Risk & Compliance

Lay: No Recall of ”Dire Straits”

Also challenges Andrew Fastow's testimony that late in 2001, the erstwhile CFO solicited Goldman Sachs to help Enron with a huge restructuring and ...
Stephen TaubApril 25, 2006


Examine our Enron archive

In Tuesday afternoon testimony, Kenneth Lay disputed the assertion of Andrew Fastow that Lay was aware the company was in “dire straits” on August 15, 2001 — the day after Jeffrey Skilling left the company — according to the Houston Chronicle.

In fact, Lay reportedly told jurors he did not even remember a one-in-one meeting with Fastow that day, as the former CFO had claimed.

“Those meetings were primarily about Jeff’s leaving the company…I do recall in the case of Mr. Fastow he was pretty anxious in one of the meetings that he needed a new contract and that he wanted to be considered to go into the office of the chair…but I certainly don’t recall ‘dire straits’ or the rest of it,” Lay testified, according to the paper.

Lay also reportedly challenged Fastow’s testimony that late in 2001, the erstwhile CFO solicited Goldman Sachs to help Enron with a huge restructuring and to create a “poison pill” as a defense against a hostile takeover, and that Lay and others ignored his warnings that the company needed to be saved.

Lay also disputed prosecution claims that he misled investors and employees about the financial condition of the company. At an October 2001 meeting, when he told employees that Enron’s stock was a good buy and that the company was doing well, “I thought the balance sheet was strong,” Lay told jurors, the Chronicle reported. “I still believe that.”

On an audiotape of that meeting played in court, one employee asked Lay for his assessment of Enron’s global assets. “They are generating a very, very low return….earning almost no income,” Lay is heard responding, according to the newspaper.

Asked how candid he was about the state of Enron’s international assets in general, Lay reportedly responded, “It wasn’t and it shouldn’t have been a mystery to employees at Enron or to anybody; we’ve been [talking about it] for quite some time.”

Prosecutors have alleged that in 2001, Enron executives overstated the company’s international assets by billions of dollars, the newspaper noted.