Risk & Compliance

Prosecution Accuses Lay of Witness Tampering

Ex-Enron chairman Kenneth Lay engaged in a testy exchange with prosecutors over their allegations that he called witnesses to "get his story straig...
Stephen TaubApril 27, 2006

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Prosecutor John Hueston immediately went on the attack Wednesday when his cross examination got underway, accusing former Enron chairman Kenneth Lay of tampering with witnesses, according to the Associated Press.

Noting that Lay called several potential witnesses after the trial had begun, Hueston asked, “Did you have any conversations to get your story straight for trial?”

Lay, said by the wire service to be noticeably irked, reportedly snapped, “Can you elaborate on that Mr. Hueston? I’m not sure what story you’re talking about.”

The wire service said the jury “snapped to attention” when the exchange suddenly exploded.

Hueston pointed out that Lay called two Goldman Sachs executives during the trial who had attended a September 2001 meeting. Former chief financial officer Andrew Fastow testified in March that he and Lay had met with the executives at the 2001 meeting to discuss restructuring Enron at the same time Lay was telling employees and reporters that the company was in good shape, the wire service noted.

In Wednesday’s testimony, Lay acknowledged that he called the executives in March, but insisted they didn’t discuss how they would give the same account of the 2001 meeting.

“I was trying to make sure some facts I had about a meeting we had in the fall of 2001 was right. I was just trying to make sure that all of my facts were as accurate as they could,” Lay reportedly told jurors, adding that Fastow “gave a fake version of that meeting.”

However, Hueston pointed out that Goldman attorneys warned Lay to stop calling the executives directly. The AP said Lay glumly replied, “Uh, yeah.”

The AP also noted that Lay acknowledged trying to contact former Enron risk analyst Vince Kaminski nine days before he testified for the prosecution.

In his testimony, Kaminski said he received a cool reception from Lay and other executives in October 2001 when he warned that Enron needed to “come clean” on questionable financial structures.

“I was trying to reach Vince Kaminski a long time ago before I even knew he would testify,” Lay testified. “I was trying to reconnect with Vince, to talk to him about some issues I wanted to talk to him about.”

Lay also admitted he may have violated Enron’s code of ethics by failing to disclose an investment in an online photo-sharing company run by a woman co-defendant and former Enron chief executive Jeff Skilling once dated, which did $450,000 of business with Enron, according to the AP.

According to the report, Lay initially said he invested $60,000, but Hueston then displayed a document indicating he had committed to invest twice that sum.

Earlier, Lay once again asserted he did not mislead analysts on an Oct. 16, 2001 conference call as he is charged, according to the Houston Chronicle.

“I don’t believe I did,” he reportedly said, adding that a script prepared for him for that day was vetted by Enron’s investor relations team and the company’s top accountant, Rick Causey.

And when he was asked about assertions that Enron’s liquidity was fine just months before the company filed for bankruptcy, he reportedly stated, “I was basically relying on the people who I thought were the experts in the company, our chief financial officer and our treasurer, as to the liquidity.”

Lay also provided details jurors with details about his lifestyle and compensation, telling jurors his living expenses during a three-year period before the scandal broke were $22 million, according to The Chronicle.

He also said he gave $25 million to not-for-profit organizations such as churches, the United Way and the YMCA, according to the report.

Lay reportedly said he sold his properties in Aspen for more than $20 million, which has already been used up to pay for living expenses and legal fees.

He also conceded he has “lived well” and was “able to share our good fortune with our large, very large family,” adding that he entertained a lot and likes “to go out to fine restaurants and less-than-fine restaurants and eat well.”

Lay noted that about 80 percent of his wealth was tied up in Enron stock. He also reportedly defended the use of a line of credit, which grew to $7.5 million, calling it a perk for top executives Enron, whom he said received “a disproportionate share of their compensation in Enron stock.”