Lay blames others while taking "full responsibility"

HOUSTON — Enron founder Kenneth Lay, taking the stand for the first time in his fraud trial, told jurors he took "full responsibility" for the Houston energy company's collapse, even as he went on to blame others for the company's misfortune.

Lay, 64, showed more hard edge than charm as he singled out short sellers who bet Enron's stock price would sink, skeptical media reports and disclosures about theft by finance chief Andrew Fastow as responsible for Enron's collapse.

He also, ever so subtly, cast blame for the market unrest that led to Enron's collapse on the resignation of the man who has sat at the defense table with him for 13 weeks, protégé and former Chief Executive Jeffrey Skilling.

"I think Mr. Skilling's resignation certainly created some uncertainty that we couldn't have predicted at the time," said Lay, who had planned to leave Enron for an investment partnership before Skilling's announcement.

"I should have stepped down. That was my intent, that was my plan," Lay said. "I expect if I had done that I wouldn't be sitting here right now."

Lay, famously nicknamed Kenny Boy by President Bush, is the most prominent of business leaders brought low in a wave of investigations of corporate scandals.

The trial is the closely watched final chapter in the government's effort to hold accountable executives who prosecutors say enriched themselves at the expense of investors and workers at companies that failed.

Lay faces a half-dozen criminal charges for statements he made touting the stock after he took over day-to-day operations at Enron in the summer of 2001, at a time when prosecutors say he knew the company was crumbling.

He stepped in after Skilling abruptly resigned for what he said were personal reasons that August.

Lay began his testimony by walking the jury through his impoverished upbringing and his success at the helm of what had been by some measures the nation's seventh-largest public company. He lived, Lay testified, the American dream, only to watch it turn into a "nightmare" when he was handcuffed and slapped with criminal charges for lying about Enron's health two years ago.

"I've been very anxious to tell what I believe is the truth about Enron," Lay said in a strong voice shortly after he was sworn in Monday morning.

His lawyer, George "Mac" Secrest, told him, "Mr. Lay, that day has arrived."

Lay insisted "the fundamentals of Enron were incredibly strong" that summer, telling jurors he and Skilling were "very candid" about problems in the Internet division and with several international assets.

"It is absolutely ludicrous that I would step back as CEO and, as the indictment says, pick up the mantle of a conspiracy," he said.

Both Skilling and Lay risked taking the stand to defend themselves, though with slightly different agendas.

Skilling, who testified for most of last week, passionately described himself as a man more concerned with ideas and building new businesses than with the lure of management and administrative duties.

On his first day on the stand, Lay labored to portray himself as a big-picture leader who relied on scores of accountants, lawyers and subordinates while he spent weeks traveling by corporate jet to meet with such dignitaries as the Italian prime minister and Indian heads of state.

The man with a doctorate in economics from the University of Houston added, "I've had some accounting in college, I'm not an accountant. I had some statistics in college, I don't think I'm a statistician. Had some physics in college, don't think I'm a physicist."

Wearing a gray suit, blue shirt and red tie, Lay often directly addressed the jury and nine relatives who sat in the front row, including his wife, Linda, and his former wife, Judy.

Lay sometimes sharply recast questions posed by his lawyer, offered extensive responses to simple questions and laughed to punctuate his own jokes.

Known for his charm, Lay appeared more emphatic than cordial as he looked out at a courtroom filled with curious onlookers and lawyers with a stake in civil lawsuits against him.

Lay told jurors Enron failed after several factors colluded to create "an environment very ripe to set off an investor panic." Among them, he said, were questions about outside business partnerships run by Fastow, who later admitted to siphoning millions of dollars from Enron.

Lay also denounced short sellers, Wall Street's name for investors who bet the price of a stock will fall. They engaged in what he called "a real conspiracy going back to January 2001" to drive down the stock price, he said.

Last, he argued, was a series of negative Wall Street Journal articles beginning in mid-October. "It didn't take long to set the run on the bank in motion," Lay testified.

Lay contradicted testimony from a parade of government witnesses, many of them former Enron insiders who pleaded guilty in exchange for reduced prison sentences.

He told the jury that an August 2001 meeting with Fastow, the man Lay said launched Enron's problems, "didn't happen, period." A September management meeting, which witnesses described as an "ugly" recitation of mounting problems, was in Lay's view emotional yet "very productive."

In an area likely to be the focus of cross-examination later, Lay said he instructed corporate lawyers "let's not reinvent the wheel," to investigate allegations of improper accounting lodged by executive Sherron Watkins that summer.

The investigation, later deemed a "whitewash" by federal lawmakers, uncovered no trouble, even though Enron imploded a few months later in part because of scrutiny over the conflicts of interest Watkins highlighted.

"We've seen a lot of interesting testimony, a lot of interesting people, a lot of allegations, a lot of lies, a lot of misinformation and some truth," Lay testified. "I would have never thought I'd be in federal court charged with criminal charges."