, flatly denied Fastow told him any such thing.
(04/11/06 5:13am)
HOUSTON -- Former Enron Corp. Chief Executive Jeffrey Skilling told jurors in his fraud and conspiracy trial Monday that he abruptly resigned from the energy trading company a few months before it collapsed because he was worn out and troubled by its falling share price -- not because he knew disaster loomed.\n"I am absolutely innocent," Skilling said right after he swore to tell the truth while testifying in his own defense Monday.\nThen he let jurors know what's at stake for him:\n"I guess in some ways my life is on the line, so I'm a little nervous."\nAs he testified, he became more relaxed and conversational, with no hint of the swaggering bravado for which he was known when he ran what was once the nation's seventh-largest company. Known for his plainspoken manner as he led Enron's transformation from a staid pipeline company into an energy giant, Skilling addressed jurors directly, his eyebrows raised slightly, looking earnest and alert.\nAt times he appeared self-deprecating, even telling jurors that he was admitted to Harvard Business School "by some huge mistake." Later, he sounded like a business professor, giving jurors a mini-seminar on Enron's businesses and gas and electricity markets.\nHe repeated what he said twice before congressional panels in 2002, that Enron was "in very good condition in the middle of August (2001) when I left."\nHis lawyer, Daniel Petrocelli, asked if he had had any clue that Enron would flame out in scandal less than four months later.\n"Not in my wildest dreams, no. It's almost inconceivable now what happened," the ex-CEO said.\n"Would you have left if you thought the company was going to experience the events that later transpired?" Petrocelli asked.\n"No," Skilling replied matter-of-factly.\nThe 52-year-old ex-CEO's testimony kicked off the 11th week of the federal trial. His co-defendant, Enron founder Kenneth Lay, aims to testify later this month.\nBoth are accused of repeatedly lying to investors and employees about Enron's financial health when they allegedly knew fraudulent accounting propped up a facade of success. Enron careened into bankruptcy proceedings in December 2001, six weeks after announcing unprecedented losses and a massive equity writedown that generated intense scrutiny from once-adoring Wall Street and regulators.\nThe two men say there was no fraud at Enron other than that committed by former Chief Financial Officer Andrew Fastow and a few others, who skimmed millions from secret schemes, and that bad publicity coupled with lost market confidence sank the company.\n"I know of no reason Enron would have to resort to fraud," Skilling said.\nIn staccato fashion, Petrocelli asked Skilling if he ever destroyed documents or computers, set up offshore accounts to hide money, or did anything to hide past behavior or dealings. Each time, Skilling said, "No," sometimes accentuating his answer by leaning forward.\n"Did you leave town?" Petrocelli asked.\n"I went to Fredericksburg," Skilling replied, eliciting courtroom laughter at his referral to a small town a few hours' drive away.\nSkilling is charged with 28 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces six counts of fraud and conspiracy.\nIf convicted of all counts, Skilling faces a maximum of 275 years in prison and tens of millions of dollars in fines -- though an actual prison term would likely exceed two decades. Lay faces a maximum of 45 years in prison if convicted of the six counts against him.\nPetrocelli was to continue questioning his client on Tuesday. The ex-CEO had yet to address the multitude of allegations made against him by government witnesses.\nSkilling explained his stock sales. Nine of the 10 insider trading counts against him refer to sales he said were part of a program of pre-ordered sales to diversify his holdings. Skilling said he halted that program in the summer of 2001 because he thought Enron shares were too low.
(07/08/04 1:31am)
HOUSTON -- The three-year investigation of Enron Corp.'s scandalous collapse has reached the top of the energy company, with the criminal indictment of founder and former chief executive Kenneth Lay, sources told The Associated Press Wednesday.\nLay, who has insisted he knew nothing of the financial fraud at Enron, was expected to surrender to federal authorities Thursday, said the sources who spoke on condition of anonymity.\nThe specific charges remained under seal. Prosecutors from the Justice Department's Enron Task Force presented an indictment to U.S. Magistrate Judge Mary Milloy in Houston Wednesday, and at their request she sealed both the indictment and an arrest warrant, the sources said.\nA hearing before Milloy was scheduled for late Thursday morning. Lay's lawyer, Michael Ramsey, didn't immediately return a call for comment.\nThe Securities and Exchange Commission was expected to bring civil fraud charges against Lay on Thursday, including making false and misleading statements and insider trading, a person familiar with the case said, speaking on condition of anonymity.\nProsecutors have aggressively pursued the one-time celebrity CEO and friend and contributor to President Bush who led Enron's rise to No. 7 in the Fortune 500 and resigned within weeks of its stunning failure. Barring last-minute delays, Lay is the 30th and highest-profile individual charged.\nHe will be the second Enron CEO to be charged. Jeffrey Skilling, who succeeded Lay and then stepped down abruptly in August 2001, shortly before the scandal broke, was charged with nearly three dozen counts of fraud and other crimes in February.\nWaiting to testify for the prosecution is former finance chief Andrew Fastow, who pleaded guilty to two conspiracy counts in January. Fastow admitted to engineering partnerships and financial schemes to hide Enron debt and inflate profits while pocketing millions for himself.\nEnron's collapse led a series of corporate scandals that sent investors fleeing and sparked numerous investigations through 2002. Thousands of Enron's workers lost their jobs and stock fell from a high of $90 in August 2000 to just pennies.\nThe charges against Skilling and former top accountant Richard Causey target actions over several years leading up to Enron's collapse, while allegations against Lay were expected to focus on his actions after he resumed the role of CEO upon Skilling's abrupt resignation in August 2001, the sources said.\nDays after Skilling's resignation, Lay met privately with Sherron Watkins, then an executive on Fastow's staff, who had sent him a lengthy memo warning of impending doom from Fastow's myriad schemes to hide debt and inflate profits.\nBut Lay told The New York Times last month that he didn't believe the company had serious problems and trusted other senior managers -- including Fastow and Causey -- when they reassured him that all was fine.\nSkilling and Causey are awaiting trial on charges of conspiracy, fraud and insider trading. Both pleaded innocent and are free on bond.
(01/23/04 4:16am)
HOUSTON -- A former Enron Corp. accountant described as "a principal architect" of a scheme to mislead government regulators and investors turned himself in Thursday, and pleaded innocent to federal fraud charges related to the energy giant's 2001 collapse.\nRichard Causey, 44, entered his plea before U.S. Magistrate Judge, Frances Stacy. He was released on $1 million bond, secured by $500,000 in cash provided by a brother-in-law.\nWhen asked if he was employed, Causey replied, "I am not."\nCausey, who surrendered to the FBI before daybreak Thursday and was taken to court in handcuffs, was described in a six-count indictment unsealed Thursday as "a principal architect and operator of the scheme to manipulate Enron's reported earnings." He was charged with security fraud and conspiracy to commit security fraud.\nIf convicted of all charges, Causey faces a maximum sentence of 55 years in prison and $5.25 million in fines.\nAlong with other Enron executives and senior managers, the indictment handed up Wednesday said Causey "engaged in a wide-ranging scheme, through a variety of devices, to deceive the investing public about the true performance and profitability of Enron's businesses."\nThe document noted Causey reported to Enron's chairman and chief executive officer but did not name former Enron Chairman Kenneth Lay or former CEO Jeffrey Skilling. Neither of them have been charged with any crime.\nAccording to the indictment, the scheme's objectives -- among other things -- were to produce earnings that grew by 15 to 20 percent annually and meet or exceed "without fail" the published expectations of industry analysts, while avoiding public reporting of large losses.\nCausey's trial was set for March 8. Prosecutor Sam Buell estimated the trial would take three to six weeks.\nAlso Thursday, the Securities and Exchange Commission filed a civil complaint accusing Causey of helping Enron file fraudulent information with the agency.\nMark Hulkower, one of Causey's attorneys, said Wednesday his client "has done absolutely nothing wrong, and we will vigorously contest any charges the government may bring."\nCausey had been expected to turn himself in and appear in federal court two weeks ago. But his case moved to the back burner when a plea bargain package for former Enron finance chief Andrew Fastow and Fastow's wife, Lea, hit a snag.\nLast week, the Fastows pleaded guilty in their separate cases -- Andrew Fastow to two counts of conspiracy, Lea Fastow to one count of filing a false tax return. Those guilty pleas needed to be secured before moving on to Causey, sources close to the investigation said Wednesday on condition of anonymity.\nLike Andrew Fastow, Causey reported directly to Lay and Skilling. Causey and Fastow split financial duties at Enron and were at the same management level.\nEnron imploded in late 2001 in a sea of hidden debt, inflated profits and accounting tricks.\nCausey was fired in February 2002 after an internal probe concluded he failed in his duty to adequately look out for Enron's interests when the energy giant did deals with Andrew Fastow's partnerships. He also invoked the Fifth Amendment and declined to answer questions when he appeared before a congressional committee that year.\n"Richard Causey and the other corrupt executives that ran Enron into the ground, used some of the most sophisticated tricks in the corporate-fraud playbook to con the public into believing Enron was a success," James B. Comey, a deputy attorney general, said in Washington.\nAndrew Fastow's October 2002 indictment referred to the chief accounting officer as having a secret deal with Fastow ensuring he wouldn't lose money when one of many shady partnerships he ran did business with Enron. Causey was chief accounting officer when the partnerships were operating.\nAndrew Fastow admitted he and others in Enron's senior management misled investors about Enron's finances to inflate its stock and he schemed to enrich himself and others at shareholders' expenses.\nCausey was one of many Enron executives who joined the energy giant after working at its former outside auditor, Arthur Andersen LLP. He started at Enron in 1991 as assistant controller and became chief accounting officer in 1999.
(01/15/04 5:38am)
HOUSTON -- Andrew Fastow, the chief architect of the shady, off-the-books deals that brought down Enron, pleaded guilty Wednesday to two counts of conspiracy in a deal that could take prosecutors to the top of the corporate ladder at the scandal-ridden company.\nThe plea by the former Enron finance chief called for a 10-year sentence and for him to help prosecutors who have targeted -- but not charged the executives who once occupied the most opulent offices on the company's top floor: former Chairman, Kenneth Lay, and former CEO, Jeffrey Skilling.\nFastow's wife, Lea, was also set to plead guilty later Wednesday to a tax charge related to Enron's ill-gotten gains. Lea Fastow, 42, was Enron's former assistant treasurer.\nThe Fastow plea deals had stalled last week after a judge refused to guarantee Lea Fastow a five-month prison sentence, as agreed to with prosecutors.\nHer attorney said the couple insisted on the five-month sentence to ensure their two young sons have at least one parent at home. U.S. District Judge David Hittner demanded he retain the right to alter Lea Fastow's term, and it was not immediately known what sentence he would order.\nAndrew Fastow, 42, is the highest-ranking Enron executive charged in the 2001 collapse of the Houston-based energy company. Without a plea, he would have gone to trial on 98 counts of fraud, money laundering, insider trading and other charges.\nProsecutors say Fastow masterminded a sea of partnerships and tangled financing deals that hid Enron debt and inflated company profits while funneling millions of dollars to him, his family and selected friends. The partnerships had names like LJM (the first initials of Fastow's wife and two sons) and Chewco (after the "Star Wars" character Chewbacca).\nSome experts believe the plea could break open the case against Lay and Skilling.\n"Unquestionably, this is the breakthrough that the government has been pursuing," said Robert Mintz, a former federal prosecutor and an expert in white-collar crime. "There is nobody besides Fastow who can make this case for the government and that's why they have been pursuing him for so long and so aggressively."\nEnron declared bankruptcy in December 2001 amid mass layoffs, leaving investors and retirees stuck with worthless stock. In the following months, WorldCom, Global Crossing, Adelphia Communications and others suffered a similar fate as investigators uncovered a raft of accounting failures across corporate America.\nEnron also became a source of ammunition for Democrats because of President Bush's close ties to Lay, a major campaign backer.\nLay and Skilling have steadfastly maintained their innocence. Lay's attorney, Michael Ramsey, said Wednesday Lay has no worries if Fastow tells the truth.
(04/10/02 4:45am)
HOUSTON -- The Arthur Andersen auditor who oversaw Enron's books pleaded guilty Tuesday to ordering the shredding of Enron documents and agreed to cooperate with prosecutors in a deal that could break the scandal wide open. \nFormer partner David B. Duncan pleaded guilty to obstruction of justice, admitting he tried to thwart an Enron investigation by the Securities and Exchange Commission. \nHe is believed to be the first person in the Enron case to strike a deal with federal prosecutors. \n"Documents were in fact destroyed so that they would not be available to the SEC," he told U.S. District Judge Melinda Harmon, reading from a statement. \nThe charge carries up to 10 years in prison and hundreds of thousands of dollars in fines. Duncan remains free until his sentencing Aug. 26. \nHe had no comment as he left the courthouse. His attorney, Sam Seymour, said: "He's continuing his cooperation, as we've said all along." \nAndersen spokesman Patrick Dorton declined comment on Duncan's plea. \nDuncan was fired by Andersen after the accounting firm acknowledged the large-scale destruction of documents and deletion of computer files related to the collapse of the energy giant, whose bankruptcy cost thousands of employees their jobs and, in many cases, their life savings. \nDuncan could prove crucial in enabling prosecutors to build a case against Enron. As the senior auditor in charge of the Enron account, he would presumably have knowledge of the complex web of partnerships used by the company to keep millions of dollars in debt off its books. \nUnder the plea bargain, Duncan is immune to any further prosecution related to the Enron case as long as he fully cooperates with federal authorities -- which could include testimony at future trials -- and agrees not to sell his story or otherwise profit from the debacle. \nIn court, Duncan described how he ordered Andersen employees Oct. 21 to destroy certain documents two days after he learned that the SEC was investigating Enron. \n"I also personally destroyed such documents," Duncan told the judge. "I accept that my conduct violated federal law." \nProsecutors said the shredding occurred between Oct. 23 and Nov. 9. The SEC notified Andersen on Nov. 8 that it would subpoena documents related the firm's work on Enron.