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Concerns Grow Amid Conflicts
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When James W. Crownover, a former McKinsey & Co. executive in Houston, headed the city's United Way campaign in 2000, he asked Lay to take charge of major gifts. "He gave $100,000 and challenged five other people to do the same, which they did."
Willie J. Alexander, an African American owner of a small human resources consulting firm, didn't crack Houston's stratified business establishment until he met Lay through Republican Party activities.
Lay became Alexander's mentor, arranged consulting contracts with Enron and sat down with him once a year for brainstorming sessions. To Alexander, Lay was caring, spiritual and incapable of deceit.
'I Need Their Earnings'
Lay's record at Enron was not so spotless.
At various times over the years, Enron's affable founder had ignored warnings, sidestepped problems and tolerated misdeeds, former executives said.
Fifteen years earlier, Muckleroy warned that two Enron executives working out of an office in Valhalla, N.Y., were making oil trades far larger than Enron had authorized.
But Lay brushed him off, Muckleroy said. "Ken was the kind of fellow, he did not like dissension. He did not like hostility. He did not like facing up to the music."
Eventually, internal auditors substantiated reports of fraudulent trading, but Lay wouldn't fire the traders. That shocked and angered Woytek, one of the internal auditors. "I was in the audit committee of the board of directors," Woytek recalled, "when Ken Lay said, 'I have decided not to terminate them. Instead we are going to put in controls to keep this from happening in the future. . . . I need their earnings.' "
Lay didn't fire the trading executives until their operation came up more than 50 million barrels of oil short and cost the company roughly $140 million, almost destroying Enron, Muckleroy and other former executives said. The traders pleaded guilty to fraud and tax evasion.
In a written response to The Washington Post, Lay's spokeswoman, Kelly Kimberly, did not address Woytek's account of that meeting. But she noted that Lay and Enron's board responded to early signs of trouble in Valhalla by auditing the operation repeatedly.
James Alexander, former chief financial officer of Enron Global Power & Pipelines LLC, recounted another incident.
In 1995, he heard that employees who closed energy deals received bonuses based on their own dubious estimates of future profitability.
