Lay, prosecutor clash at trial
Enron founder takes issue with questions about debt repayment, contacting witnesses, media comments.
By Shaheen Pasha, staff writer

HOUSTON ( - Tempers flared at the trial of Enron's co-founder and ex-CEO Wednesday as government prosecutor John Hueston started cross-examining Enron founder Kenneth Lay.

Within the first few moments of questioning, Hueston asked Lay if he had paid back the $7.5 million he owed Enron's line of credit in January 2002; Lay had just finished testifying that he had paid back all but the debt he owed Enron. That sparked anger as Lay said he tried to pay that off in 2003 and 2004 but Hueston blocked his ability to do so.

Enron founder Kenneth Lay, surrounded by media, is escorted to the courthouse by police for his third day of testimony in his fraud and conspiracy trial Tuesday, April 26, 2006 in Houston.
Enron founder Kenneth Lay, surrounded by media, is escorted to the courthouse by police for his third day of testimony in his fraud and conspiracy trial Tuesday, April 26, 2006 in Houston.
Find out who you might have seen at the Enron trial, how they got involved, and what they're doing now.
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As Hueston, in a cool voice, asked him again if he had tried to pay it off in January 2002, Lay leaned forward in his chair and in a clipped, angry voice responded "Mr. Hueston, when I was sworn in here I was sworn in here to tell the truth, the whole truth, not the partial truth.... No principal was paid because you blocked the settlement."

Hueston, without missing a beat, shifted gears and accused Lay of trying to contact potential witnesses, as well as government witness Vince Kaminsky, during the course of the trial in an attempt to "get your stories straight."

Lay said he only attempted to contact former executives at Goldman Sachs - despite being told repeatedly by Goldman Sachs attorneys to direct all contact to them in order to make sure he had his facts straight about a meeting in which Lay said Goldman approached the company and warned that it was vulnerable to a hostile takeover in 2001 due to its low stock price.

Former financial chief Andrew Fastow testified in March that Enron approached Goldman Sachs to mull putting itself up for sale - a story Lay vehemently denied.

And he said he didn't know that Kaminsky, a former Enron employee, was on the government's witness list when he tried to reach out to him in March to discuss "risk management issues."

"So, it's an incredible coincidence that you decided to talk about risk management just nine days before he showed up here to serve as a government witness?" Hueston asked. "I wanted to talk to him about risk management issues that might come up in my case," Lay responded.

The cross-examination then took a bizarre turn as Hueston whipped out comments that Lay made to the media during the trial in which he called former Enron treasurer Ben Glisan a liar.

"Have you engaged in character assassination?" Hueston asked. "Are you counting yourself" on that list? Lay retorted.

"I am a U.S. Attorney, that is my job," Hueston replied dryly. "You may call me anything you want."

Lay said he approached Glisan in the witness area when he testified to inquire how he was doing because he knew that he was under a lot of pressure to fabricate a story in order to satisfy the government.

"So you made him feel better by calling him a liar and letting your attorneys call him a monkey?" Hueston asked, referring to a comment attorney Michael Ramsey made to the media outside of the courtroom. "I can't take full responsibility for what my lawyers say or do," Lay replied.

Hueston also raised questions about Lay's own investment in the start-up company Photofete - which gained notoriety during former chief executive Jeffrey Skilling's cross-examination as it was an investment that wasn't disclosed to the board in violation of Enron's code of ethics and involved Skilling's ex-girlfriend.

Lay said he didn't remember making a $60,000 investment until the trial and couldn't recall if he had reported the investment to the board of directors, as required by Enron's code of ethics.

"Have you checked that?" Lay asked, then added with his voice dripping with sarcasm "I'm sure you have. The one thing you guys are is very thorough."

He eventually conceded that if he didn't report it, he had violated the very code that he put into place.

It was a contentious beginning to the cross-examination . For Lay, who tried to make himself appear in the best possible light to the jury Wednesday during the final day of direct examination by his own attorney, some of his effort fell by the wayside as his anger toward the government simmered close to the surface.

In the final day of questioning by defense attorney George Secrest, Lay testified that he was confident in the company's strength, but was forced to sell large amounts of stock in order to meet margin calls and repay a line of credit that he borrowed from Enron.

He also said that he was given a script by accounting chief Richard Causey and accounting firm Arthur Andersen for a third-quarter analyst call, not knowing that the information was false. Among the accusations against him is that he misrepresented the company's losses in the call in order to pump up Enron stock. (Click here for more on Lay's final questioning by his attorney).

While the relationship between Lay and Secrest and the pace of the direct examination improved Wednesday from some bumpy moments the day before, his inability to control his temper with prosecutor Hueston could pose problems for Lay during the cross.

In the absence of any solid documentary evidence proving Lay and Skilling are guilty, the jury will have to weigh the testimonies of the 22 witnesses presented by the prosecution with the defendants' stories on the stand. And in the end, it all comes down to whom they believe.

That makes likability a critical factor for both Lay and Skilling.

The defense contends that not only are Lay and Skilling innocent of any criminal conduct, but that there was no fraud at Enron other than the activities of Fastow and a handful of cohorts.

Combined, Lay and Skilling face almost three dozen charges of fraud and conspiracy and could get 20 to 30 years behind bars if convicted. Lay will also face a trial for bank fraud once jurors begin deliberations in the current case.

Enron, once the seventh-largest corporation in the nation, declared bankruptcy in December 2001, resulting in billions in losses for investors and costing thousands of employees their jobs.


Mr. Skilling's brave new world. For more, click here.

For complete coverage of the trial, click hereTop of page

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