Lay pointed the finger of blame at Andrew Fastow, Enron's former chief financial officer, who pleaded guilty to conspiracy and securities fraud last year. Fastow is expected to testify against Lay and two other former Enron executives, Jeffrey Skilling and Richard Causey, when the three are tried together for various corporate crimes next month. Lay said he was guilty only of being "too trusting" of Fastow. He said it was the "stench" of Fastow's misconduct that led the investing public to lose confidence in Enron.
UNUSUAL VENUE. And Enron's fall? Lay argued that it was "public hysteria" that doomed the company rather than its business fundamentals. "Enron's bankruptcy was caused by liquidity problems, not by solvency problems. The company's on- and off-balance-sheet assets exceeded its liabilities by billions of dollars," he said. Indeed, he claimed that Enron would still be a going concern if investors hadn't panicked.
Lay chose to argue his case before the Houston Forum, a well-heeled group that engages prominent speakers like Senator John McCain (R-Ariz.) and former Secretary of State Henry Kissinger. It certainly was an unusual venue. Others charged with corporate crimes like, Tyco's (TYC
) Dennis Koslowski and ImClone's (IMCL
) Samuel Waksal, stood stoically behind their lawyers in public and couldn't be brought to utter even "no comment."
Says Houston attorney, David Berg, who defends white-collar criminals and follows the Enron case: "I'd never let a client make a speech like that because his words can and will be used against him."
"AGAINST THE WALL." It reminded Berg of Skilling's testimony during congressional hearings in 2002: "It's the ultimate in hubris for these guys to spout off like that," Berg says, adding that for Lay to deliver his speech before a wealthy crowd in a ballroom at an expensive hotel didn't help him, either.
Lay's attorney Mike Ramsey says the speech wasn't intended to influence jurors, which have already been selected, since the people attending the luncheon "are too smart to get on a jury that's going to last six months." Rather, Ramsey says, "Our backs are against the wall" in getting witnesses to help with Lay's defense. "We're trying to get Enron employees to speak out."
Lay urged Enron employees to "stand up" and be "truthsayers." He was once a popular figure in Houston where Enron had its corporate headquarters. When he wasn't picking out upholstery for his corporate jet in his executive suite atop Enron's glass skyscraper downtown, he was out schmoozing with city leaders and playing golf with U.S. Presidents, past and present. Lay and his wife, Linda, gave generously to local causes and were fixtures in Houston's society pages.
Though fervent and polished, Lay's speech didn't seem to sway many in the audience. "If that's your only excuse -- that your CFO was running rampant -- then that's negligence," says David Holland, an investment banker. With the trial scheduled to begin Jan. 17, it's the jurors' turn next to hear Lay.
Murphy is a contributing correspondent for BusinessWeek Online