Kenneth Lee "Ken" Lay (April 15, 1942July 5, 2006), was an American businessman, best known for his role in the widely-reported corruption scandal that led to the downfall of Enron Corporation. Ken Lay and Enron became synonymous with corporate abuse and accounting fraud when the scandal broke in 2001. Lay was the CEO and chairman of Enron from 1986 until his resignation on January 23, 2002, except for a few months in 2001 when he was chairman and Jeffrey Skilling was CEO.

On July 7, 2004, he was indicted by a grand jury on 11 counts of securities fraud and related charges.[1] On January 31, 2006, following four and a half years of preparation by government prosecutors, Lay's and Skilling's trial began in Houston, Lay was found guilty on May 25, 2006, of 10 counts against him; the judge dismissed the 11th. Because each count carried a maximum 5- to 10-year sentence, legal experts said Lay could have faced 20 to 30 years in prison.[2] On July 5, 2006, however, he died of coronary artery disease at his vacation home in Old Snowmass, Colorado, several months before his scheduled October sentencing.

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Early life and career[edit]

Lay was born into a poor family in Tyrone, Missouri. As a child Ken delivered newspapers and mowed lawns. His father, Omer, was a Baptist preacher and some-time tractor salesman. He attended the University of Missouri where he studied economics. He has been described by his undergraduate classmates at the University of Missouri-Columbia as industrious and high-minded[citation needed], and served as president of the Zeta Phi chapter of the Beta Theta Pi fraternity at the University of Missouri. He got his doctorate in economics at University of Houston in 1970 and went to work at Exxon Mobil Corp. predecessor Humble Oil & Refining upon graduation.

Lay worked in the early ‘70s as a federal energy regulator. He then became undersecretary for the Department of the Interior before he returned to the business world as an executive at Florida Gas. By the Reagan administration, when energy was deregulated, Lay was already an energy company executive and he took advantage of the new climate by merging Houston Natural Gas Co. with Nebraska-based Inter-North to form Enron in 1985.

Lay was one of America's highest-paid CEOs, earning (for example) a $42.4 million compensation package in 1999.[3] He dumped large amounts of his Enron stock in September and October of 2001 as its price fell, while encouraging employees to buy more stock, telling them the company would rebound. Lay liquidated more than $300 million in Enron stock from 1989 to 2001, mostly in stock options.

Lay maintained business and political ties to Republican government officials, hiring (for example) James Baker and Robert Mosbacher as they left the Cabinet of President George H. W. Bush (both men lobbied for Enron contracts in the wake of the First Gulf War). Lay was a supporter of current president George W. Bush for Governor of Texas; in 1999, Bush signed a law deregulating Texas electric markets.[3] Bush carried on an extensive personal correspondence with Lay [4] and Bush is reputed to have given Lay the personal nickname "Kenny Boy". [5] [6]

A Bush Pioneer, Lay became one of the largest individual contributors to the Bush-Cheney 2000 presidential campaign: his donation history shows $651,760 to Republicans, $61,960 to Democrats, and $62,150 to special interests.[7] Lay allowed Bush and Cheney to use his personal Enron jet for transportation during their 2000 election campaign, and served on the Bush-Cheney Transition Advisory Committee. According to Kurt Eichenwald's book Conspiracy of Fools, he was nearly selected to be Secretary of the Treasury following Bush's victory in the 2000 U.S. presidential election. Ultimately Paul O'Neill was chosen for the position instead.

Together with his wife, Linda, Lay had five children and 12 grandchildren.

Indictment and trial[edit]

On July 7, 2004, Lay was indicted by a grand jury in Houston, Texas, for his role in Enron's collapse. Lay was charged, in a 65-page indictment, with 11 counts of securities fraud, wire fraud, and making false and misleading statements. The trial commenced on January 30, 2006, in Houston, despite repeated protests from defense attorneys calling for a change of venue on the grounds that that "it was impossible to get a fair trial in Houston – the epicenter of Enron's collapse.

Enron's bankruptcy, the biggest in U.S. history when it was filed in December 2001, cost 4,000 employees their jobs and many of them their life savings. Investors lost billions."[2]

During his trial, Lay claimed that in 2001 Enron stock made up about 90 percent of his wealth, and that his current net worth (in 2006) was in the negative by $250,000. He insisted that Enron's collapse was due to a "conspiracy" waged by short sellers, rogue executives, and the news media.[8] It was reported that Lay's congenial reputation took a blow as he appeared confrontational and irritable at several points during his testimony. [9] On May 25, 2006, Lay was found guilty on all six counts of conspiracy and fraud by a jury of eight women and four men. In a separate bench trial, Judge Lake ruled Lay was guilty of four counts of fraud and false statements. Sentencing was scheduled to take place on October 23, 2006 at 1 p.m.

A number of books have been written on Lay and Enron including Conspiracy of Fools (2005), Icarus in the Boardroom, The Smartest Guys in the Room (2003), and 24 Days. The Smartest Guys in the Room was adapted into a documentary film titled Enron: The Smartest Guys in the Room, released in 2005.

Death and abatement of conviction[edit]

While vacationing in Colorado on July 5, 2006, Kenneth Lay died from coronary artery disease. The Pitkin Sheriff’s Department confirmed that officers were called to Lay’s house in Old Snowmass, Colorado, near Aspen at 1:41 AM MDT. Lay was taken to Aspen Valley Hospital, where he was pronounced dead at 3:11 AM MDT.

Since Lay died prior to exhausting his appeals, his conviction may be considered abated under precedent in the Fifth Circuit Court of Appeals, the Federal appellate court governing the district where Lay was indicted;[10] therefore, the status of Lay's conviction is placed in doubt.[11] Civil suits are expected to continue against Lay's estate. However, claimants may not seek punitive damages against a deceased defendant, only compensatory damages. [12]

Events timeline[edit]

Trivia[edit]

See also[edit]

References[edit]

  1. ^ Crawford, Kristen (2004-7-12). "Lay surrenders to authorities". CNN Money. Retrieved 2006-05-25.  Check date values in: |date= (help)
  2. ^ a b Pasha, Shaheen and Jessica Seid (2006-05-25). "Lay and Skilling's day of reckoning". CNN Money. Retrieved 2006-05-25. 
  3. ^ a b Texans for Public Justice
  4. ^ "Bush-Lay correspondence". 
  5. ^ Fineman, Howard (2005-05-25). "Kenny Boy, Meet Brownie". Newsweek. Retrieved 2005-05-25. 
  6. ^ "CNN: Bush-Lay letters suggest close relationship". 
  7. ^ "Ken Lay's Federal Campaign Contribution Report". NewsMeat. 2002. Retrieved 2006-05-25. 
  8. ^ New York Times
  9. ^ CNN.com
  10. ^ See United States v. AssetTemplate:PDF, 990 F.2d 208 (5th Cir. 1993); United States v. Estate of ParsonsTemplate:PDF, 367 F.3d 409 (5th Cir. 2004).
  11. ^ Death Puts Lay Conviction in Doubt L.A. Times, retrieved July 6, 2006.
  12. ^ Enron founder Ken Lay dies, CNN.com, July 5, 2006.

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