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Enron's Lay surrenders to face charges "Andy is obviously a liar and a thief," Ramsey said before entering the courthouse Thursday. "He admits that."
Prosecutors have aggressively pursued the one-time celebrity CEO and friend and contributor to President George W. Bush who led Enron's rise to No. 7 in the Fortune 500 and resigned within weeks of its stunning failure. Lay is the 30th and highest-profile individual charged.
Prosecutors allege Lay knew Enron was preparing to announce massive third-quarter losses and a $1.2 billion writedown in shareholder equity, yet told Enron employees in a Sept. 26, 2001 Internet chat that he had strongly encouraged management to buy Enron stock.
"Some, including myself, have done so over the last couple of months and others will probably do so in the future," he said. "My personal belief is that Enron stock is an incredible bargain at current prices." Then on Oct. 12, 2001, he told a credit rating agency that Enron and its auditors had "scrubbed" the company's books and that no additional writedowns would be forthcoming. Four days later, the company announced those big losses, but the shareholder equity writedown was not in Enron's press release. The indictment alleges Lay also knew Enron was facing a $700 million writedown in its water business, Azurix, but didn't disclose detailed information. In addition, it alleges Lay knew Enron had shifted hundreds of millions of dollars in losses from its retail energy unit to its wholesale trading unit to hide the retail energy unit's actual poor performance. "We're not trying to conceal anything," Lay told analysts on Oct. 23, 2001, according to the indictment. "We are not trying to hide anything." He also told employees that same day: "Our liquidity is fine; as a matter of fact, it is better than fine, it is strong." But prosecutors allege Lay knew Enron had been forced to offer its pipelines as collateral to get a $1 billion bank loan to maintain liquidity. Then on Nov. 12, 2001, in a call to analysts and in another effort to combat bad publicity, he said: "We don't have anything we are trying to hide. I am disclosing everything that we've found." But prosecutors allege Lay knew that he and other senior Enron managers had not disclosed a litany of negative facts about Enron's finances. The counts alleging bank fraud accuse Lay of improperly drawing from his lines of credit, and exposing banks to a higher risk of loss, to directly or indirectly buy and carry margin stock. Skilling succeeded Lay as CEO in February 2001 and resigned abruptly six months later, just weeks before the scandal broke. He was indicted in February on nearly three dozen counts of fraud and other crimes. Waiting to testify for the prosecution is Fastow, who pleaded guilty to two conspiracy counts in January. Fastow admitted to orchestrating partnerships and financial schemes to hide Enron debt and inflate profits while pocketing millions of dollars for himself. Enron's collapse was the first of a series of corporate scandals that led to Congress' passage of sweeping reforms to securities laws with the Sarbanes-Oxley Act two years ago. Thousands of Enron's workers lost their jobs, and the stock fell from a high of $90 in August 2000 to just pennies, wiping out many workers' retirement savings.
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