Lay: Have A Nice Cruise... But I'm Getting Off This Ship

When Kenneth L. Lay resigned as Enron's chairman recently, as a Justice Department task force was intensifying its investigation of the worst corporate bankruptcy in the nation's history, the ever resilient and ebullient salesman had one final sale to close. Using his wife as his surrogate, Mr. Lay embarked on a public relations campaign to convince the public that he was not the one to blame.

Mr. Lay himself was scheduled to make the argument, in testimony before the Senate Commerce Committee, beginning on Monday, February 4. But on February 3 he informed the Senate that he would not appear. If he does eventually appear, he'll likely say that he simply knew nothing at all about the massive financial fraud taking place at Enron until it was too late for him to do anything about it. This was the thrust of Mr. Lay's proxies as they laid the groundwork for his aborted appearance on February 4.

Appearing on NBC's "Today" show on January 28, Linda Lay asserted that her husband had been "out of the loop" about the massive financial meltdown that was occurring at Enron while her husband ran the company: "There's some things that we weren’t -- that he wasn't told," she claimed.

The next morning, the equally credulous Washington Post reported on its front page: "Linda Lay's comments bluntly put into the public domain what Kenneth Lay's friends, family members and attorneys have been saying in recent weeks: The man who helped build the aggressive, innovative energy company was not involved in the day-to-day details of its operations, [instead] trusting his executives" to run things in his ever present absence.

Explaining Mr. Lay's decision before Congress, a close relative of Mr. Lay told the all too sympathetic Post: "He is far less interested in his net worth than in his reputation. It's not about money."

A report released on February 2 by a special committee of Enron's board of directors contains contradictory evidence regarding Mr. Lay's claims as to not have known about everything going on at his company. On the one hand, the report concludes that Mr. Lay was detached to some extent in running Enron, acting at times more like a director of the energy corporation than as its chief manager.

But the report also pointedly declares that Mr. Lay clearly was "captain of the ship." More specifically, it condemns Mr. Lay for putting in place a system that allowed Enron's then chief financial officer, Andrew S. Fastow, to set up for himself several questionable offshore partnerships with Enron -- which ultimately cost the company more than $1 billion and plunged it into bankruptcy. Mr. Lay, the report asserts, "bears significant responsibility for those flawed decisions, as well as for Enron's failure to implement sufficiently rigorous procedural controls to prevent the abuses that flowed from this inherent conflict of interest."

It is, of course, audacious and bold for Mr. Lay to defend himself by alleging that he was "out of the loop" at Enron, which seems implausible on the surface. But we should not sell Mr. Lay short, even as we may kick ourselves for not having sold Enron stock short.

Mr. Lay has already proven himself to be more than an adept salesman. He was, after all, able to convince his employees and stockholders to continue pumping Enron’s stock, as he himself was dumping his own shares and his company was barreling towards a financial implosion.

As for his latest sales pitch -- to portray himself as the hapless dupe of his own subordinates -- Mr. Lay has surprisingly, for now, met with some early success. Many in the press appear only too eager to uncritically do his bidding in exchange for access and an easy headline.

It was not long ago, of course, that Kenneth L. Lay was one of the most admired corporate executives in America. But that image, it turns out, was an elaborately constructed facade.