Posted at 09:47 AM ET, 07/ 6/2006
No Foul Play
In a very quick turnaround, a Colorado coroner pronounced yesterday that Enron founder Kenneth L. Lay died of coronary artery disease and that the 64-year-old had suffered a previous heart attack.
I doubt this will put all the conspiracy theories -- yes, they started the minute his death was announced -- to bed.
It's not hard to diagnose severe arterial blockage. It can be done on the living with EKGs, angiograms and CT scans to check for arterial plaque..
Lay was 64, had blocked arteries, had suffered a heart attack and was under extraordinary stress. He was a prime candidate for what happened to him. And I won't even go into the Houston diet.
Still, almost as soon as news of his death came out, the conspiracy theories started flying:
* He killed himself because he couldn't face prison.
* He was killed by someone (from disgruntled former Enron shareholders to anyone else you could think of).
* He faked his death and he's sipping mojitos in Buenos Aires.
Of course, all of these require some form of cover-up or exotic mixture of pharmaceuticals and poisons that would puzzle Miss Marple. ("It was Col. Mustard with a gas pipe in the study!") And if you believe in the whole Bush-Enron-Halliburton power troika, any cover-up is possible.
But 14th-century Franciscan logician Occam got it right when he wrote: "Entities should not be multiplied beyond necessity." In today's language: "The simplest explanation is usually the best one."
Many will remain unconvinced. When you point out to the conspiracy-minded that Lay had an autopsy, they'd likely respond with: "Oh, yeah? JFK had an autopsy, too."
Posted at 04:58 PM ET, 07/ 5/2006
Heart of the Defense
It's coincidental, if not ironic, that Kenneth L. Lay should die of a heart attack.
Several weeks into his trial on federal fraud charges, in March, defense lawyer Michael W. Ramsey said he believed he had suffered a small heart attack in court after shouting at a government witness, former Enron chief finance officer, Andrew S. Fastow.
In late March, Ramsey had a stent placed in his heart to open clogged blood flow. He quickly developed problems with the stent and had to head back to the hospital for further help. Days later, he had a second stent implanted -- this one in his carotid artery. Ramsey never returned to the trial, leaving Lay's crucial testimony in the hands of back-up lawyer George "Mac" Secrest.
Lay bullied Secrest from the witness stand, at one point saying, "I'm not sure where you're going with this" line of questioning. It was Lay's decision, however, not to seek a delay in the trial to await Ramsey's recuperation. It seems he was determined just to bulldoze his way through the unpleasantness, regardless of the outcome.
In some ways, it reminds me of the aged and terminally ill. When the end is inevitable, and painful, the course of action toward that end becomes increasingly irrelevant.
Posted at 04:17 PM ET, 07/ 5/2006
Note From the Afterlife?
Obviously, Kenneth L. Lay's family has other things on its mind now, but a quick check to www.kenlayinfo.com, which the Lay defense team posted more than a year ago and used to tell their client's side of the story, shows it is still active and has not been updated to reflect today's news.
Indeed, the opening line of the most-recent entry, posted after his guilty verdict in May, reads eeriliy like a note from beyond, if the word "trial" is read figuratively rather than literally:
Now that my trial has concluded, I would like to offer a few brief comments."
Posted at 02:53 PM ET, 07/ 5/2006
A No-Surprise Ending
I'm not surprised by the news of Kenneth L. Lay's sudden death. Nor am I surprised that death came now, less than two months after he was convicted of fraud and conspiracy for his role in Enron's downfall. In many ways, it seems almost inevitable.
After Lay was found guilty on all six charges in May, he realistically faced the rest of his life in prison, come sentencing in September. At 64, even a 10-year sentence, what many observers expected, would have pushed him two years past the average lifespan of an American male. And that's an average American male who did not gain the whole world -- at least in his estimation -- and then lose it.
There will be no facile and mean-spirited shots at the dead man here. No "he got what he deserved" or "he got off easy." I feel sympathy for his family -- whatever he was to the 30,000 former Enron employees and the thousands upon thousands of shareholders who lost their savings, he was a father and a husband as well.
But it is impossible not to think back to the Lay who sat in a witness box in a federal courthouse in Houston for five days in April and remember him as tarnished king, backed into a corner by an aggressive and righteously indignant young prosecutor, John Hueston, and responding with arrogance, anger and bile.
Co-defendant Jeffrey K. Skilling, Enron's former chief executive, cut a different figure on the witness stand with his interrogator, Sean Berkowitz. His anger could have been interpreted as passion for Enron, passion for the work of building a business that was the envy of the industry.
Lay's time on the stand, however, was a meltdown, a sideshow, an alarming glimpse into the man's dark psyche.
When I think of Lay's testimony, I can't help but remember a throwaway but powerful scene in the 1990 movie, "The Krays," a semi-biopic about the notorious Kray brothers, twins who ran a brutal criminal empire in London in the '60s. One of the older women in the film set off on a rant about London during wartime, about how the men went off to war and glory and the women were left behind to deal with the daily horrors of life in a city that was bombed to bits by the German Lutwaffe. A lifetime of hatred of men came spewing out, and she ended the scene coughing blood. Shortly after, she was dead, poisoned by her own bile.
I watched Lay on the stand and wondered how he would have handled prison. Some famous white-collar criminals, like Martha Stewart, attack prison time like one more task to be solved, one more obstacle to be surmounted. For her, prison seemed like a particularly knotty dinner seating-chart to work out.
Lay, by contrast, seemed angry without being defiant. When he was on the stand, it was as if he were saying, "I know I'm going down, and I'm going to vent."
Unlike Skilling, he did not act like a man who wanted to help his case. Instead, he seemed to willfully sabotage it. During testimony, it was revealed that Lay believed the Wall Street Journal, whose October 2001 articles helped begin Enron's downfall, had "a hate on" for Enron.
In the last months of his life, Lay -- stripped off his hundreds of millions, his many perks of privilege, his industry-wide power, his standing on the world stage -- may have had nothing left but his own hate.
Posted at 04:09 PM ET, 05/26/2006
Whatever will we talk about now?
Now that a Houston jury has convicted former Enron executives Kenneth L. Lay and Jeffrey K. Skilling on fraud and conspiracy charges, let's do a little housekeeping, then take a look ahead.
There are a couple of good stories in today's Houston Chronicle worth checking out. One is a profile of John Hueston, the government prosecutor who cross-examined Lay with such irritating jabs that the Enron founder turned into the Mean Old Man of the trial, destroying any chance he might have thought he had to charm the jury. Right out of the chute, Hueston accused Lay of witness tampering, something that he knew would disorient and anger Lay because it was outside of the indictment and most likely a surprise.
The second is a Q-and-A with Jennifer Binder, the former Skilling girlfriend who started a digital photo business that did business with Enron and in which Skilling invested, while not disclosing the conflict of interest to the Enron board. The prosecution used the company, called Photofete, to argue: If Skilling will lie about one thing, he'll lie about another.
Now, moving forward.
The chief job of Lay and Skilling now is to ready their appeals. They're free on bail until sentencing on Sept. 11. Legal folks estimate they have a few grounds for appeal: that presiding Judge Simeon T. Lake III would not change the venue, that he would not grant separate trials for Lay and Skilling, and that he told the jury they could consider intent to fraud if they decided the defendants took measures to not know what was going on.
However, a number of lawyers quoted in various publications today seemed to think that hopes for a reversal on appeal are dim, largely because they focus on Lake's decisions, and appellate courts usually give trial judges wide latitude. Further, "SL3" is known for running a tight ship and does not play fast and loose with the law.
Many commenters to this blog were flabbergasted that, even after such a slam-dunk pair of convictions, Lay and Skilling still deny they did anything wrong. They argue that the government had criminalized standard, albeit cutting-edge, business practices.
After listening only to the testimony of Lay and Skilling, I can see the merit in such an argument. The lack of a smoking-gun document by the prosecution was noteworthy. Also, Skilling especially had reasonable-sounding (and fairly easy-to-understand) explanations for Enron business practices that the government said were criminal.
However ... I did not have the benefit of listening to the testimony of previous prosecution witnesses, such as former finance chief Andrew S. Fastow, who admitted to crimes, and others who swore that Lay and Skilling were either in the room where such crimes were being committed, or explicitly or implicitly knew about them and signed off on them.
Therefore, Lay and Skilling were forced to testify that a) they didn't remember such meetings or b) such meetings never happened. That meant it became a question of their credibility, and the prosecution did do an effective job of tearing that down.
There are a lot of ways to win a case. The satisfaction felt by the prosecution team -- Hueston, Sean Berkowitz, Kathryn Ruemmler and the others -- must be immense. To have spent the past two-plus years on this and have an acquittal or hung jury would have been devastating to them.
Me, I'm very interested now in what day-to-day life will be like for Skilling and Lay over the rest of the summer. The government has its eyes on their abodes. Both also face civil suits filed by shareholders who seek billions of dollars.
Lay is 64, Skilling is 52. A sentence of at least 10 years most likely will be a life sentence for Lay. But if Skilling pulled only 10 years, he could have a life afterward. What would he do? Who would hire him? He's a brilliant businessman and an expert in the energy industry. But would he be forever tainted?
These will be interesting questions to chew on as In the Pipeline goes dark for now. However, it will pop back up from time to time over the summer when the Enron news merits it, and we'll be back full-force around sentencing in September, so keep checking back.
And, whatever you're going to do over the next three months, be assured you're going to have a better summer than Ken Lay and Jeff Skilling.
Posted at 07:28 AM ET, 05/26/2006
The Specter of Prison Becomes Real
One commenter to this blog earlier today brought up the point that, perhaps up until now, Jeffrey K. Skilling and Kenneth L. Lay may not have contemplated spending actual time in jail. Now, assuming their convictions do not get overturned on appeal, that is a near-certainty.
Legal experts have speculated that the two would be sentenced to a medium-security prison, not the light-security federal work camps once nicknamed "Club Fed." Sentencing is scheduled for Sept. 11.
According to the Federal Bureau of Prisons Web site, medium-security FCIs (Federal Correctional Institutes) have "strengthened perimeters (often double fences with electronic detection systems), mostly cell-type housing, a wide variety of work and treatment programs, an even higher staff-to-inmate ratio than low security FCIs, and even greater internal controls."
Medium-security prisons are sometimes part of a larger complex, such as in Beaumont, Tex., the closest to Houston, which has low-, medium- and high-security prisons.
Lay and Skilling will each get eight-digit registration numbers, khaki uniforms and enter the prison's general population, or "GenPop." It is not known where they would be assigned, but they can request where they will be incarcerated. A look at the regulations for Beaumont medium shed some light on what life is like behind the walls of the kind of place where Lay and Skilling may spend many, many years.
They could have a bank account for prison commissary purchases. Friends and family can deposit money into the accounts. This may have poignant impact on Skilling, whose net worth was once as much as $70 million.
They will be allowed visitors only during certain hours and on certain days. At Beaumont, inmates get 12 points at the beginning of each month and are charged one point for a weekday visit and two for a weekend visit. Visitors are not allowed to wear khaki (resembles inmate uniforms), athletic wear (potential of gang association) or suggestive clothing, such as Spandex, shorts, skirts above the knees or sleeveless garments.
They would be required to work at jobs such as plumbing, painting and groundskeeping, earning 12 cents to 41 cents per hour. If they're lucky, they could get a job in the prison factory, where wages are as much as $1.15 per hour. From 1999 to 2001, Lay's total compensation at Enron was $223 million.
No jail time is easy time, whether you're in a minimum-security joint or a SuperMax, where you get strip-searched each time you get to leave your cell for one hour per day. Aside from the threat of violence, the real killers are loss of control and, maybe even worse, sheer boredom. Each moment of an inmate's life is scripted, even if it's scripted only as "time to do nothing but sit and stare."
For men such as Lay and Skilling, this truly could be capital punishment. Both spent their careers giving orders, not taking them. Lay showed, on the witness stand, that he could not relinquish control even to his own lawyer to run his defense. Both men created environments favorable to them, from their home life to their work life. They created their habitat and their habits. Now, they may have no say in either.
While I was reading all of the prison rules that an inmate must follow, one jumped out at me. It's a non-issue to most inmates, but it must be a blow to the heart of what Lay and Skilling were: "No inmate is permitted to actively engage in a business or profession while incarcerated."
Posted at 04:24 PM ET, 05/25/2006
Lay Finally Emerges
Kenneth L. Lay just poppped out of the court house with his family. The holdup: He had to come up with the $5 million required for his bail so he could go free.
CBNC was reporting that there were federal agents in Lay's luxury Houston penthouse -- the last liquid asset he has (he testified he has an annuity for retirement of about $10 million, if I recall correctly) -- pricing assets to see if they added up to $5 million. The network also reported that family members had to sign forms vouching for Lay, i.e., pledging their assets to his bail.
When he came out and faced the media, he made a brief statement, proclaiming his innocence and saying he'd have more to say later.
"I am still a very blessed man," he said, next to his wife. "I have a very warm and loving Christian family that supports me. Most of all, we believe that God in fact is in control and indeed He does work all things for good for those who love the Lord. And we love our Lord."
Posted at 03:16 PM ET, 05/25/2006
Taking a Breath
Now that we're through the first flurry of activity reporting the verdicts against Kenneth L. Lay and Jeffrey K. Skilling, let's sit back and take a breath and think about what we've seen and what's ahead.
First, a little housekeeping, which I should have gotten to earlier: Unlike in April, when I was in Houston, sitting in the Overflow Press Room (OPR, or Mole Hole, as dubbed by Houston AP reporter Kristen Hays), watching the testimony, I am now back in Washington.
My colleague Carrie Johnson, who has been covering the story for four years now and the trial since its kickoff more than 16 weeks ago, is still in Houston. I'm sitting here at The Post's Continuous News Desk in the main newsroom amid a flurry of multimedia activity. So far, I've been on Washington Post Radio once, CNN Headline News twice and MSNBC once. Also, I'm reporting a story for tomorrow's newspaper (remember newspapers?) and talking to you guys.
So there's that. Now, moving on.
When I posted my most recent entry before today, on May 3, Lay had finished his testimony. He was preceded by Skilling. As I wrote at the time, the two behaved far differently than expected under examination. The legendarily hot-tempered Skilling by and large kept his intellectual bullying to a minimum. A reasonable juror could have interpreted the occasional flash of Skilling anger as passion for Enron. Meanwhile, the avuncular Lay became an arrogant and angry old man on the stand, especially under cross-examination. In short, the longer Lay was on the stand, the better Skilling looked.
And the jury responded accordingly, it seemed. At least one juror said she felt Lay "had a chip on his shoulder" during his testimony. I thought Skilling did well enough to get some charges dismissed but for him, it was an all-or-nothing play. Even acquitted of nine charges, Skilling could still spend the rest of his life in prison, depending on his Sept. 11 sentencing.
Skilling's lawyer Daniel M. Petrocelli has said his team will appeal. "We've just begun to fight," he said, after he and Skilling emerged from the courthouse. So far, Lay and his family have not come out. In fact, they just ordered lunch in.
Grounds for appeal could include venue -- the defense could argue it was impossible for them to get an impartial jury in Houston. On the other hand, Enron's influence was so widespread -- so many people held Enron stock and the company's name became shorthad for 1990s corporate crime -- a change of venue may not matter.
Posted at 01:38 PM ET, 05/25/2006
Lay in Prayer
Jeffrey K. Skilling and his lawyer, Dan Petrocelli, emerged from the court house and briefly addressed the media shortly after the verdict.
But Kenneth L. Lay has yet to emerge. CNBC reported a few minutes ago that Lay and his family, as well as his lawyers and much of the Lay team, had joined hands in a circle of prayer, along with Lay's longtime pastor, Stephen Wende, inside the court house.
Lay had said all along that the verdict was in God's hands.
Posted at 01:07 PM ET, 05/25/2006
Grooving on Glisan
After the verdict was announced, several jurors talked to reporters, explaining what they found compelling in the testimony and evidence.
One of the defense's key hopes was that the jury would discount the highly damaging testimony of former Enron chief financial officer Andrew S. Fastow. Fastow had pleaded guilty to several charges and cooperated with the government in its case against Jeffrey K. Skilling and Kenneth L. Lay. The defense told the jury that Fastow was damaged goods, that he'd say anything to save his hide.
But at least one juror talking after the trial said the jury found the testimony of former Enron treasurer Benjamin Glisan both damaging and credible.
Like Fastow, Glisan had pleaded guilty to fraud. But, unlike Fastow, he did not cooperate with the government. And -- bad news for Lay and Skilling -- Glisan was a copious note-taker. He put Lay and Skilling in meetings where criminal activities were discussed. That left Lay and Skilling only able to deny they were in the room as Glisan had said.
In the end, the jury found Glisan a more believable witness than Lay and Skilling.
Posted at 12:51 PM ET, 05/25/2006
Guilty, Guilty and Guilty
It's pretty clear that the government prosecution hit a home run with the verdicts against former Enron chief executives Jeffrey K. Skilling and Kenneth L. Lay, which were just released. Lay was found guilty on all six couns, Skilling on 19 of 28 counts.
The jury, which began deliberation May 17, clearly wanted to put a hurt on the top two men of Enron. After getting guilty pleas from several lesser Enron executives -- some of whom gave damaging testimony against Lay and Skilling -- it was important for government prosecutors Kathryn Ruemmler, Sean Berkowitz and John Hueston to get convictions against Lay and Skilling.
Though the prosecution never produced a slam-dunk smoking-gun memo or e-mail, such as: "Dear Ken: Let's defraud the investors. Love, Jeff," it did a thorough job of damaging the credibility of both Lay and Skilling, essentially, saying, "If these two will lie about one thing, they'll lie about another."
In some ways, the case-within-a-case was the Photofete scandal. In his cross-examination of Skilling, Berkowitz revealed that Skilling had invested a tidy sum in a photo start-up business run by a former Enron employee and -- bonus! -- girlfriend of Skilling's.
Skilling was caught flatfooted by the questions and said he'd invested only a small amount. When Berkowitz produced canceled checks to show it was more, Skilling was forced to retreat.
For Lay, the government hammered away at his big stock dump during 2001. Lay sold $70 million in stock during the period while buying just a little. His purchases were disclosed in required quarterly filings, but his sales were not -- he was not required to report the sales until the end of the year because he sold the stock back to the company, and not through a broker.
Hence, prosecutors argued, a reasonable investor would believe that the chief executive of Enron -- which was facing bad press and questions from Wall Street -- was a net buyer of stock during this time, rather than a massive seller. This was a purposeful misrepresentation of the company's health, the prosecution charged. And the jury agreed.
More to come throughout the day. It's good to be back.