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.

Skilling and Causey, for instance, were charged with criminal insider trading and knowing about several deals that helped Enron hide debt and manufacture earnings. Lay, on the other hand, is facing only civil insider-trading charges, filed separately yesterday by the SEC. Those charges relate to his unloading of company stock in the months before Enron fell apart. That is perhaps a reflection of the rigorous standards of proof needed to bring a criminal insider-trading case, according to criminal law experts.

Former prosecutor David B. Irwin said a bank fraud charge against Lay may be a useful "catch-all" for prosecutors, who can direct jurors to a relatively simple, signed loan application rather than try to lead them through evidence about sophisticated accounting maneuvers that outside lawyers and auditors may have approved.

John M. Callagy, a New York defense lawyer, said it will be a "critical issue" for Lay to be tried separately from Skilling and Causey, lest Lay be affected by the more extensive evidence that prosecutors may present against his co-defendants.

Lay's chief defense lawyer, Michael Ramsey, yesterday said he would seek a judge's approval to have a separate and quick trial for Lay. Ramsey said he would forgo a chance to exchange documents with the government and seek a trial within months, even before the November elections. Prosecutors are likely to contest such a move, and it is unclear whether U.S. District Judge Sim Lake would agree to the defense request.

Skilling's attorney Daniel M. Petrocelli said, "Given my view that the people at the top of the company are being indicted for the acts of a few others, it may make good sense to have Mr. Lay and Mr. Skilling tried together."

One of the highlights of a trial will probably be Lay's time on the witness stand. Ramsey said "of course" Lay will testify in his own defense. Such testimony will be central to the case for Lay, who insists that he believed the company could rebound even in the face of terrible financial woes in late 2001. In fraud cases, the government must prove defendants intended to break the law, focusing on their credibility and state of mind.

Lay reaped $217 million in profit from sales of Enron stock between 1998 and 2001, the indictment said. Over that period, he also collected $19 million in salary and bonuses, including $8 million in salary and bonus for 2001 alone.

As part of its criminal case, the government is seeking to seize Lay's 33rd-floor penthouse apartment in the Huntingdon, a luxury complex near downtown Houston.

Regulators at the SEC demanded Lay return more than $90 million he collected from stock sales during the last year of his tenure at Enron.

The allegations against Lay appear to be based on meetings and briefings in which he was told about financial problems, as well as internal reports he saw as the company's chief executive, according to court papers. Neither the indictment nor the SEC lawsuit contains references to e-mails or other documents that could help prosecutors. Instead, the court papers remain vague on specifics about who said what to whom.

Throughout late 2001, Lay met with employees, investors and at least one credit rating agency to tout Enron's health, the indictment said. Prosecutors cited the public statements in an apparent effort to show that Lay crossed the line between promoting a business and lying about its prospects in the face of evidence to the contrary.

The SEC complaint said Lay met with unnamed executives in January 2001 to discuss $500 million worth of "uncollectable" receivables at Enron's faltering retail energy unit. Lay, Skilling and Causey instead tinkered with the accounting to absorb the losses, regulators said.

Lay also was on notice by September 2001 about an accounting rule change that could have resulted in a $700 million write-down for its water services business, according to court papers. The problem was not disclosed to outside auditors or analysts even though it would have had a substantial impact on Enron's financial statements, prosecutors claim.

Later that summer, prosecutors say, Lay and Causey mulled over a merger or a sale of the company's prized assets to help bring in money. Earnings shortfalls adding up to $1 billion "in virtually every Enron business unit" came up in management meetings Lay attended, the SEC said. And Enron officials convened at a Texas resort in early September 2001 to talk about the problems.

Lay said yesterday that his "worst mistake" at the company was trusting former chief financial officer Andrew S. Fastow, who pleaded guilty to conspiracy and fraud earlier this year and who is likely to be a witness at his trial.

Lay claimed he was duped by Fastow, who presided over secretive partnerships used to bury company debt while taking more than $60 million in company money under the table. Fastow's name seldom appears in the Lay indictment, a move that legal experts said could mean prosecutors recognize his credibility is open to attack.

Court papers list several other Enron officials prepared to testify against the company's former leaders, including former Fastow deputy Michael J. Kopper, former treasurer Ben F. Glisan Jr., former division president David W. Delainey and former internal accountant Wesley H. Colwell. Glisan and others were at Enron throughout most of Lay's final days as chief executive.

People inside and outside the company continue to be probed in connection with its fall. "We have gotten to the top of Enron, but we have not gotten to the bottom," Deputy Attorney General Jim Comey said yesterday.

Houston business executives and lawyers said the Lay charges should help resolve some of the uncertainty lingering over the city Lay once commanded as a socialite and master philanthropist.

John Olson, a Houston stock analyst who had repeated run-ins with Lay and other Enron leaders over his lukewarm stock ratings on the company, said, "There's been so many lives and careers ruined by the Enron experience that I don't have any feeling of vindication."

Special correspondent Steven Long contributed to this report from Houston.

Kenneth L. Lay is led into a Houston court to face charges of conspiracy, fraud and making false statements to banks in the financial scandal that brought down Enron, the company he founded.