Founder of Enron Pleads Not Guilty

11 Criminal Charges Against Lay Unsealed

Former Enron Corp. chief executive Kenneth L. Lay surrendered to federal agents at daybreak in Houston yesterday, pleading not guilty to criminal charges that he knew his company was failing in 2001 when he sold millions of dollars in stock and urged investors and employees to buy more.

The government accuses Lay of standing at the top of a scheme to mask more than $7 billion in losses and increasingly severe debt problems at Enron in the latter half of 2001, leading to a financial disaster that became the signature scandal of the 1990s stock market bubble.

In the indictment, prosecutors rejected Lay's public defense that he was kept in the dark about Enron's problems by greedy subordinates.

"Mr. Lay is today a defendant not because he was a disengaged figurehead, but rather because he was an all-too-engaged participant in the fraud that was Enron," said Linda C. Thomsen, deputy director of enforcement of the Securities and Exchange Commission, which also filed civil charges against Lay yesterday.

The 62-year-old former executive was led in handcuffs to the federal courthouse in Houston and was released on $500,000 bond after entering his plea. He then fought back by conducting a news conference in a hotel ballroom in the shadow of Enron's former headquarters, where he again proclaimed his innocence.

"This has been a very tragic day for me and my family," Lay said. "I reject the notion that I had anything to do with any criminal activities."

The 11 charges against Lay of conspiracy, fraud and making false statements mark the pinnacle of an investigation into Enron's collapse -- a probe that has ensnared 31 people, including Wall Street bankers, myriad Enron underlings and the now-defunct accounting firm Arthur Andersen LLP. Prosecutors added the charges against Lay to a preexisting case against former Enron accounting chief Richard A. Causey and Lay's handpicked successor, Jeffrey K. Skilling.

That sets up the prospect that Lay and Skilling, two 1990s corporate titans who once graced magazine covers, will sit side by side at a defendant's table and face years behind bars. According to his lawyer, Lay plans to take the stand in his own defense.

Lay had built a stodgy pipeline company into a Wall Street favorite through his familiarity with Washington regulation and politics, including his role as a top fundraiser for both Presidents Bush. Enron once reported revenue that made it the seventh-largest public company in the country. Its demise led to thousands of job cuts and $66 billion in investor losses and started the momentum toward a landmark corporate reform law requiring executives to certify the accuracy of their financial results.

The criminal case against Lay is narrower in scope than the indictment of Skilling, who is accused of running the alleged conspiracy from 1998 until his sudden departure in mid-August 2001, when Lay resumed day-to-day control of the company.