Congress Seeks Subpoena After Lay Refuses to Testify About Enron

Senate lawmakers will vote Tuesday on whether to subpoena former Enron head Kenneth Lay after he suddenly pulled out of Monday's scheduled congressional hearings investigating the energy giant's collapse.

"We feel the appropriate approach now is to issue a subpoena," Sen. Byron Dorgan, D-N.D., said. "He certainly has a right to claim his Fifth Amendment rights when he does appear."

Lay's attorney, Earl Silbert, told Senate and House panels in a letter Sunday that the former chairman "cannot be expected to participate in a proceeding in which conclusions have been reached before Mr. Lay has been given an opportunity to be heard."

Several senators and representatives said publicly over the weekend that Lay and other Enron executives almost certainly participated in illegal activity.

"These inflammatory statements show that ... the tenor of the hearing will be prosecutorial," Silbert said in his letter.

The Senate Commerce Committee's subcommittee on consumer affairs, which Dorgan chairs, canceled Monday's hearing after Lay backed out, while the House Financial Services Committee, led by Rep. Billy Tauzin, R-La., proceeded without its chief witness.

Both committees want to investigate whether the seventh largest U.S. corporation before its bankruptcy bilked its investors by disguising its financial debts. Eleven congressional committees have scheduled hearings on Enron's collapse, but several that included Lay may have to re-organize or cancel their hearings.

Lay joins a long list of people who have not cooperated with the hearings. Former chief financial officer Andrew Fastow and ex-Enron executive Michael Kopper have indicated they will refuse to answer questions from Congress.

On Jan. 24, Arthur Andersen auditor David Duncan, who was fired by the accounting firm for his role in shredding Enron documents, invoked his Fifth Amendment right not to testify.

No Preconceived Notions?

Though senators describing their plans to proceed with a subpoena hearing said they had not made up their minds yet about the taint behind Enron's failings, one senator, Fritz Hollings, D-S.D., was quick to suggest that the Bush administration is corrupt for hiring officials who previously consulted for the energy company that declared sudden bankruptcy in early December.

"I have never seen a better example of cash-'n'-carry government than this Bush administration and Enron," Hollings said.

Hollings pointed out that several administration officials, including Bush's Treasury secretary, vice president, energy secretary, chief economic adviser, budget director, and secretary of the Army were all once consultants to Enron.

"If we don't ourselves show any shame in this particular escapade, we'll never get any kind of campaign finance enacted, so that's one of my main concerns in these hearings, in addition to the consumer," Hollings said.

Sen. Ron Wyden, D-Ore., however, took a more measured approach, emphasizing the financial, rather than political, aspect of Enron's collapse.

"Now, as Chairman Hollings and Chairman Dorgan have noted, we have not arrived at any preconceived notions here. But I will tell you, from an appearance standpoint, it sure appears to me that this company was on the financial equivalent of steroids," Wyden said.

Lay's decision to bail out of the congressional hearings came one day after an Enron-authorized review of several of the company's estimated 3,000 off-the-books partnerships by University of Texas law school dean William Powers found that the energy trader's management concealed financial information from the public.

The report said the partnerships "were used by Enron management" to enter into transactions that "apparently were designed to accomplish favorable financial statement results, not to achieve bona fide economic objectives."

Dorgan said, "I believe that the report that was issued by the board of directors, the Powers report, is a pretty devastating indictment of a number of things that went on inside that corporation."

The Powers review of Enron also found that a key document summarizing deal transactions and showing required approvals was missing from a partnership deal. It noted the same type of situation in another transaction as well, and it raised the possibility that no approval sheet was ever prepared.

Lay said he was unaware of any such transaction and former Enron chief executive officer Jeff Skilling said he did not know the terms. In his letters to Sen. Hollings, and Rep. Michael Oxley, R-Ohio, Silbert said, "Mr. Lay firmly rejected any allegations that he engaged in wrongful or criminal conduct."

Tauzin said Skilling, who left the company last summer after only six months as CEO, backed away from signing his name to off-the-books partnership deals.

If he is subpoenaed, Lay may decline to testify by invoking his Fifth Amendment right against self-incrimination. But Sen. Peter Fitzgerald, R-Ill., who likened Enron's collapse to a "gigantic Ponzi scheme," warned that if Lay is indeed innocent of charges that he helped bankrupt the company by hiding its debts and cashed in on his stock before the company went belly up, then it is in his interest to testify.

"I would stipulate it's theoretically possible that Mr. Lay as CEO did not know what was going on beneath him. But the documents give the impression that there were so many transactions taking place over so long a period of time that to believe that you would have to conclude that Mr. Lay was the most out- to-lunch CEO of any corporation in America," Fitzgerald said. "If Mr. Lay wishes to correct the damning impressions that are coming out of those documents, he ought to come before the American people and try to dispel those misconceptions."

The Associated Press contributed to this report.