Former Enron Chairman Ken Lay continued spinning his story of innocence at his trial yesterday, maintaining that Enron's collapse was the fault of ex-CFO Andy Fastow, short sellers and the financial journalists at The Wall Street Journal. Lay stressed that be believed Enron was doing just fine, which means he couldn't possibly have been lying to people when he told them things were OK at the company even as it was sliding toward corporate doom in late 2001.
"Indeed, I believed the company was fundamentally sound and the balance sheet was strong," Lay said, standing by his contention that Enron was a vibrant enterprise felled by a "run on the bank" not by the greed, corruption and conspiracy prosecutors allege. "I believed that then. I still believe that."
Even on Oct. 16, 2001, when Lay announced Enron's third-quarter earnings that included a $1.2 billion equity hit, he said he "felt good about what had happened." And even though Enron's stock was at about $35 a share, down from a high of $90, Lay said he thought the company was "finally going to turn the corner" and its value would start increasing again — but in reality, things would totally fall apart within weeks.
Lay spent a great deal of time Tuesday talking about Fastow's LJM side deals and the Raptors hedging vehicles, which Lay said had been "thoroughly scrubbed" by auditors and lawyers. Once the Enron board had unwound the Raptors and believed Fastow was out of the LJMs, they stood behind Fastow even as The Wall Street Journal published stories calling Enron's health into question.
But when the board found out Fastow had made $45 million from his side deals, Lay said he went to Fastow's office and ordered him to pack up and leave the building. Lay also contradicted Fastow's testimony in the trial, saying Fastow never told him the company was in "dire straits" financially and that a meeting with Goldman Sachs wasn't held to help Enron get back on track financially, as Fastow had said. Instead, Lay said the meeting was designed to prevent another company from executing a hostile takeover of Enron while Enron's stock was undervalued. "That seems at odds with the notion that Enron was in dire financial straits," defense lawyer George "Mac" Secrest said. "Absolutely," Lay agreed.
Coming back to the allegations that he lied to employees and investors, Lay said he didn't — not even when he told employees he had bought $4 million in Enron stock in October 2001, but failed to mention that he had sold about $24 million in stock back to the company. After all, did they really need to know that?
Cross-examination of Lay is expected to begin late today or tomorrow. The defense said yeesterday it may have as much as three weeks of testimony left; if that happens, Judge Sim Lake said he might extend the trial's hours to keep things moving.
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