Ken Lay: Enron Kept Me Mum To Press

Enron Corp. founder Kenneth Lay testified Tuesday it was "against every bone in my body" not to talk to The Wall Street Journal when it first raised questions about some Enron transactions in September 2001.

On Sept. 26, 2001, Lay met with senior Enron executives to discuss questions the newspaper raised about special partnerships created by Enron chief financial officer Andrew Fastow that did business with Enron.

"My policy had always been it's better to talk to the press than not talk to the press," Lay told jurors in his second day of testimony at his fraud and conspiracy trial. "At least try to get your viewpoint across and let them at least consider it."

But Lay said Enron public-relations officials believed the Journal was asking biased, negative and judgmental questions, and urged him not to respond with an interview or to allow Fastow to be interviewed.

Lay said he told Enron public-relations chief Mark Palmer: "Even though it's against every bone in my body I will agree with your recommendation." Enron ultimately responded with a written statement.

Weeks later, the Journal published several more stories that raised more questions about Fastow's role in the partnerships — articles that drove down Enron stock by as much as 10 percent per day.

CBS News correspondent Kelly Cobiella reports that, according to Lay, Fastow was so brilliant at accounting that he fooled Lay, two accounting firms, the board and lawyers.

"I was shocked by the $45 million and all the members of the board were too," Lay said. "For the board and me you realized that Andy Fastow was not what he represented himself to be."

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Watch Cobiella's latest report with details on Lay's testimony.

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From the witness stand, Lay described rising from humble beginnings in Missouri to found Enron and help build it into the nation's seventh-largest company — and suffering through more than four years of federal investigations.

"I've not only pursued the American dream, I've achieved it," he said under questioning from his lawyer George Secrest. "I suppose we could say the last few years, I've also achieved the American nightmare."

Lay made a point of accepting "full responsibility for everything that happened at Enron" and acknowledged the thousands of jobs and billions of investor dollars that were vaporized in its collapse.

He explicitly denied committing fraud, participating in a criminal conspiracy or knowingly misleading investors and employees about the health of the company.

Outside court at day's end Monday, Lay said he was pleased to finally begin his testimony and "to address a lot of the lies about me, about Mr. Skilling and about Enron. And we're going to keep doing that."

Cobiella reports Lay described Monday 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."

Secrest said he would likely question the 64-year-old former CEO at least through the end of the day Tuesday. Prosecutors would then begin their cross-examination.

Lay faces six counts of fraud and conspiracy. Former CEO Jeffrey Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors. The conspiracy count accuses both men of leading an effort to portray Enron as healthy when they knew accounting tricks hid bad news and failing business ventures.

In a separate case, Lay is accused of obtaining $75 million in loans from three banks and reneging on an agreement with lenders that he would not use the money to buy Enron stock on margin.

Those criminal charges, covering 1999 to 2001, will be tried without a jury before U.S. District Judge Sim Lake while the jurors in the Lay-Skilling trial are deliberating. Lake is also presiding over the Lay-Skilling trial.