Concerns Grow Amid Conflicts

Incapable of Deceit

Ken Lay was ill-prepared to manage the kind of crisis that Enron now faced. Lay, 59, had a PhD in economics from the University of Houston and a national reputation as a business innovator. He was deeply involved in some of Enron's biggest challenges, including the California energy crisis and its troubled power project in India. But he had not really run Enron's daily operations since the early 1990s.

By September 2001, he was more accustomed to striding the corridors of power than handling the controls of a Fortune 500 company.

In Enron's early years, he turned day-to-day management over to Richard D. Kinder, a lawyer with an exacting eye for costs. Kinder was nuts and bolts; Lay was big-picture. Both agreed that ultimate success depended on Wall Street, not the oil patch.

To keep its stock price high, Enron had to meet Wall Street's profit expectations.

Kinder was the stern taskmaster who implemented the Wall Street strategy.

"He would be screaming at us," recalled David G. Woytek, an accountant and former vice president for finance. " 'How can your earnings be down!' Everyone was intimidated. Even if prices were down, somehow you had to come up with earnings . . . because we can't disappoint the Street."

Even in its early years, Enron relied on some aggressive accounting to boost its reported earnings, Woytek said. "So many people would look the other way," said Woytek, who complained and was eventually pushed out. "I got ulcers."

Kinder, who left Enron in 1996, declined through a spokesman to comment on his tenure at the company.

As Kinder minded the store, Lay increasingly looked outward. He became known as a powerful lobbyist and prolific fundraiser for political and charitable causes. He enjoyed the perks of power.

He wanted everything to be first-class. Michael Muckleroy, former chairman of Enron Liquid Fuels Inc., once occupied one of the four corner offices on the 50th floor of Enron's headquarters in Houston, a mirror image of Lay's. A self-described "plug horse," Muckleroy was so embarrassed by the grandiosity of his top-floor office, with its 23-foot high ceiling, that he refused to meet clients and vendors there.

Lay moved steadily to the top of Houston's business and civic elite.

"Nothing of significance that was going on in Houston was not touched by Enron and Ken Lay," said James D. Calaway, president of the Center for Houston's Future, a civic organization.