Lay Will Pin It on CFO

''We did trust Andy Fastow and sadly, tragically, that trust turned out to be fatally misplaced," says Enron's former chief.
Stephen TaubDecember 14, 2005

Ken Lay has offered a preview of his defense at his trial. On Tuesday, during a speech in Houston that he titled “Guilty, until Proven Innocent,” the former chairman of Enron Corp. blamed his onetime chief financial officer, Andrew Fastow, and his cohorts for the financial shenanigans that eventually plunged the energy company into bankruptcy, according to the Houston Chronicle.

“We did trust Andy Fastow and sadly, tragically, that trust turned out to be fatally misplaced,” said Lay, according to the paper.

Lay seems to be adopting the tactics of Richard Scrushy, who was tried earlier this year of dozens of charges stemming from the accounting scandal at HealthSouth Corp. The founder and former CEO maintained that rogue former finance executives played games with his company’s books without his knowledge. Five CFOs pleaded guilty and turned state’s evidence against Scrushy, who was nonetheless acquitted.

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In January 2004, Fastow pleaded guilty to two counts of conspiracy and agreed to cooperate with prosecutors, forfeit $29 million in assets, and serve 10 years in prison.

Lay, who asserted that most of what has been reported about Enron has been false or distorted, also insisted that those who pleaded guilty were probably not guilty of crimes but rather bullied into their pleas by prosecutors, according to the Chronicle.

The newspaper noted that after the speech, Lay’s lawyer Mike Ramsey said he and lawyers for Lay’s co-defendants, former CEO Jeffrey Skilling and former chief accounting officer Richard Causey, are still looking for witnesses who can help their cases. Ramsey reportedly asserted, however, that they were concerned some people have not come forward for fear of prosecution.

Lay, who promised he will testify in his own defense, blamed the financial community and Enron’s trading partners for losing confidence in the company, the Chronicle noted. He also criticized the Justice Department for destroying Arthur Andersen and for trying to criminalize what he called normal business practices.

“If asked, I am certain that the Enron Task Force would say they have taken so much time because the crimes at Enron are so complicated,” Lay reportedly said. “However, I would say the Enron Task Force has taken so much time because it is complicated to find crimes where they do not exist.”

The paper noted that Lay seemed to be addressing the potential jurors who will eventually decide his fate and those who might come to his aid, saying, “The problem is that it is always slower reversing a mania or hysteria than it is starting one.”

Lay also called on Enron employees to join him in creating a “wave of truth.” According to the paper’s account, Lay said, “Enron employees really have only two choices. Either we stand up now — and prove that Enron was a real company, a substantial company, an honest company, a company that had a vision and values — or we will leave this horrific legacy shaped by others.”

The Lay-Skilling-Causey trial is scheduled to begin January 17.