Enron's Lay Calls Charges 'Ludicrous'

Enron Corp. founder Kenneth Lay testified Monday that the company's collapse has caused him more "enduring pain" than the loss of loved ones, and he again denied lying to investors about Enron's weak financial condition as it slid into bankruptcy.

Asked by one of his lawyers whether he conspired to violate federal securities rules or broke wire fraud and securities fraud laws, Lay answered in a firm voice: "I did not."

As he took the witness stand in his own defense, Lay described as "ludicrous" a charge by federal prosecutors that he resumed his role as Enron chief executive officer in August 2001, six months after leaving the job, and immediately led a criminal conspiracy to commit fraud.

In a case in which conviction or acquittal could depend heavily on the impression Lay makes with jurors, he spoke fondly of his wife — coyly declining to tell her age to the jury — and talked of a deep moral conviction and religious faith.

"I've been very blessed throughout my life," he said. But he said that while he had achieved the American dream, the years since the collapse of Enron have amounted to "the American nightmare."

CBS News correspondent Kelly Cobiella reports Lay described seeing the collapse of the company he founded as "incredibly painful" and said "the worst was the employees and all the hurt and pain that it caused."

He said "there's absolutely nothing in my life, including the loss of life of many of my loved ones that even comes close to the same level of pain, and the same enduring pain, that has caused."

He cast himself as a hard worker who enjoyed great financial success, only to find himself somewhere he never thought he would be — on trial in a federal courtroom. He was asked by lawyer George Secrest what it had been like to watch the trial unfold.

"It's been very interesting," Lay answered. "We've seen a lot of interesting testimony. We've seen a lot of interesting people, a lot of allegations, a lot of lies, a lot of misinformation and some truth."

The 64-year-old ex-chairman, who founded Enron in 1985 when his Houston Natural Gas merged with Omaha, Neb., natural gas pipeline company InterNorth, is on trial along with former Enron Chief Executive Jeffrey Skilling.

Lay aimed to build on what Skilling spent the last two weeks telling jurors: Enron was no bed of fraud and the pair did nothing wrong.

Lay has portrayed himself as a desperate captain trying in vain to save a sinking ship in the months before Enron careened into bankruptcy protection in December 2001. The spectacular flameout of what was once the nation's seventh-largest company left thousands jobless and wiped out billions from investors.

From the stand, Lay several times described the collapse of Enron as a classic "run on the bank" set in motion by theft by Chief Financial Officer Andrew Fastow and accelerated by negative stories about Enron that appeared in The Wall Street Journal in late 2001.

"I think it all begins with the deceit of Andy Fastow and probably not more than one or two other people," Lay said. "A person at the very heart of our organization, and a key position, was basically stealing from the company … and concealing some things and doing a brilliant job of hiding that from me, Skilling, the board and most of the employees."

Enron's implosion was made possible, Lay said, by a "tinderbox" of external factors including the Sept. 11, 2001, terror attacks and the broader bear market that followed the collapse of the late-1990s technology stock bubble.

Prosecutors allege Lay knew the company faced enormous problems with fraudulent accounting tricks, overvalued assets and flailing business ventures in the months before the crash as he hid bad news and touted Enron's strength to investors and employees.

So far in the trial, a slew of prosecution witnesses bolstered those contentions while a few — including Skilling — spoke up for Lay.

Secrest was questioning Lay because his lead lawyer, Michael Ramsey, was recovering from coronary surgery.

The 28 counts of fraud, conspiracy, insider trading and lying to auditors against Skilling span 1999 through his abrupt resignation in mid-August 2001 after succeeding Lay as CEO for only six months. Lay's six counts of fraud and conspiracy largely focus on his actions between Skilling's resignation and the company's failure.

The overarching conspiracy count alleges both participated in a sprawling effort to lie by portraying Enron publicly as healthy, however.

Skilling told jurors last week he and Lay were "taking a stand" to rid their much-maligned company of its scandalous taint so former workers can look back with pride.

Unlike Skilling, Lay isn't charged with improper stock sales. But his heavy usage of his line of credit with Enron in the months before the company failed to repay his personal bank loans could damage his credibility.

Lay repaid more than $70 million in company loans with Enron stock throughout 2001. He had used Enron stock as collateral for personal bank loans, which he has said he had to repay because banks issued margin calls as the company's share price fell.

He didn't tell employees of those sales, however, as he encouraged them to buy more stock in September 2001.

An executive's stock sales back to a company don't have to be reported to regulators until the year after they occur. Had Lay sold stock on the open market, he would have had to report it to the Securities and Exchange Commission.