HOUSTON – Creeping paragraph by paragraph through a federal indictment, Enron Corp. founder Kenneth Lay aimed Wednesday to discredit charges he deceived investors and analysts in the final months before the company collapsed.
Defense lawyer George Secrest asked Lay in his third day on the stand about specific government accusations. Lay insisted his public statements in late 2001 were made in good faith based on what he knew at the time.
Secrest asked Lay about a charge that in October 2001, he had inappropriately characterized a $1 billion loss in certain segments of Enron's business as a "nonrecurring" event.
Lay said the decision had been cleared by Arthur Andersen, Enron's outside accountants. "At least at that point they had no problem with the accounting," he told jurors.
In a conference call with analysts later that month, the government says, Lay misleadingly said that Enron was "not trying to conceal anything. We're not trying to hide anything."
Lay stood by those statements on Wednesday when Secrest asked if he believed they were fair and accurate remarks. "I do. I did then. I do today. Based on what I knew."
U.S. District Judge Sim Lake appeared to be increasingly frustrated at the pace of the trial, rejecting Secrest's suggestion of a morning break after one hour and 15 minutes of testimony.
On Tuesday, outside the presence of the jury, lawyers on both sides estimated up to three weeks' more testimony. Lake said he might extend the days in court or shorten breaks.
Lay told jurors Tuesday that during October 2001 he thought the company could move past its problems. But the next six weeks prompted the real firestorm, Lay said, with vexing media scrutiny and diminishing investor confidence.
Lay said Tuesday he heard no mention of Enron possibly seeking bankruptcy protection even when some of the nation's top bankruptcy lawyers sat in on a weekend executive meeting four days before Halloween 2001.
"I don't remember the subject of bankruptcy coming up anywhere by anybody until after that," he said.
His recollection contradicted prosecution testimony from former Enron treasurer Ben Glisan Jr., who told jurors he told Lay days earlier that "bankruptcy is inevitable."
The government says Lay and his co-defendant, former Enron Chief Executive Jeffrey 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.
Both 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 has insisted that Enron collapsed in a storm of bad press, a skittish post-Sept. 11 market and Fastow's greed.
Lay faces six counts of fraud and conspiracy related to his tenure as CEO following Skilling's resignation in mid-August 2001. Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors related to his activities from 1999 to 2001.
Once jurors in the Lay-Skilling case begin deliberating, Lay faces a trial without a jury before Lake on bank fraud charges for allegedly reneging on an agreement with banks not to use $75 million in loans to buy Enron stock on margin.