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SEC Targets Former Enron Chief As Trials Start

Sep 29, 2003 |

Just as the trials of Dennis Kozlowski and Frank Quattrone got under way on Monday, there was a reminder from US regulators that Enron, the biggest of the wave of US corporate scandals, was still top of their agenda.

The Securities and Exchange Commission, the chief US financial regulator, announced that it had filed a subpoena enforcement action against Ken Lay, the former Enron chairman and chief executive.

The SEC said Mr Lay was still in possession of documents in spite of a subpoena request. Mr Lay, the SEC said, was arguing that by taking his Fifth Amendment right to silence, he did not have to hand them over. The SEC says no Fifth Amendment right exists for corporate records.

The blunt acknowledgement of the state of one of its probes comes as the SEC is under pressure to reassert its role as the primary financial regulator in the face of actions by some state attorneys-general such as Eliot Spitzer in New York.

Lawyers for Mr Lay were not available on Monday. However people close to the SEC's investigation said that Mr Lay had complied with numerous requests for documents. The subpoena relates to a few remaining papers, copies of memos and other documents bearing Mr Lay's handwriting and annotations, as well as copies of letters, position papers and draft speeches.

"The SEC will not permit Lay to dictate the conditions on which he will comply with a lawfully issued subpoena, particularly where such conditions would compromise the SEC's law enforcement objectives," the SEC said.

The move came as Mr Kozlowski, former chief executive of the conglomerate Tyco, and Frank Quattrone, once high-flying high-tech Credit Suisse First Boston banker, arrived at Manhattan courtrooms for the start of their trials.

Judge Michael Obus, in Manhattan State Supreme Court, filled the entire courtroom with about 100 potential jurors from an expected waiting pool of 1,500.

He warned jurors that the trial of Mr Kozlowski and Mark Swartz, Tyco's former chief financial officer, could last three or four months. The two men are accused of illegally gaining $600m from Tyco in improper compensation and share deals.

"We are not hear to conduct some kind of sociological study; we are not here to send a message to anybody," said Mr Obus. "This is not a case about Enron or WorldCom or any other company you may have heard about."

The scale of alleged wrongdoing at the energy trader and the telecoms company still stand out as the worst examples of the wave of corporate scandals that swept America last year. Those in charge at the time of the alleged fraud are still at large.

Mr Quattrone is charged with obstructing justice by ordering staff to destroy e-mails when he allegedly knew CSFB's was under investigation by the SEC.

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