Published January 14, 2015
Former Enron Corp. chairman Kenneth Lay (search) took responsibility for the company's spectacular demise but blamed any criminal acts on underlings in a wide-ranging interview with The New York Times.
"I take full responsibility for what happened at Enron (search)," Lay said in his first unrestricted interview since the company declared bankruptcy amid myriad accounting scandals in December 2001. "But saying that, I know in my mind that I did nothing criminal."
In an article posted on the Times' Web site Saturday, Lay also said he believes his first-name relationship with President Bush will prove to be a liability as prosecutors reportedly weigh criminal charges against the former chairman.
"If anything, being friends with the Bush family, including the president, has made my situation more difficult," Lay said, "because it's probably a tougher decision not to indict me than to indict me."
Lay, a major fund-raiser in Bush's 2000 campaign, is considered in prosecutors' crosshairs because he is the last well-known Enron figure to have escaped charges so far.
Former chief executive Jeffrey Skilling (search) is under indictment and former finance chief Andrew Fastow pleaded guilty and accepted a 10-year prison term in exchange for his cooperation.
Lay, 62, said he understands why outsiders are focused on him even though attorney Michael Ramsey said earlier this month he doesn't believe his client will be indicted.
Asked if he would consider pleading guilty to anything, he responded "absolutely not."
In more than six hours of interviews with the Times at Lay's downtown Houston office, he placed most of the blame for the scandal on Fastow, who prosecutors say was the main architect of several Byzantine schemes that eventually were called into question.
Lay acknowledged, however, that he and his board signed off on maneuvers that ultimately became troublesome for the Houston-based energy trader. The board took the unusual step of allowing Fastow to have a business conflict with Enron by operating an investment fund that did business with the company and financed some Fastow-related partnerships.
Now that there is evidence Fastow used the complex constructions to manipulate Enron's balance sheet and enrich himself, Lay said it's easy to criticize the latitude Fastow was granted.
"At the time it seemed the appropriate thing to do," he said.
Sources involved in the investigation said the main accusation against Lay is that he promoted Enron stock to employees and others even as he was selling as its share price began to tumble in late 2001.
Lay's attorney, however, has maintained that the sales were triggered automatically by lenders, and a Times review of Lay's trading records shows he did his best to keep as many shares as possible.
Lay characterized himself as one of the "98 percent of the people who worked at Enron" who were "good, honest, hardworking individuals."
He placed Fastow among the other 2 percent.
"We had a chief financial officer and a few other people who in fact mismanaged the company's balance sheet and finances and enriched themselves in a way that once we got into a stressful environment in the marketplace, the company collapsed," he said.
Lay said he recalled meeting with executive Sherron Watkins (search), who warned him about the accounting issues that eventually torpedoed the company, shortly after Lay retook the CEO's reins when Skilling abruptly resigned in August 2001.
Lay said he recalled Watkins as "very credible, very smart," but "you just don't read one letter coming from a person in middle management and decide, 'Well, we have a serious problem here."'
He said he had Watkins' claims reviewed by a prestigious Houston law firm that found no major problems. In fact, Lay said top executives — including Fastow — were telling him as late as September that the nation's seventh-largest corporation was as well-positioned as ever.
The interview broke Lay's 21/2-year silence about Enron's downfall. He was called to congressional hearings shortly after Enron's collapse but declined to testify, citing his Fifth Amendment rights. He said he did so at his lawyers' insistence, although Skilling bucked any such advice and answered questions.
Lay told the newspaper his net worth has crumbled from more than $400 million to less than $1 million, not counting millions set aside to repay debt and legal fees. Enron's stock implosion is mostly to blame.