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Enron's Lay subpoenaed to testify

By SCOTT BURNELL   |   Feb. 5, 2002 at 1:13 PM   |   Comments

WASHINGTON, Feb. 5 (UPI) -- The Senate Commerce and Science Committee Tuesday unanimously voted to subpoena former Enron Chairman Kenneth Lay, who refused to testify before the panel the day before about the energy company's financial debacle.

The committee wants Lay to appear even though members said they expected him to invoke the Fifth Amendment to the U.S. Constitution and not testify to protect himself against self-incrimination.

Lay, 59, resigned from Enron's board of directors on Monday after his 11th-hour decision not to testify. He resigned Jan. 23 as chairman and chief executive officer after his company filed for the country's biggest bankruptcy on Dec. 2.

Lay's testimony had been eagerly awaited in Washington, where the demise of the Houston-based firm had raised questions about whether management acted illegally or improperly in its business ventures and in attempting to influence the Bush administration's energy policy. Lawmakers want to question him about the fact Enron stockholders and employees lost millions of dollars when the company's stock plummeted, while Enron executives made millions selling their stock shortly before the drop but failing to warn people of the full extent of the company's financial woes.

"It's theoretically possible that a CEO wouldn't know about theses activities but in that case we'd have to conclude Lay was the most out-to-lunch CEO in the nation," said Peter Fitzgerald, D-Ill., ranking member of the Subcommittee on Consumer Protection, during Tuesday's brief consideration before the subpoena vote.

In a letter to the committee, Lay's lawyer, Earl Silbert, said his client could "not be expected to participate in a proceeding in which conclusions have been reached before Mr. Lay has been given an opportunity to be heard."

"If you juxtapose what happened to the people at the bottom and the people at the top it makes you sick," said Sen. Byron Dorgan, D-N.D. "Issuing a subpoena is appropriate with this apparent culture of corporate corruption."

There was discussion about wanting to keep politics out of the investigation but committee chairman, Sen. Ernest Hollings, D-S.C., said it had to be part of the discussion and also called for a one-line amendment to U.S. Constitution to give Congress the ability to control all campaign financing, hard and soft money.

Enron was a large donor to political campaigns, notably the Bush presidential run in 2000, and some have suggested that the company was trying to buy influence with the donations.

Also eager to see Lay appear were members of the California delegation, who have been pressing the Federal Energy Regulatory Commission to investigate whether Enron engaged in any illegal manipulation of the state's wholesale electricity market.

Sen. Barbara Boxer, D-Calif., told reporters Monday she suspected Enron's insistence power prices not be capped during last year's electricity crisis might in part stem from the company's need to boost its cash flow at a time when its financial strength appeared on the surface to be deep.

"In all that period, they were transferring billions of dollars out of California into the Enron Corporation and other corporations in that business," said Boxer. "It is our contention that in that period, Enron was kept afloat with these enormous profits. And while they were kept afloat, the insiders were unloading (shares of Enron stock)."

There was speculation Monday that Lay might have bailed out of the hearings due to the Saturday release of a new internal Enron report that was critical of upper management, and Lay in particular.

The 218-page Powers report disclosed several previously unknown allegations, including accusations Enron was aided in its long list of failures by its accounting firm Arthur Andersen, which seemingly ignored auditing standards. Also, according to the report, lawyers appeared to fail their responsibilities.

Andersen, fired by Enron after the company's fall, reacted quickly to the report, authored by an outside director brought in by Enron to investigate, calling it an attempt "to shift blame to others." Andersen has hired former Federal Reserve Chairman Paul Volcker to head a team that will make recommendations changing corporate policy and accounting practices in light of the Enron downfall.

© 2002 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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