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Former Enron chairman ordered to testify

By: Mark Tran and agencies
The Guardian, February 5, 2002

The Senate commerce committee today summoned Kenneth Lay to appear before Congress, but Enron's former chairman appears to have gone to ground.

The Senate panel issued a subpoena after Mr. Lay abruptly cancelled a congressional appearance scheduled yesterday. But Mr. Lay's attorney, Earl Silbert, said he could not accept a subpoena in his client's name, partly because he did not know Lay's whereabouts.

"My feeling is we have no choice," said senator Byron Dorgan, chairman of the commerce subcommittee on consumer affairs and a Democrat from North Dakota. "Based on what we have learned in the interim ... we know that we really need to compel the testimony of Mr. Lay."

Even if he did appear, congressional officials are unlikely to get much out of Mr. Lay as he would almost certainly cite his fifth amendment right to remain silent so as not to incriminate himself.

At least 11 committees and subcommittees, the justice department and the securities and exchange commission are investigating the collapse of what was once America's seventh largest company.

The biggest bankruptcy in US history has left thousands of workers unemployed and their retirement funds shrunken because most of their investments were in now nearly worthless Enron stock.

Mr. Lay is sought for questioning to determine how much he knew about Enron's creative accounting techniques to hide huge debt and losses.

"It's not possible to figure out what caused this huge Enron ship to capsize if you can't hear from the captain," said Senator Ron Wyden, an Oregon Democrat.

Mr. Lay, who lives in Houston but also has homes elsewhere, including Galveston, Texas, and Aspen, Colorado, resigned yesterday from Enron's board after stepping down as Enron chairman on January 23. Enron and Mr. Lay have been among President George Bush's largest campaign contributors.

An attorney for Lay has said the former executive declined to appear before the senate panel because of the prosecutorial tone of lawmakers investigating the bankrupt energy giant.

An Enron internal investigation released at the weekend found that there was a "systematic and pervasive" attempt by senior Enron mangers to "misrepresent the company's financial condition" through the use of partnerships.

Those partnerships had no economic value to Enron except to hide debt and artificially inflate profits on Enron's balance sheet, the report said.

It said Mr. Lay approved the arrangements under which Enron's chief financial officer, Andrew Fastow, created the partnerships and that the Enron chairman "bears significant responsibility" for not preventing the abuses that this "inherent conflict of interest" created.

The internal report also criticised Enron's board of directors for the partnerships - especially one led by Mr. Fastow - and for not pursuing more aggressively questions about their operation.

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