Risk & Compliance

Lay Backs Skilling’s Story

Former Enron Chairman Kenneth Lay says he believed CEO Jeffrey Skilling's reasons for leaving the company. Watkins, he says, never told him the com...
Stephen TaubApril 24, 2006

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Testifying in the afternoon of his first day on the witness stand, former Enron Chairman Kenneth Lay corroborated ex-CEO Jeffrey Skilling’s explanation for why Skilling left Enron Corp. in the summer of 2001.

Lay said Skilling told him he was leaving for personal reasons, according to the Houston Chronicle. Lay’s comment counters prosecution suggestions that Skilling left when he realized the company’s financial woes were reaching a crisis point.

Lay, who learned of the resignation the day after returning from a trip, admitted he was surprised by the news, according to the report. He said he asked Skilling what prompted the decision. According to The Chronicle, he remembers Skilling telling him, “It was something I had been thinking about for a long time.” Lay also said Skilling told him “he had some personal issues and family issues that he had to address.”

Lay reportedly testified that he pressed Skilling further. “I asked him if there was anything about the company that I should know about or the board should know about,” Lay reportedly said, adding that Skilling said there was nothing for him to elaborate on. Lay also told jurors he tried unsuccessfully to convince Skilling to remain.

“I was convinced it was [for personal reasons],” Lay reportedly said. “In my 15 years I’d known Jeff, he was always a straight shooter with me.”

When Lay was asked whether Skilling had expressed dissatisfaction earlier, Lay reportedly testified, “Probably a month or so before this it was pretty clear that Jeff wasn’t having much fun in his new job, I can certainly understand that. I certainly didn’t find it terribly unreasonable.”

Lay also testified that celebrated whistle-blower Sherron Watkins was more concerned about bad publicity related to the company’s accounting than whether there were any illegal acts taking place, according to The Chronicle.

Lay acknowledged that he found Watkins to be “a very serious” and “credible” individual with accounting and finance experience. “She had some very serious concerns about our accounting,” Lay added, according to the paper.

After Watkins admitted she was the author of the famous memo that raised concerns about Enron’s accounting, Lay said he spoke to her. “I asked her whether she believed that the accounting did not comply with the generally accepted accounting principles. In each case she would say she didn’t know whether they complied.”

Lay also reportedly told jurors: “I pressed her more about whether there was something wrong or illegal about them . . . Again she said no. Each time she would come back and say she was just concerned about the appearance of the transactions . . . that if it got out into the press it might be a public relations-type problem.”