Enron Corp -- the world's largest energy-trading firm -- filed for bankruptcy on Dec. 2.
It was the largest bankruptcy in U.S. history, putting thousands of employees out of work and wiping out their retirement savings along with those of many outside investors. Enron's collapse came amid substantial questions about the company's accounting methods, and about the role of accountant Arthur Andersen LLP.
Lay and other Enron officials, both current and former, were scheduled to appear at various Capitol Hill hearings. At present, at least 11 different congressional committees are holding investigative hearings into the massive business collapse.
Contacted by the House Financial Services Committee late Monday, Lay attorney Earl Silbert was reported by committee officials to have refused to accept any subpoenas for his client, who was expected to testify at several hearings this week. Lay had pulled out Sunday, based on what his lawyer called the "prosecutorial" tone of the committees.
House Financial Services Chairman Michael G. Oxley, R-Ohio, signed a subpoena for Lay on Monday after a unanimous vote by the committee. On Tuesday, the Senate Commerce and Science Committee also unanimously voted to subpoena Lay.
Both committees want Lay to appear even though congressional members said they expected the former Enron head to invoke the Fifth Amendment of the U.S. Constitution and not testify, thereby protecting himself against self-incrimination.
Lay, 59, resigned from Enron's board of directors on Monday after his last-minute decision not to testify. He resigned Jan. 23 as chairman and chief executive officer after his company filed for bankruptcy.
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 when the company's stock plummeted. Enron executives made millions selling their stock shortly before the drop but did not warn investors 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 the 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., said 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 Corp. 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 in 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.
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