Prosecutor John Hueston pressed ex-Enron Chairman Ken Lay yesterday on his allegation that short sellers and financial journalists brought about Enron's collapse, pointing out that Lay's son Mark was one of the people short-selling Enron stock in 2001. Hueston said Mark Lay made more than $166,000 by betting Enron's stock prices would fall.
"I didn't know that," Lay said."He wasn't a vulture was he?" Hueston asked Lay of his son.
"I don't think he's a vulture," Lay responded.
"He wasn't trying to kill Enron in 2001, was he?" Hueston asked.
"I would think not," Lay said.
Regarding the Oct. 17, 2001, Wall Street Journal story on Enron's earnings report that Lay said contributed to Enron's downfall, Hueston suggested that news stories about Moody's credit rating agency looking into Enron's credit rating might also have had the same effect. Lay, however, argued that Enron shareholders would have known about Moody's investigation without having to read about it in the paper. Hueston asked whether the "average Joe" stockholder might not have learned the news from a newspaper, and Lay responded, "I'd like to think Enron didn't have any shareholders who were average Joes." And who would know better about average Joedom than Ken Lay?
Lay testified Thursday that he didn't do anything illegal or improper by telling employees he was buying Enron stock in late 2001 and urging them to do the same even as he was selling many more millions of dollars' worth of stock at the same time. Lay bought $4 million in stock in 2001, which he said was a voluntary purchase, but he said his more than $70 million stock sales were forced by his personal finances. Lay didn't have to disclose the sales monthly because he traded the stock for cash in a revolving credit line at Enron, and he accused Hueston of misleading jurors by suggesting the sale was improper. "There was no requirement that I disclose any of that," he told Hueston. "You're trying to mislead the jury as to somehow I was doing something illegal, and I'm not."
Lay was contrary throughout the day of cross-examination, telling Hueston he wouldn't understand a plan to change Enron's direction in mid-2001, suggesting witnesses the prosecution should call and even telling Hueston he should stop a line of questioning. That came during questions about Enron's writing down the value of a British water utility it owned, which the indictment against Lay alleges he lied about. "We've spent more than an hour on this," Lay complained to Hueston. "Obviously you can go where you want to, but I think it's a real waste of the jury's time."
Prosecutors are expected to continue questioning Lay through Monday, after which the defense will call five character witnesses and some business experts. Judge Sim Lake said he would like testimony to wrap up in the next two weeks so final arguments could begin May 15.
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