Lay Wraps Up His Testimony

Enron Founder Calls Bankruptcy 'Most Painful Thing' in Life

HOUSTON, May 2 -- In his sixth and final day on the witness stand, former Enron Corp. chairman Kenneth L. Lay testified that "I did everything I could humanly do" to avert the energy company's December 2001 bankruptcy filing.

Lay, 64, continued to blame deceitful subordinates and external forces for helping incite a crisis in confidence, even as he told prosecutors who questioned his handling of a personal investment that "rules are important, but you shouldn't be a slave to rules, either."

How jurors evaluate Lay's credibility could be the decisive factor in the 14-week-old trial. Lay and fellow defendant Jeffrey K. Skilling, who testified for eight days last month, face more than a decade in prison if they are convicted on fraud and conspiracy charges.

Lay calmly answered questions Tuesday morning from his lawyer George "Mac" Secrest. But he once again bristled at an aggressive line of inquiry from prosecutor John C. Hueston.

Lay accused the government of "distorting" the facts and raised his voice when Hueston implied that Lay misled employees about his use of an Enron-sponsored line of credit in the company's waning months. Prosecutors claim Lay failed to disclose more than $70 million in stock sales, casting doubt on the truthfulness of statements he made urging employees and investors to buy shares as an "incredible bargain" in the same period.

Lay has not been charged with insider-trading violations, and he says he relied on lawyers with Securities and Exchange Commission experience for advice about the sales.

"No SEC attorney gave you license to address Enron employees and give them half-truths," Hueston said.

"I was not trying to give them half-truths," Lay shot back.

They tangled again when Hueston asserted that Lay violated Enron's ethics code by not getting approval from the board of directors for a $120,000 personal investment in an online photography start-up that did business with Enron.

Testifying on his own behalf, Lay is the single most important witness in his portion of the case. Tuesday morning, he told jurors, "I loved Enron very much. I loved Enron employees very much. I spent over half my professional life at Enron. I was identified with Enron. I think the most painful thing in my life was watching Enron finally go into bankruptcy."

A lawyer who represented Lay in civil lawsuits, Martin S. Siegel, offered support for the argument that Lay had tried to settle a case filed by Enron's creditors committee. The deal was scuttled by the Justice Department, Siegel said.

But on cross-examination, Enron Task Force Director Sean M. Berkowitz pointed out that Lay would have reaped valuable rewards in the rejected settlement, including annuities that would have paid him $80,000 per month for life.

The witness, who hemmed and hawed under the prosecutor's questions, also earned a rebuke from U.S. District Judge Simeon T. Lake III, who said: "These are simple questions. You don't seem to be able to answer a simple question."

Character witnesses for Lay had an easier time of it. As jurors craned forward in their chairs, former Houston mayor Bob Lanier testified that Lay had not only been a potential mayoral candidate but also was "a backer and constructive force in just about every civic event I can think of."

Adm. George "Gus" Kinnear, who supervised Lay in the U.S. Navy decades ago, said Lay continued to be a sounding board on business issues. But prosecutors pointed out that Lay invested $500,000 in a technology company Kinnear helped lead in late September 2001 -- the same time Lay was selling Enron stock.

The Rev. William A. Lawson, a pastor emeritus at the Wheeler Avenue Baptist Church, told the jury that Lay donated time and money to small nonprofit groups and African American projects.

"This is a man who has been a friend to presidents . . . who has been invited places I could never go, and at the same time he is concerned about these small organizations," said Lawson, a prominent civil rights leader in Houston. "I hope we can judge him as a good man who would never attempt to be callous enough to hurt people who would lose their jobs."

On cross-examination, Assistant U.S. Attorney Cliff Stricklin suggested to the witness that "sometimes even good people can make bad decisions."

"There is not one of us in this room of whom that is not true," Lawson replied.