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Ken lay blames friendship with bush

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Posted on Sun, Jun. 27, 2004
Ex-Enron chief proclaims innocence

By Kurt Eichenwald
New York Times

HOUSTON - There was a time when Kenneth L. Lay's close relationship with President Bush brought him power and influence in Washington that was virtually unparalleled among his colleagues in corporate America.

Now, Lay, the former chairman and chief executive of Enron, fears that those ties may only serve to bring him criminal charges.

``If anything, being friends with the Bush family, including the president, has made my situation more difficult,'' Lay said in a recent interview, ``because it's probably a tougher decision not to indict me than to indict me.''

For more than two years, he has been the nation's silent pariah.

Now, on the eve of what may be the government's final decision on whether to charge him with a crime, Lay is talking for the first time about the company's collapse in 2001 and the scandal that enveloped it. In more than six hours of interviews with the New York Times, Lay remained steadfast in his expressions of innocence, even as he acknowledged, as head of the company, responsibility for the debacle rests rightfully with him.

``I take full responsibility for what happened at Enron,'' said Lay, 62. ``But saying that, I know in my mind that I did nothing criminal.''

As Lay describes it, the Enron debacle was the outgrowth of the wrong-headed and criminal acts of the company's finance organization, and specifically its chief financial officer, Andrew S. Fastow. He says both he and the board were misled by Fastow about the activities and true nature of a series of off-the-books partnerships that played the decisive role in the company's collapse.

Yet, Lay still argues that some of the company's most controversial decisions -- including some that set up financial conflicts of interest for Fastow that could well be unprecedented in corporate America -- had good reasons to be done, and can only be seen as mistakes in hindsight.

The years since the Enron collapse have transformed Lay. His financial status has declined sharply. At the beginning of 2001, Lay said, he had a net worth in excess of $400 million -- almost all of it in Enron stock. Today, his worth is below $20 million, and his total available cash not earmarked for legal fees or repayment of debt is less than $1 million.

But the changes amount to more than just money. A man once celebrated in business and political circles, today he is widely vilified as bearing significant responsibility for Enron's downfall, a debacle that cost thousands of employees their jobs, millions of investors their savings, and, for a time, forced a nation to question the system of the capital markets. He is often portrayed as a man who bailed out of his company as it was sinking, selling millions of shares even while telling investors and employees that he believed in the company's future.

It is a portrait, he insists, that disregards the realities of Enron's last months, a time in which he describes himself as first working hard to improve the company, then struggling desperately to keep it afloat.

In the end, Lay said, the Enron story is one of corrupt executives in a finance organization led by Fastow who took advantage of the company for their own personal benefit and ultimately destroyed it. Fastow has pleaded guilty to fraud and is cooperating with the government.

``At our core, regrettably, 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. ``But by the same token, most -- and I mean 98 percent -- of the people who worked at Enron were good, honest, hardworking individuals. They were not crooks.''

Still, Lay said he clung to a belief that the outcomes of certain corporate decisions that ultimately proved devastating to the company could not have been anticipated. The use of such partnerships was widespread throughout the business world, as corporations attempted to use a technique authorized under the accounting rules to pretty up their reported financial picture. But Enron took those efforts much further, adopting policies that were unheard of, such as allowing Fastow to operate an off-books investment fund that did business with the company and provided financing for some of the partnerships.

Legal experts dismiss the entire venture as foolhardy from inception. ``It's just not commonsense thinking,'' said John J. Fahy, a former federal prosecutor now with Fahy Choi in Rutherford, N.J. ``Your CFO cannot be put in a position where he is in conflict with the company. He is simply too important. The idea is just crazy.''

While he has been subjected in recent years to withering personal criticism on Capitol Hill, by the media, on late night talk shows and across the Internet, Lay said that in his hometown many longtime friends and associates remained supportive, and he continues to serve on charitable boards in town.

Despite the rumblings that criminal charges against him could well be imminent, Lay says he is sanguine.

``I know in my mind I did nothing wrong and nothing criminal,'' he said. ``But I'd say if it does happen, it's a great miscarriage of justice.''

But, if faced with indictment, would Lay consider pleading guilty?

``Absolutely not.''

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