HOUSTON – Kenneth L. Lay stepped down as chairman and chief executive of Enron Corp. after watching the the company he built into an energy giant tumble into bankruptcy.
Lay's resignation on Wednesday came one day before two congressional committee hearings were to begin looking into Enron's stunning collapse. Congress is trying to sort out conflicting accounts of document shredding at the Houston-based company's outside auditing firm, Arthur Andersen LLP.
Lay said in a statement Wednesday that the investigations into Enron were taking up too much time for him to run the company effectively.
``I want to see Enron survive, and for that to happen we need someone at the helm who can focus 100 percent of his efforts on reorganizing the company and preserving value for our creditors and hardworking employees,'' he said.
Enron's slide into the biggest bankruptcy in U.S. history on Dec. 2 left thousands of employees jobless and their retirement savings all but gone because the funds had been invested largely in Enron stock, which became nearly worthless. Other investors and creditors also have lost hundreds of millions of dollars.
Lay has been widely criticized because he urged Enron employees to buy the company's stock a month after he was warned that the energy-trading giant faced potential accounting scandals.
Enron allegedly kept billions of dollars in debt off its books, and the company acknowledged that it overstated profits for four years.
Despite resigning from his leadership posts, Lay will remain on Enron's board, which will work with creditors to find a restructuring specialist. The specialist will serve as acting chief executive officer, the company said.
Analysts said the resignation was inevitable, since Lay has been associated with so much controversy surrounding Enron and will be immersed in interviews and investigations into the Enron collapse.
``Sooner or later this was going to happen, and it happened sooner,'' said John Olson, a Houston-based securities analyst with Sanders Morris Harris.
Henry T.C. Hu, a corporate law professor at the University of Texas, said Enron's situation was so bleak that Lay's resignation could only help matters.
``You have a situation where Enron, rightly or wrongly, has been accused of everything except harboring bin Laden in the basement of its corporate headquarters,'' Hu said.
Lay is expected to testify before congressional committees on Feb. 4, as part of a sweeping investigation that is causing political anxiety at the White House and in Congress. Lay is a friend of the president, and the company has contributed large amounts to his campaign and those of several congressional members.
Four Andersen executives were scheduled to appear before the House Energy and Commerce investigations subcommittee on Thursday, including David Duncan, the auditor who handled the Enron account. He isn't talking publicly without immunity from prosecution, and will ``rely on his constitutional right not to testify'' under the Fifth Amendment, one of his lawyers said Wednesday.
Last week, Andersen fired Duncan because of his role in the shredding of Enron-related documents. But Duncan has told investigators that he was following guidance from Enron on document destruction.
The Senate Governmental Affairs Committee also was to hold a hearing Thursday focusing on whether federal regulations can be strengthened to prevent another meltdown like Enron's.
In addition, FBI agents have been in the building investigating Enron's own alleged shredding of financial documents.
Lay took over as chief executive officer at Enron in February 1986, seven months after the company was formed by the merger of Houston Natural Gas and Omaha, Neb.-based InterNorth Inc.
In December 2000, he turned over chief executive duties to Jeffrey Skilling but remained chairman. Late that month, Enron shares hit a 52-week high of $84.78.
Eight months later Skilling abruptly resigned, citing personal reasons. With the stock sliding, Lay returned as CEO.
In October, Enron reported a $618 million third-quarter loss and disclosed a $1.2 billion drop in shareholder equity. The skidding stock went into free-fall and settled at less than $1.
From October 1998 through November 2001, records show Lay sold tens of millions of dollars worth of Enron stock. Lay's lawyer defended the transactions, saying the proceeds were intended to pay off loans.
That was little comfort to Michelle Cormier, 33, left jobless with two young daughters when the company sought bankruptcy protection.
``He's resigned and he's rich and I'm out of a job and I have no money,'' Cormier said Wednesday night. ``He has something to fall back on.''