July 6, 2006
Ken Lay
Kenneth L. Lay, the disgraced former chairman and chief executive of Enron who defrauded his stockholders and employees of billions of dollars, died on July 5 of a heart attack while vacationing in Aspen. He was 64.
Lay was born and raised in Missouri, one of three children of a Baptist minister and a housewife. To help support the family, he mowed lawns and delivered newspapers on three different routes.
Determined to live a life worthy of Horatio Alger, whose namesake award he once won, Lay attended the University of Missouri on scholarship, and earned bachelor's and master's degrees in economics. After graduation, he worked for Humble Oil and Refining, the predecessor to Exxon Mobil Corp., and took night courses at the University of Houston to obtain a doctorate in economics.
Lay enlisted in the Navy as an economist and served his time at the Pentagon, working on cost-and-performance analyses of major weapons systems. Upon returning to the private sector in 1974, Lay became an executive at Florida Gas, then Transco Energy. His efforts in helping Houston Natural Gas fend off an aggressive investment play by Oscar Wyatt in the early 1980s earned Lay a promotion -- to CEO of the pipeline operator. In 1985, he merged HNG with InterNorth to create Enron Corp.
Lay spent the next two decades building Enron into the seventh largest company in America. As CEO of the Houston-based natural gas company and energy trader, Lay joined the highest business circles and befriended the political elite, including Presidents Bill Clinton, George H.W. Bush and George W. Bush.
Enron soon developed a reputation for inspiring loyalty in its employees by paying good wages and offering numerous perks, such as on-site fitness centers and after-hours transportation. Enron also matched employee pension contributions with company stock, and encouraged staff to further invest in its future. Lay's piece of the pie was significant -- he made more than $217 million in four years from stock options, and another $19 million in salary and bonuses.
Under the guidance of Lay, and Jeffrey K. Skilling, who succeeded Lay as chief executive in 2001, Enron aggressively invested in new ventures -- from municipal water systems to overseas power plants. Many of these investments bled the company of cash, and then failed to pay off. At the same time, the company engaged in unethical and unlawful practices. During California's energy crisis in 2000, Enron traders manipulated electricity flows to boost profits. The traders even taped conversations boasting about their misdeeds. Knowing the bottom was about to fall out, Lay began selling off his own Enron shares while encouraging staff to hold onto theirs.
Wall Street knew little of these matters because they didn't appear on Enron’s balance sheet. In an effort to mislead investors, Enron's chief financial officer Andrew Fastow manipulated the company's public reports. When Enron finally collapsed in 2001, and its stock dropped from $90 to 26 cents a share, 4,000 employees lost their jobs and life savings. Fastow pleaded guilty to falsifying Enron's balance sheet and to conspiring with a few other employees to skim millions for themselves. In exchange for a lighter sentence, Fastow agreed to testify against Lay and Skilling in court.
On May 25, 2006, a jury determined that Lay and Skilling had lied to Enron employees and investors as well as business regulators to hide the financial weaknesses of their energy empire. Lay was convicted of six counts of fraud and conspiracy and four counts of bank fraud. At the time of his death, Lay was free on a $5 million bond while awaiting his sentencing. He faced the possibility of spending the rest of his life in prison. Skilling, who was convicted of 18 counts of fraud and conspiracy and one count of insider trading, will be sentenced in the fall. He also faces a possible life sentence.
According to the Enron corporate Website, the company is "in the midst of liquidating its remaining operations and distributing its assets to its creditors."
• Complete Coverage of Enron's Fall From The Houston Chronicle
Posted on July 6, 2006 11:29 AM
Digg This The only thing unfortunate about this is he had a much more merciful sentencing than he should have faced.
Posted by Dave on July 19, 2006 6:23 PMAlthough it is true that Ken Lay was convicted it was because his team of lawyers failed to introduce evidence that would have cleared him. His pending appeal would have resulted in a reversal of his unfair trial and ultimately his complete innocence would have come to light. He was a great man and as honest as the driven snow. I feel sorry for him and his family as they have really suffered. As far as the employees of Enron are concerned they failed to plan ahead and are suffering from their own negligence. Three cheers for Ken Lay.
Posted by Geoffrey Brandner on August 5, 2006 3:58 PMKen Lay, convicted thief and destroyer of people's lives should only be remembered as a negative example of corruption and disregard.
Posted by Peter H on August 30, 2006 2:44 PMHe didn't deserve to die as he did. Whilste on vacation in Aspen? He should of died while on the chow line in some Federal Prison by a fellow inmates shank. He is no less guilty of robbery than a person who enters a gas station and holds it up at gunpoint.
Posted by James on September 24, 2006 12:05 AM