Federal prosecutors unveiled charges Thursday that placed Enron Corp. founder and former chairman Kenneth Lay at the center of a conspiracy to manipulate the companyâ€™s books in the frenzied weeks before its scandalous collapse.
He returned the punch with an unusual and aggressive public declaration of innocence, speaking at length at a news conference and taking questions from reporters after entering a plea of not guilty.
â€œI firmly reject any notion that I engaged in any wrongful or criminal activity,â€� Lay said, adding that his failure to prevent the companyâ€™s bankruptcy did not equate to a crime. â€œNot only are we ready to go to trial, but we are anxious to prove my innocence.â€�
Lay was escorted to federal court in Houston in handcuffs 2 1/2 years into a methodical investigation that has produced charges against some of his once most highly trusted lieutenants.
Prosecutors have aggressively pursued the one-time friend and contributor to President Bush, and this weekâ€™s action made Lay the 30th and highest-profile individual charged.
Prosecutors contend Lay, his hand-picked protege and former Enron CEO Jeffrey Skilling and the companyâ€™s former top accountant, Richard Causey, were among principal operators of a wide-ranging scheme to deceive the public, shareholders, government regulators and others.
A federal indictment unsealed Thursday alleged that Skilling spearheaded the scheme until he abruptly quit in mid-August 2001, less than four months before Enron imploded.
Lay resumed as CEO upon Skillingâ€™s departure and â€œtook over leadership of the conspiracy,â€� the indictment said.
In 11 counts of conspiracy, securities fraud, bank fraud and other charges, prosecutors allege Lay was not a CEO blithely unaware of wrongdoing by his minions, as he has maintained. The indictment alleged Lay intensified his oversight of Enronâ€™s day-to-day operations and â€œtook controlâ€� of a conspiracy to keep Enronâ€™s ever-growing financial crises hidden in the bowels of the company.
Enronâ€™s collapse led a series of corporate scandals that led to Congressâ€™ passage of sweeping reforms to securities laws.
Thousands of Enronâ€™s workers lost their jobs, and the stock fell from a high of $90 in August 2000 to just pennies, wiping out many workersâ€™ retirement savings.
The charges allege Lay painted a rosy picture of Enron to employees, analysts and investors when he had learned in meetings that the company faced massive losses on shoddy assets and money-losing business units.
â€œRather than come clean and tell the unvarnished truth about Enron, Lay chose to conceal and distort and mislead at the expense of shareholders and employees, people to whom he owed a duty of complete candor,â€� said Andrew Weissmann, head of the Justice Departmentâ€™s Enron Task Force.
Lay asserted outside the courthouse that he took responsibility for Enronâ€™s collapse as chairman, but he said â€œthat does not mean I know everything that went on at Enron.â€�
Lay surrendered to the FBI before dawn Thursday and was placed in handcuffs.
Prosecutors allege that Lay knew Enron was preparing to announce massive third-quarter losses and a $1.2 billion writedown in shareholder equity, yet in a Sept. 26, 2001, Internet chat told Enron employees he had strongly encouraged management to buy Enron stock.
The superseding indictment, now totaling 53 counts, also accused Lay, Skilling and Causey of enriching themselves through salaries, bonuses, grants of stock and stock options.
If convicted on all counts, Lay could receive up to 175 years in prison plus fines possibly totaling more than $5.7 million.