After years of living the American dream, the past six years have been an “American nightmare,” Enron Corp. founder Kenneth L. Lay said Monday in his fraud and conspiracy trial. Lay, 64, who faces several years in prison if he is convicted on a half dozen criminal counts, took the stand in his defense for the first time, attempting to convince jurors in Houston he had done no wrong in the months before Enron collapsed.

“It is absolutely ludicrous that I would step back into a company and pick up the mantle of a conspiracy,” Lay said of his action in stepping back into the CEO role when Jeffrey Skilling, his codefendant, resigned in August 2001. “I don’t think there was ever a conspiracy of any kind.” Besides the securities and wire fraud charges against him, Lay also faces four fraud charges related to his personal banking. A separate trial on those charges will begin when this trial concludes.

Asked by defense lawyer George McCall Secrest Jr. what he thought of the 13-week-old trial so far, Lay answered, “It’s been very interesting. We’ve seen a lot of interesting testimony, a lot of interesting people, a lot of lies, a lot of misinformation, and some truth.” Lay founded Enron in 1985 when his company, Houston Natural Gas, merged with Omaha-based InterNorth.

With his wife Linda and several members of his family watching him testify in a packed courtroom, Lay appeared relaxed on the witness stand, offering homespun stories about his humble childhood and his journey toward running what was once the seventh largest company in the country. He adamantly proclaimed his innocence, and said most of the stories the public has heard about Enron were false. In 2001, only about 10% of the entire company was not performing well in 2001, but the rest of the company was in good shape, he said.

“Enron’s failure was caused by a run on the bank,” Lay said. “It all begins with the deceit of [former CFO] Andy Fastow and probably no more than one or two other people.” Lay also blamed “short sellers who were working together and conspiring together…a real conspiracy.”

The company’s downfall also was attributed to “the cooperation of the most powerful financial newspaper in this country, The Wall Street Journal,” he said. The newspaper engaged in a campaign against Enron that began in October 2001, said Lay, with information from short sellers that was published “day after day after day…They had information that even we didn’t have.”

But Lay said Enron’s “fundamentals” at the beginning of 2001 “were incredibly strong.” About 10% of the company’s operating units were experiencing some problems, he said, including Enron Broadband Services and Enron Energy Services. However, all of the problems were being fixed. “And as far as the problems of the company, I think that I and before me Jeff [Skilling] were being very candid about those problems. We were addressing those problems, we were solving those problems.”

Asked if he has purposely misled investors in 2001 about Enron’s true financials, Lay said, “Absolutely not…Certainly at the time I thought all of those things were accurate.” After going through the financial documents “painstakingly” to prepare for trial, “I still believe with all of the information we had at the time, we were being accurate.”

Lay accepted “full responsibility for everything that happened at Enron. Having said that, I can’t take full responsibility for illegal activity…for all 30,000 employees at Enron, particularly those engaged in illegal activities.”

His biggest mistake? “I suppose with hindsight, that would be the hiring of Andy Fastow.”

His second biggest mistake? “Promoting him to chief financial officer.”

Lay said he also regrets allowing Enron’s board and Skilling to convince him to take over the CEO role when Skilling resigned in August 2001.

“If I hadn’t done that, I wouldn’t be sitting here right now,” he told jurors.

Secrest asked Lay about his management style. Was he a micromanager? “Oh no, I’m very much a decentralization person. I’ve always tried to develop the organization around the talent of the individuals. Let them spread their wings and see what they can do. I’m more of a delegator.” He added, “I’ve always begun with the basic premise that you need to go after the very best talent.”

Lay reminded jurors that Enron’s finances had been routinely audited by outside auditor Arthur Andersen, once one of the Big Five accounting firms. At the time, “Arthur Andersen had the reputation of being the top accounting or audit firm…particularly in the energy business,” said Lay. “We basically turned over all of our internal and external audit functions [to Andersen]…In the process they had over 100 auditors on site in one of Enron’s buildings and indeed it was made known to them, repeatedly made known to them, that they had access to everything at Enron…They basically had a real-time audit by Arthur Andersen all the time.”

Of Enron’s submission of certified financial statements, “At the end of the day, it was Arthur Andersen’s certification,” he said.

Lay also answered questions about his relationship with Skilling, who testified earlier this month. Skilling testified he left after only six months as CEO not because of problems at Enron but because of personal issues. Lay backed his story. He said Skilling told him he wanted to leave the day after returning from an overseas trip. He said Skilling told him he had some “personal issues and family issues that he had to address.”

Lay said he asked Skilling “if there was anything about the company that I should know about or the board should know about,” but Skilling said there was nothing for him to elaborate on. Lay also said he tried to convince Skilling to stay, but he declined.

Asked if he had any reason to doubt what Skilling told him, Lay said, “In my 15 years I’d known Jeff, he was always a straight shooter with me.”

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