|Born||Kenneth Lee Lay
April 15, 1942
Tyrone, Missouri, U.S.
|Died||July 5, 2006
Snowmass, Colorado, U.S.
Kenneth Lee "Ken" Lay (April 15, 1942 – July 5, 2006) was an American businessman. He played a leading role in the corruption scandal that led to the downfall of Enron Corporation. Lay and Enron became synonymous with corporate abuse and accounting fraud when the scandal broke in 2001. Lay was the CEO and chairman of Enron from 1985 until his resignation on January 23, 2002, except for a few months in 2000 when he was chairman and Jeffrey Skilling was chief executive officer (CEO).
On July 7, 2004, Lay was indicted by a grand jury on 11 counts of securities fraud and related charges. On January 31, 2006, following four and a half years of preparation by government prosecutors, Lay's and Skilling's trial began in Houston. Lay was found guilty on May 25, 2006, of 10 counts against him; the judge dismissed the 11th. Because each count carried a maximum 5- to 10-year sentence, legal experts said Lay could have faced 20 to 30 years in prison. However, he died while vacationing in Snowmass, Colorado, on July 5, 2006, about three and a half months before his scheduled October 23 sentencing. Preliminary autopsy reports state that he died of a heart attack caused by coronary artery disease. As a result of his death, on October 17, 2006, the federal district court judge who presided over the case vacated Lay's conviction.
Lay was born in the Texas County, Missouri town of Tyrone, the son of Ruth (née Rees) and Omer Lay. His father was a Baptist preacher and some-time tractor salesman. When Lay was a child, he delivered newspapers and mowed lawns. Early on, he moved to Columbia, Missouri and attended David H. Hickman High School and the University of Missouri where he studied economics, receiving a B.A. in 1964 and an M.A. in 1965. He served as president of the Zeta Phi chapter of the Beta Theta Pi fraternity at the University of Missouri. He went on to earn his Ph.D. in economics from the University of Houston in 1970 and soon after went to work at Exxon Company, USA, the successor to Standard Oil of New Jersey, and a predecessor of ExxonMobil.
Lay worked in the early 1970s as a federal energy regulator. He then became undersecretary for the Department of the Interior before he returned to the business world as an executive at Florida Gas Transmission. By the time energy was deregulated in the 1980s, Lay was already an energy company executive and he took advantage of the new climate when Omaha-based Internorth bought his company Houston Natural Gas and changed the name to Enron in 1985. The much larger, better capitalized and more diversified Internorth was then used as an asset to propel his efforts at Enron. He also was a member of the board of directors of Eli Lilly and Company and was also a director of Texas Commerce Bank which later was taken over by JPMorgan Chase.
Lay was one of America's highest-paid CEOs, earning a $42.4 million compensation package in 1999. Lay dumped large amounts of his Enron stock in September and October 2001 as its price fell, while encouraging employees to buy more stock, telling them the company would rebound. Lay liquidated more than $300 million in Enron stock from 1998 to 2001, mostly in stock options. As the scandal unfolded, Lay insisted he wanted to "tell his story," but later reneged on a promise to testify to Congress, taking the Fifth instead. Condé Nast Portfolio ranked Lay as the 3rd worst American CEO of all time.
Ken Lay was a close friend of the Bush family. He first established a relationship with Vice President George H. W. Bush, making large campaign contributions to him and heading several critical committees in the Republican Party. Lay was co-chairman of Bush's 1992 re-election committee. At the request of George H. W. Bush, Mr. Lay helped to orchestrate the World Economic Summit in Houston. Lay was a prolific Republican Party contributor nicknamed "Kenny Boy" by President George W. Bush, he was also Houston's most influential power broker for a decade. Mr. Lay remained close friends with Mr. Bush, eventually establishing a close relationship with his son, then Texas Governor George W. Bush & his Manchester UK operations.
When Governor George W. Bush ran for president, Lay served as host at big fund-raisers and contributed plenty of his own money to the effort. After Bush won, the new President and his wife flew to Washington with Mr. Lay on an Enron corporate plane. In December 2000, Lay was mentioned as a possible candidate for President Bush's Treasury Secretary along with head Douglas A. Warner III of J.P. Morgan & Co., but Paul O'Neill was eventually selected.
Indictment and trial
On July 7, 2004, Lay was indicted by a grand jury in Houston, Texas, for his role in Enron's collapse. Lay was charged, in a 65-page indictment, with 11 counts of securities fraud, wire fraud, and making false and misleading statements. The trial commenced on January 30, 2006, in Houston, despite repeated protests from defense attorneys calling for a change of venue on the grounds that "it was impossible to get a fair trial in Houston" — the epicenter of Enron's collapse. Enron's bankruptcy was the biggest in U.S. history when it was filed in December 2001. It cost 20,000 employees their jobs and many of them their life savings. Investors lost billions of dollars. Before Lay was put on trial he was estimated to have a gross wealth of approximately 40 million US dollars. It is believed that most of it was spent on his legal defense.
During his trial, Lay claimed that in 2001 Enron stock made up about 90 percent of his wealth, and that his current net worth (in 2006) was in the negative by $250,000. He insisted that Enron's collapse was due to a conspiracy waged by short sellers, rogue executives, and the news media. It was reported that Lay's congenial reputation took a blow as he appeared confrontational and irritable at several points during his testimony. On May 25, 2006, Lay was found guilty on all six counts of conspiracy and fraud by the jury. In a separate bench trial, Judge Lake ruled Lay was also guilty of four counts of fraud and making false statements. Sentencing was scheduled to take place on 11 September 2006, but was later rescheduled for 23 October 2006.
A number of books have been written on Mr. Lay and Enron including Conspiracy of Fools (2005), Icarus in the Boardroom, The Tao of Enron: Spiritual Lessons from a Fortune 500 Fallout (2002), Enron: Anatomy of Greed (2001), The Smartest Guys in the Room (2003), 24 Days, Business Fairy Tales and Power Failure. The Smartest Guys in the Room was adapted into a documentary film titled Enron: The Smartest Guys in the Room, released in 2005.
Lay died on July 5, 2006, while vacationing in Colorado. The Pitkin Sheriff's Department confirmed that officers were called to Lay's house in Old Snowmass, Colorado, near Aspen at 1:41 am MDT. Lay was taken to Aspen Valley Hospital, where he was pronounced dead at 3:11 am MDT. The autopsy indicated that he died of a heart attack brought on by coronary artery disease, and found evidence that he had suffered a previous heart attack.
A private funeral with around 200 in attendance was held in Aspen four days after his death, his body cremated and the ashes buried in a secret location in the mountains. A memorial was held a week after his death at the First United Methodist Church in Houston, attended by nearly 1,200 guests including former President George H. W. Bush, who did not speak.
Vacating of conviction
On October 17, 2006, since Lay died prior to exhausting his appeals, his conviction was vacated. Precedent in the Fifth Circuit Court of Appeals, the federal appellate court governing the district where Lay was indicted, indicates that vacation of the conviction had to be automatically granted. When vacation occurs, the law views it as though he had never been indicted, tried and convicted. The government opposed Lay's attorneys' motion, and the Department of Justice issued a statement that it "remains committed to pursuing all available legal remedies and to reclaim for victims the proceeds of crimes committed by Ken Lay." Civil suits are expected to continue against Lay's estate. According to legal expert Joel Androphy, claimants may not recover punitive damages against a deceased defendant, although claimants may recover compensatory damages.
Timeline of events
- 1965: Economist, Exxon Corporation
- 1969: Assistant professor, George Washington University
- 1970: Awarded PhD Economics, University of Houston
- 1971: Assistant to a commissioner, Federal Power Commission
- 1972: Undersecretary for energy issues, Department of the Interior
- 1974: Vice president, Florida Gas Transmission
- 1976: President, Florida Gas Transmission
- 1981: President, chief operating officer, Transco
- 1984: Chief executive officer, Houston Natural Gas
- 1985: Enron formed by purchase of Houston Natural Gas by InterNorth
- 1990: Chairman of the Board and chief executive officer, Enron; Co-chairman, organizing committee for G8 summit
- 1992: Co-chairman, President Bush Re-election Committee
- 1993: Member, President Clinton's 'President's Council on Sustainable Development'
- 1994: Assists with campaign of Sheila Jackson-Lee to defeat Congressman Craig Washington
- February 2001: Steps aside as CEO in favor of Jeffrey Skilling
- August 2001: Returns as CEO after Skilling's departure
- January 2002: Under extreme pressure, Lay resigns as Enron CEO, leaves Board
- July 2004: Indicted by grand jury
- May 2006: Found guilty on ten counts of fraud and conspiracy
- July 2006: Died at age 64, near Aspen, Colorado, while on vacation
- October 2006: A federal Judge vacates conviction
Awards and honors
- Anti-Defamation League—Torch of Liberty Award
- Beta Theta Pi (National Fraternity)—Oxford Cup
- Brunel University (London)—Honorary Doctor of Social Sciences
- Child Advocates—Super Hero Honoree Award
- Episcopal High School—Campaign Fundraiser Award
- Gas Daily—Man of the Year Award
- Horatio Alger Association of Distinguished Americans—Annual Membership Award
- Houston Area Women's Center—Honoree
- Houston Children's Chorus—Honoree
- Houston Community Partners—Father of The Year
- Kenneth Lay Day—Proclaimed by Kathryn J. Whitmire, Mayor of Houston, Texas
- Kiwanis Club of Houston and the Greater Houston Partnership—International Executive of the Year
- March of Dimes—Award of Distinction
- NAACP Freedom Fund Banquet—Mickey Leland Humanitarian Award
- National Conference of Christians and Jews—Brotherhood Award
- Oswego State University—Honorary Doctor of Humane Letters Degree
- Phi Beta Kappa—Outstanding Alumnus Award
- Private Sector Council—Annual Leadership Award
- Stanford Business School Alumni Associations—Houston Business Man of the Year
- Texans For Lawsuit Reform—Award
- Texas Association of Minority Business Enterprises—Texas Corporate Partnering Award
- Texas Business Hall of Fame—Inductee
- Texas Navy Admiral—Commissioned by William P. Clements, Jr., Governor of Texas
- Texas Society To Prevent Blindness—Man of Vision Award
- The Brookwood Community—Honoree Award
- The Rotary Club of Houston—Distinguished Citizen Award
- The Wall Street Transcript—Chief Executive Officer Award
- United States Energy Association—United States Energy Award
- United States Navy—Navy Commendation Medal & National Defense Service Medal
- University of Colorado, College of Business and Administration—Ben K. Miller Memorial, International Business Award
- University of Houston—Distinguished Alumnus Award
- University of Houston—Honorary Doctor of Humane Letters Degree
- University of Missouri—Honorary Doctor of Law Degree; The Hebert J. Davenport Society Benefactor Award
- Volunteer Houston—Honoree Award
- The YMCA in Cinco Ranch in unincorporated Harris County, Texas, was named after Lay. Following the collapse of Enron, his name outside the building was made 70% smaller. Ultimately, the YMCA was renamed the "Katy Family YMCA" after the city of Katy.
Articles by Ken Lay:
- Megatrends Of Energy - World Energy Magazine Vol. 1 No. 1
- Electricity Restructuring Update - Increasing Efficiencies and Customer Choice are Integral to the Market Transition - World Energy Magazine Vol. 1 No. 2
- Crawford, Kristen (2004-07-12). "Lay surrenders to authorities". CNN Money. Retrieved 2010-03-02.
- Pasha, Shaheen and Jessica Seid (2006-05-25). "Lay and Skilling's day of reckoning". CNN Money. Retrieved 2010-03-02.
- Mulligan, Thomas S.; Bustillo, Miguel (July 6, 2006). "Death Puts Lay Conviction in Doubt". Los Angeles Times. Retrieved 2010-03-02.[dead link]
- Fowler, Tom (17 October 2006). "Judge vacates conviction of Ken Lay". Associated Press. Retrieved 2010-03-02.
- United States v. Lay, Criminal Action No. H-04-0025, 456 F.Supp.2d 869 (S.D. Tex. 2006), at .
- Handbook of Texas Online. Retrieved 2010-03-02.
- "Kenneth Lay: Bush Pioneer". Texans for Public Justice. Retrieved 2010-03-02.
- Ackman, Dan (February 2, 2002). "Lay Lays an Egg". Forbes.com. Retrieved 2010-03-02.
- Portfolio.com staff (30 April 2009). Portfolio's Worst American CEOs of All Time. CNBC
- Ken Lay at biography.com
- Kenneth and Linda Phillips Lay Marriage Profile, about.com
- Commentary: Ken Lay's Audacious Ignorance. Businessweek (2006-02-05). Retrieved on 2013-07-12.
- Bajaj, Vikas; Eichenwald, Kurt (July 6, 2006). "Kenneth L. Lay, 64, Enron Founder and Symbol of Corporate Excess, Dies". The New York Times.
- OsterDowJones. (Dec. 14, 2000) Who will Bush pick to run Treasury?
- Jeremy W. Peters and Simon Romero (5 July 2006). "Enron Founder Dies Before Sentencing". The New York Times. Retrieved 2010-03-02.
- Shaheen Pasha (5 July 2006). "Enron founder Ken Lay dies". CNN. Retrieved 2010-03-02.
- Moreno, Sylvia (July 13, 2006). "Lay Is Remembered As a 'Straight Arrow'". The Washington Post. Retrieved 2010-03-02.
- "Lay victim of `lynching,' speaker at service says". The Chicago Tribune. July 13, 2006. Retrieved 2006-07-13.[dead link]
- "Ken Lay's memorial attracts power elite". CNN. July 12, 2006. Retrieved 2006-07-13.[dead link]
- "Enron's Kenneth Lay Defended at His Memorial Service". Bloomberg. July 12, 2006. Retrieved 2010-03-02.
- "Judge Vacates Conviction". The New York Times. October 17, 2006. Retrieved 2006-10-17.[dead link]
- "Experts See Lay's Death Erasing Conviction". The New York Times. July 7, 2006. Retrieved 2006-06-07.[dead link]
- Memorandum Opinion and Order, Oct. 17, 2006, docket entry 1126, case no. 4:04-cr-00025, United States v. Kenneth L. Lay, U.S. District Court for the Southern District of Texas (Houston Div.).
- See PDF (37.1 KB), 990 F.2d 208 (5th Cir. 1993); PDF (146 KB), 367 F.3d 409 (5th Cir. 2004).
- Engber, Daniel (July 6, 2006). "Can't the Feds Get Lay's Money?". Slate.com. Retrieved 2010-03-02.
- Hays, Kristen (August 16, 2006). "Prosecutors to oppose wiping Lay's record clean". Chicago Sun-Times. Retrieved 2006-08-16.[dead link]
- Associated Press (August 16, 2006). "Prosecutors will oppose clearing Lay's record, filing says". USA today. Retrieved 2010-03-02.
- Pasha, Shaheen (July 5, 2006). "Enron founder Ken Lay dies". CNN.com. Retrieved 2010-03-02.
- US v. Skilling and Lay, indictment document (2.3MB PDF).
- Film documentary: The Smartest Guys in the Room
- Calling Inquiries a Distraction, Enron Chief Quits Under Pressure, The New York Times, January 24, 2002
- Ken Lay's political donations
- Alternative History: Treasury Secretary Ken Lay
- Jury selected in Lay's trial - CNN Money
- Ken Lay's political campaign contributions
- Some charges dropped, Enron prosecution rests
- Lay, Skilling guilty in Enron Scandal - MSNBC
- Enron's Founder Kenneth Lay, 64, Dies in Colorado
- No Redemption Now: Thoughts on the Death of Ken Lay, JURIST
- The Times, Obituary