As part of its ongoing investigation into the collapse of Enron, House Energy and Commerce Committee Chairman Billy Tauzin (R-LA), along with Ranking Member John Dingell (D-MI), Oversight and Investigations Subcommittee Chairman James Greenwood (R-PA) and Subcommittee Ranking Member Peter Deutsch (D-FL), called on former Enron CEO Kenneth Lay to explain in detail the personal loans he obtained from the company. The Congressmen told Lay they want to determine what impact his unreported financial activity may have had on company shareholders and employees.

“We are writing to you to gather additional information concerning your Enron stock transactions,” the Congressmen said in a letter to Lay. “We are aware that all public sales of stock must be reported in the following month of such sales. According to these reports, during the past three years, you exercised stock options and then sold stock for a profit of about $205 million. However, these public reports do not include sales of stock back to Enron, which would be used to pay personal loans.”

They explained that Lay had a $4 million revolving line of credit from Enron, which was raised to $7.5 million in 2001. Lay apparently took out money from that loan and then repaid it on 15 separate occasions from February through October. In each case, he repaid it by turning over stock to Enron. He appears to have obtained some of those shares by exercising options, while in other cases he returned shares he already owned. Lay supposedly took out the loans from the company when he expected that he was likely to face margin calls from other lenders. If those 15 repayments each averaged $4 million, then they totaled $60 million, which would represent the value of stock he returned to the company. Formal disclosure of the transactions is not required by Securities and Exchange Commission rules until Feb. 14.

“We are concerned about the unreported nature of these transactions and their effect upon Enron shareholders and employees, particularly during the stock’s steep decline in 2001,” the Congressmen told Lay.

“We request that you provide our Committee with a detailed listing of all loan transactions involving you, Jeff Skilling, Andrew Fastow, Michael Kopper, Rick Buy, Rick Causey, and any other senior executive with your company during 2001. We understand that you have resigned your position as chairman and chief executive of Enron. With respect to questions relating to other Enron executives, please forward this letter to your successor in the corporation to respond. We request that this information be provided to the committee no later than Jan. 28.”

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