Ex-Enron boss Lay told probers CEO knew details of partnership deals

WASHINGTON (AP) _ Former Enron chief executive Jeffrey Skilling was so upset as the company's stock price plummeted last summer that he told the former chairman, Kenneth Lay, he couldn't sleep

Wednesday, February 20th 2002, 12:00 am

By: News On 6

WASHINGTON (AP) _ Former Enron chief executive Jeffrey Skilling was so upset as the company's stock price plummeted last summer that he told the former chairman, Kenneth Lay, he couldn't sleep at night and would resign, Lay told company investigators.

In 17 pages of notes released Tuesday, Lay appeared to contradict Skilling's recent testimony before Congress. Lay told the investigators he was shocked when Skilling told him he was leaving the energy trading company after about six months as chief executive officer, the interview notes said.

``Skilling was taking Enron's stock decline personally and could not sleep at night,'' Lay is quoted as telling investigators last month.

Skilling testified Feb. 7 at a hearing of the House Energy and Commerce Committee's investigative panel that when he resigned in August, ``I did not believe the company was in any financial peril. ... I absolutely, unequivocally thought the company was in good shape.''

The notes, among a batch of documents released by the Energy and Commerce Committee, are the first detailed accounts of Lay's defense regarding the collapse of the energy-trading company. He has invoked his Fifth Amendment right against self-incrimination and refused to testify to Congress.

William Powers, a former Enron director and University of Texas Law School dean who headed the internal investigation, has told Congress that Lay ``bears significant responsibility ... for Enron's failure to implement sufficiently rigorous procedural controls to prevent the abuses.''

Lay also told company investigators that Skilling, his successor as chief executive officer, knew details of many of the partnership transactions that sent Houston-based Enron toward the biggest bankruptcy in U.S. history.

Lay was quoted as saying that Skilling presented board members with the idea for one of the crucial partnerships. In another instance, Lay said, Skilling would have been responsible for tracking the financial performance of one of the deals.

``Lay did not know who came up with the idea of LJM (a partnership), because Skilling and (former chief financial officer Andrew) Fastow presented the idea together,'' stated the investigators' notes from a Jan. 16 interview.

Skilling testified before Congress that he knew few details of the partnership transactions.

A spokeswoman for Skilling, Judy Leon, didn't immediately return a telephone call seeking comment Tuesday night.

Lay told the Enron investigators he never felt Skilling was trying to manipulate him, and Skilling always kept him well-informed on the company's business.

Telling investigators he had a hands-off management style, Lay repeatedly said he was unable to recall key details of the partnership transactions.

Lay said he was shocked when he discovered that Fastow had made $30 million from running the partnerships.

``Lay said that he was shocked because Fastow ... was only spending a few hours a week on LJM work,'' the investigators' notes say. Lay also said that Fastow had been reluctant to create the partnerships.

Investors nationwide lost money on a stock that had been a Wall Street favorite and thousands of Enron employees were stripped of their retirement savings in accounts loaded with Enron stock as the company slid into bankruptcy on Dec. 2.

Both the Securities and Exchange Commission and the Justice Department are investigating Enron and the role of its longtime auditor, Arthur Andersen LLP, which has acknowledged widespread destruction by its employees of Enron-related documents.

Skilling is scheduled to testify next Tuesday at a hearing of the Senate Commerce Committee. Also testifying is Enron executive Sherron Watkins, who warned Lay last August of serious accounting problems involving the partnerships that were used to hide more than $1 billion in debt and eventually brought down the company.

Other key Enron figures, including Lay and Fastow, have invoked the Fifth Amendment protection against self-incrimination and refused to answer lawmakers' questions. Skilling's testimony this month prompted some lawmakers to say they did not believe his version of events. Rep. Billy Tauzin, R-La., chairman of the Energy and Commerce Committee, suggested that Skilling could face formal accusations of perjury.

Watkins, an accountant and vice president, testified last week before the same panel that she believed Skilling and Fastow _ along with the accounting firm, Arthur Andersen, and Enron's outside legal advisers _ duped Lay and the board of directors.

Skilling's lawyer, Bruce Hiler, has disputed those statements. Asked Tuesday whether Skilling planned to testify next week, Hiler replied, ``No change in plans right now.'' He refused further comment.