HOUSTON – Kenneth L. Lay, the embattled chairman and chief executive officer of Enron Corp., resigned Wednesday from the bankrupt energy company but will remain on the company's board.
Lay, 59, transformed Enron from a regional pipeline company into one of the world's largest energy-trading firms. But more recently, he has been blamed for much of what went wrong at Enron.
"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 hard-working employees," Lay said in a statement released Wednesday night by Enron.
Lay said the many investigations into Enron's activities take up too much of his time and make it difficult to concentrate fully on what is most important to Enron's stakeholders. His resignation came the day before two congressional committee hearings related to Enron's downfall were to begin.
"He's resigned and he's rich and I'm out of a job and I have no money," said Michelle Cormier, 33, who was fired Dec. 3 from Enron Energy Services after 16 years. "He has something to fall back on."
Enron said its board of directors was working to find a "restructuring specialist" to help with its efforts to emerge from bankruptcy. That person will serve as Enron's acting chief executive officer.
John Olson, a securities analyst with Sanders Morris Harris in Houston, said Lay's resignation was inevitable.
"He recognized that he was becoming such a lightning rod of controversy that he simply needed to sever himself from the firm for the mutual benefit of Enron and himself," Olson said.
Lay took over as chief executive officer at Enron in February 1986, seven months after it was formed by the merger of Houston Natural Gas and InterNorth Inc.
In December 2000, Jeffrey Skilling was named CEO, but Lay remained chairman. The company's shares hit a 52-week high of $84.78 on Dec. 28.
Skilling abruptly resigned in August 2001, reportedly for personal reasons, amid a slumping stock and Lay resumed his role as CEO. Some company watchers said it was the first outward sign that the company was ailing.
Just months ago, Enron was the country's seventh biggest company in revenue. But investors and traders alike evaporated amid revelations of questionable partnerships that helped keep billions of dollars in debt off its books and the company's acknowledgment that it overstated profits for four years.
The company filed for bankruptcy in December, leaving thousands of employees out of work and stripping much of their retirement savings after Enron temporarily barred them from selling company stock from their Enron-dominated 401(k) accounts.
Eleven House and Senate committees are investigating Enron, while the Justice Department and the Securities and Exchange Commission pursue their own less-visible probes.
Lay is expected to testify before two congressional committees on Feb. 4.
Enron's lead outside auditor was subpoenaed to testify before Congress on Thursday about his role in the destruction of financial documents, but his lawyer said he would refuse unless the House panel grants him immunity.
The Arthur Andersen auditor, David Duncan, warned Enron's chief accounting officer last October that the wording of the company's draft press release announcing huge third-quarter losses could be misleading for investors, according to a memo Duncan wrote for the files on Oct. 15 that was obtained by investigators. The memo says his advice — made after consulting with Arthur Andersen attorneys — was ignored.
One of the attorneys was Nancy Temple, who also was subpoenaed to testify at Thursday's hearing. According to another document, Temple asked Duncan to delete her name and any reference to having consulted with the Arthur Andersen attorneys from his memo.
"If my name is mentioned it increases the chances that I might be a witness, which I prefer to avoid," Temple wrote.
Congress can compel witnesses to show up but cannot force them to answer potentially incriminating questions without granting them immunity from criminal prosecution.
Duncan already has talked to committee investigators.
Arthur Andersen, a Chicago-based auditing firm, fired Duncan last week for his role in the extensive destruction of Enron-related documents that took place after federal regulators began investigating possible accounting improprieties.
Attorneys for shareholders suing some current and former Enron executives and board members have asked a federal judge to bar Arthur Andersen from shredding more documents related to its audits of the company.
In addition to the House Energy and Commerce Committee hearing on document destruction by Arthur Andersen employees, the Senate Governmental Affairs Committee also is holding a hearing Thursday.
The Senate hearing will focus on whether and how the system of federal regulations can be strengthened to prevent another Enron-style meltdown. Witnesses include Arthur Levitt, who was SEC chairman through most of the Clinton administration.