Wednesday, July 5th, 2006
by: Ed Mayberry, July 5, 2006 5:07:00 am
Ken Lay, who died today in Aspen, Colorado at the age of 64, took Enron from a conservative natural gas pipeline company to an energy and trading giant. It was 7th on the Fortune 500 in 2000 and claimed more than $100 billion in annual revenue. But the company imploded after it became clear Enron's finances were built on fraudulent partnerships and schemes. Lay was convicted in May, along with Enron's former CEO Jeff Skilling, of defrauding investors and workers. He was also convicted in a separate trial of bank fraud and making false statements to banks. Lay was due to be sentenced in October, facing punishment that could have kept him in jail the rest of his life. Both he and Skilling maintained there had been no wrongdoing. Skilling said only that he's aware of the death. The Enron Task Force also won't comment on Lay's death. Prosecutors are not talking about what'll become of efforts to get Lay to pay more than $43 million the government says he pocketed.
Lay had been preparing his appeal. He told reporters after his conviction that he and Skilling have always had Enron employees in mind.
"We both have that conviction. We're trying our best to clear the name of all the employees of Enron. I've always taken great pride and pleasure, I guess, in trying to provide my employees good opportunities, good compensation, good retirement. So it's really painful to see how much was lost by the employees and the retirees."
Lay told the Houston Forum on December 13th, 2005 that he had his theory on why Enron collapsed.
"The actual triggering event for Enron's bankruptcy was the loss of confidence by the financial community that ultimately could not be arrested or reversed. Media articles began in late October 2001 raising questions about Enron chief financial officer Andrew Fastow."
On more than one occasion, Lay placed some of the blame for Enron's eventual collapse on revelations about former CFO Andy Fastow.
"I, and I think others, but I misjudged one key individual in particular. Hopefully, the one thing you don't do every morning is wake up and think 'I wonder if I've got a crook right in my senior management ranks.' But sometimes you can be sadly, tragically mistaken in that."
Author Robert Bryce, who wrote about Enron in his book Pipedreams, says Lay was the face of Enron, but made fatal mistakes.
"He strove to be seen as Mr. Outside, the glad-hander, the one who was doing all the, you know, civic affairs and so on. At the same time, he lost control of his own company, and despite being a PhD economist, couldn't read the cash flow statement from his own company. And if he had, I don't think Enron would have failed."
Bryce says we'll never know whether his appeal would be successful.
"He had some chance on appeal, perhaps, whether they were big or small depends on who you asked. But you know, that's it. His epitaph is written that, you know, here he dies just before he was going to go to prison. So he'll never have a chance to clear his name."
Lay was in Colorado with his wife. Officers were called early this morning to Lay's house in Old Snowmass, Colorado. Lay was taken to Aspen Valley Hospital, where he was pronounced dead. Conditions of Lay's $5 million bail allowed him to stay either in Texas or Colorado until his October sentencing. Lay died after being taken to a hospital from a home in old Snowmass, Colorado. I.V. Pabst, listed in public records as the owner of the house, declined to confirm whether she was renting to the Lays--but she called his death a blow. The Lays had long ago sold their property in Pitkin County, which surrounds Aspen and boasts some of the most expensive real estate in the world. Lay once had multiple vacation homes in Glitzy Aspen, Colorado and on the Texas Gulf Coast. Lay and his wife had a five-bedroom, six-and-a-half bath condominium on the 33rd floor of an apartment building in Houston. Their pre-scandal assets included three homes and a lot in Aspen, five properties in Galveston and rental properties in Houston. Lay eventually sold the Aspen and Galveston properties for more than $24 million and other properties in Houston for nearly $4 million.
Today's sudden death of Ken Lay deprives thousands of victims of the Enron collapse the satisfaction of possibly seeing him in prison. Charles Prestwood is a former pipeline operator who retired from Enron in 2000 and later lost $1.3 million in retirement savings. Prestwood says personally he wanted to see Lay go to prison. But Prestwood says "maybe this is God's way of having justice done.'' Sherri Saunders worked for Enron and its predecessor company for 24 years before she was laid off in 2001. She lost $1 million in retirement savings. As for Lay, Saunders says "he got off easy.'' Another former Enron worker says "justice is served at some point or another,'' and that Lay's death just means it's sooner this time. Tammie Huthmacher was a contract specialist before she was laid off in the 2001 collapse. She says she feels bad for Lay's family but she says Lay's death "spares a lot of people grief in the future.'' Huthmacher says Lay's death means "we don't have to pay for him sitting in jail and watching cable TV and having luxuries.''
Back in 2003, Michael Cleverly set up a donation jar at the Woody Creek Tavern just up the road from Aspen, Colorado. Cleverly recalls the gallon-sized glass jar eventually collected "a lot of non-cash items.'' He says it's kind of a tradition when the wealthy get in a jam in Woody Creek--the locals try to help them out. The bar eventually presented the "Ken Lay Defense Fund'' jar to Lay and his wife, Linda. Cleverly says the Texas couple good-naturedly accepted it.
British Prime Minister Tony Blair has asked British officials to help seek bail for three bankers to be extradited to the United States to face Enron-related fraud charges. However, Blair denied that a treaty being used to pursue the men was unfair to Britain. Leading British businessmen and opposition lawmakers have called on the government to prevent their deportation altogether. David Bermingham, Gary Mulgrew and Giles Darby are former executives at Greenwich NatWest, a unit of Royal Bank of Scotland Group. They've become well known in Britain because of the treaty with the United States that's been used to pursue their extradition. The 2003 treaty was purportedly aimed at speeding up the process of bringing suspected terrorists to justice. But critics contend it's not reciprocal and places a greater burden on Britain because the U.S. Congress hasn't ratified it. Bermingham, Mulgrew and Darby deny any criminal conduct. They contend that if there's a case against them, it should be tried in Britain because that is where the alleged offenses took place.
El Paso Corporation has completed the sale of its interests in power plants in Pakistan and Bangladesh to Houston-based Globeleq for $38 million. El Paso so far this year has announced or closed some $1.4 billion of its targeted $1.2 billion of asset sales in support of its debt-reduction program. Globeleq specializes in emerging markets.
Southwest Airlines has raised fares for one-way trips by $3 to $10 in one of its biggest fare increases ever. One-way fares have been increased by $10 on flights of more than 1,000 miles and $3 on flights of 751 miles to 1,000 miles. Southwest spokeswoman Paula Berg says shorter flights aren't affected. The spokeswoman says high fuel prices prompted the increases, which took effect Friday night before the July 4th holiday weekend. The Dallas-based carrier also raised the limit on its refundable fare to $319. The weekend fare hike is the fourth broad fare hike by the nation's leading low-cost carrier this year and the ninth in the past two years.
The Reverend Jesse Jackson led about 100 followers on a march in front of BP's Texas City refinery yesterday. Jackson brought his protest to the refinery to speak against what he calls price gouging, discriminatory hiring practices and unsafe working conditions at the company. Jackson says BP was chosen as a target for a boycott because none of its upper-level executives are black and there are no black owners among its hundreds of U.S. distributors. But BP says that 1,535 of its officials and mangers in the United States--or 24 percent of them--were minorities in 2005. Of that number, 614 are black. Thirty percent of new hires from universities the past two years were minorities. Company spokesman Ronnie Chappell says that BP considers having a diverse work force as a competitive advantage. He added that rising crude prices were the main force behind higher gasoline prices and were out of the company's control.