Lay: Enron's Collapse 'the Most Painful Thing in My Life'

HOUSTON – Enron Corp. founder Kenneth Lay wrapped up six days on the witness stand Tuesday by saying that the company's collapse was "the most painful thing in my life."

"I loved Enron very much," Lay told jurors in his federal fraud trial. "I think we built a great company. I think the most painful thing in my life was watching Enron finally have to go into bankruptcy."

His final day of testimony ended with a last, testy exchange with federal prosecutor John Hueston, who took aim at Lay's claim earlier in the trial that he takes responsibility for what happens at Enron, but not for any criminal activity.

"Sir, you have a long list of people to blame for Enron's collapse, sir, and it gets longer and longer as you testify," the prosecutor said. "And your list of people to blame and events to blame did not include yourself, did it, sir?"

Lay answered: "I did everything I could humanly do during this time. Did I make mistakes? I'm sure I did, Mr. Hueston. I had to make real-time decisions based on the information I had at the time."

Lay and former Enron Chief Executive Jeffrey Skilling are accused of repeatedly lying to investors and employees about Enron's prowess when they allegedly knew the company's success stemmed from accounting tricks that hid bad news and inflated profits.

The two men counter that no fraud occurred at Enron other than that committed by a few executives who stole money through secret side deals. They attribute Enron's descent into bankruptcy to a combination of bad publicity and lost market confidence. Skilling testified earlier.

Four character witnesses, including Houston Astros owner Drayton McLane Jr., were to follow Lay to the witness stand.

Aiming to undercut a prosecution argument, Lay had testified Tuesday he used about $13 million of personal assets other than Enron shares to meet bank margin calls and other financial obligations in 2001.

Hueston had sought to show Lay passed over other choices — including tens of millions of dollars in real estate, stock accounts and other lines of credit — and instead sold $70 million of Enron shares to meet the margin calls.

Those sales, in which Lay sold Enron stock back to the company in exchange for cash in $4 million chunks, did not have to be reported immediately to the public, and in late 2001 Lay told Enron employees only that he was buying Enron shares.

On Tuesday, under a second round of questioning by his lawyer George Secrest, Lay said he had used more than $7 million of non-Enron assets to meet margin calls and "other financial obligations" in spring 2001, and more than $6 million the rest of the year.

He did not specify how much of the $13 million went to meet bank margin calls and how much went to the other obligations.

Lay has testified that Enron shares made up about 90 percent of his net worth at the time, so it was not unusual for him to sell Enron shares in order to satisfy the banks.

On Monday, jurors in Lay's federal fraud trial got a glimpse at his lavish lifestyle, including homes in Aspen, a vacation on the French Riviera and $20,000 spent on antiques in Spain.

Hueston was suggesting that Lay had many ways to cover margin calls issued by banks to which he owed millions of dollars in 2001, just before Enron imploded.

Instead, Lay borrowed cash in $4 million installments from Enron — and to pay the loan back each time, he sold the company shares of his Enron stock.

When Hueston asked whether Lay considered cutting personal expenses so he could borrow less cash from Enron, the ex-chairman said he could not simply turn off his lifestyle "like a spigot."

"We could have reduced some living costs, but as I said earlier, we had realized the American dream," Lay testified Monday, his third day under a tense cross-examination from Hueston. "We were living a very expensive lifestyle."

For example, to cover a July 26, 2001, margin call of just $483,000, Lay had available $11 million in non-Enron lines of credit, plus $13.5 million in other assets held in brokerage accounts. Instead, he sold stock back to Enron.

Hueston also noted Lay had taken expensive vacations — the French Riviera in May 2001, a $20,000 antiquing trip to Mallorca, Spain, just six days after he sold $4 million of Enron stock back to the company.

And, in January 2001, for his wife's birthday, he spent $200,000 to charter a boat called Amnesia.

"I remember an Amnesia," Lay said, to the laughter of some jurors. "I think it was appropriately named."

Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces six counts of fraud and conspiracy.

Lay also faces a separate trial on bank fraud charges unrelated to the current trial. That case will be tried before Lake without a jury during deliberations in the conspiracy case.