Kenneth Lay

Kenneth Lay
Mugshot of Lay upon his arrest in 2004
Born Kenneth Lee Lay
(1942-04-15)April 15, 1942
Tyrone, Missouri, U.S.
Died July 5, 2006(2006-07-05) (aged 64)
Snowmass, Colorado, U.S.
Occupation Businessman
Political party Republican[1][2]
Spouse(s) Linda Lay
Judith Ayers[3]
Children Elizabeth Ayers Lay Vittore
Mark Kenneth Lay
Robyn Anne Herrold Lay Vermeil
Todd David Herrold
Robert Ray (Beau) Herrold[3]

Kenneth Lee "Ken" Lay (April 15, 1942 – July 5, 2006) was an American white collar criminal best known for his culpability in the Enron scandal. He was founder, CEO and Chairman of Enron Corporation for most of its existence which reached a value of $63 billion. Enron used misleading and illegal practices to hide, embezzle and mislead funds from its auditor Arthur Andersen, which was the fifth largest such company in the world. When the deception was discovered in 2000, the Enron scandal was the largest bankruptcy in the world and destroyed Arthur Andersen for not having discovered the fraud. Lay was indicted by a grand jury[4] and was found guilty of 10 counts of securities fraud.[5] Lay died while vacationing, three months before his October 23 sentencing.[6] A preliminary autopsy reported Lay had died of a heart attack caused by coronary artery disease and his conviction was vacated.[7][8][9]

Early life

Lay was born in the Texas County, Missouri town of Tyrone, the son of Ruth (born Rees) and Omer Lay.[10] Lay's father was a Baptist preacher. Later in Lay's childhood, his family moved to Columbia, Missouri, and Lay 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.[11][12] He served as president of the Zeta Phi chapter of the Beta Theta Pi fraternity at the University of Missouri.[12] He earned his Ph.D. in economics from the University of Houston in 1970.[11][12][13] He worked at Humble Oil and Refining as an economist from 1965-8 in the Corporate Planning Department.[11][12][13][lower-alpha 1] In 1968, Ken entered the Officer Candidate School for the United States Navy where, from 1968 to 1971, he rose to the rank of Lieutenant and was the Special Assistant to the Navy Comptroller and Financial Analyst at the Office of Assistant Secretary of the Navy in the Department of the Navy at Washington D.C..[12]

Career

Lay worked from 1971–2 as a technical assistant to Commissioner and Vice Chairman (federal energy regulator) of the Federal Power Commission and served as the Energy Deputy Under Secretary for the United States Department of Interior until 1974.[11] In 1974, he returned to the business world as an executive at Florida Gas Transmission[11] and was president of the Continental Resources Company from 1981–2.[12][13] In 1982, he joined the Transco Energy Company in Houston and held the positions of President, Chief Operating Officer and Director until 1984 when he became Chairman and CEO of the Houston Natural Gas Company.[12][13] 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[lower-alpha 2] bought his company Houston Natural Gas and changed the name to Enron in 1985.[12][lower-alpha 3] He was also a member of the board of directors from 1993–2001 of Eli Lilly and Company[13] and a director at Texas Commerce Bank.[18]

Lay was a friend of the Bush family including Vice President George H. W. Bush. He made monetary contributions, led several committees in the Republican Party and was co-chairman of Bush's 1992 re-election committee.[19] As President, Lay flew Bush and his wife to Washington on an Enron corporate plane.[20] In December 2000, Lay was mentioned as a possible candidate for President Bush's Treasury Secretary.[21]

From 1989 to 2002, his political contributions totaled $5.8 million, with 73% going to Republicans, and 27% going to Democrats.[2] From 1999 to 2001, he gave $365,410 to the Republican Party.[1]

In 1999 Lay was one of America's highest-paid CEOs with a $42.4 million compensation package.[22] Lay liquidated more than $300 million in Enron stock from 1998 to 2001, mostly in stock options.[23][24]

Enron bankruptcy

Lay's company, Enron, went bankrupt in 2001. At the time, this was the biggest bankruptcy in U.S. history. In total 20,000 employees lost their jobs and in many cases their life savings. Investors also lost billions of dollars. On July 7, 2004, Lay was indicted by a grand jury in Houston, Texas, for his role in the company's failure. 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.[5]

During his trial, Lay claimed that Enron stock made up about 90 percent of his wealth, and that his 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.[25][5] On May 25, 2006, Lay was found guilty on six counts of conspiracy and fraud by the jury. In a separate bench trial, Judge Lake ruled that Lay was guilty of four additional counts of fraud and making false statements. Sentencing was scheduled for September 11, 2006 and rescheduled for October 23, 2006.[26]

Death

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.[6]

A private funeral for about 200 people was held in Aspen four days after his death. His body was cremated and his ashes were buried in an undisclosed location in the mountains.[27][28][29] A memorial service was held a week after his death at the First United Methodist Church in Houston. It was attended by 1,100 guests including former President George H. W. Bush.[30]

Legacy

On October 17, 2006 his conviction was overturned due to abatement ab initio, a legal doctrine which says the death of a defendant during an appeal vacates the conviction.[31][32][33] The government opposed Lay's attorneys' motions of appeal and the Department of Justice issued a statement saying it remained "committed to pursuing all available legal remedies and to reclaim for victims the proceeds of crimes committed".[34][35][36]

Lay left behind "a legacy of shame" characterized by "mismanagement and dishonesty".[37] Condé Nast Portfolio ranked Lay as the 3rd worst American CEO of all time.[38] His actions were the catalyst for subsequent and fundamental corporate reform in regard to "standards of leadership, governance, and accountability".[37]

Personal life

At the time of his death Lay was married to his second wife, whom he married in 1982. He had two children, three stepchildren, and twelve grandchildren.[3][11]

See also

Notes

  1. ↑ On January 1, 1973, Humble Oil Refining merged with its parent, Standard Oil of New Jersey, to form Exxon Company, USA.[14]
  2. ↑ In 1983, Northern Natural Gas[15] merged with the Belco Oil & Gas Corporation to become the BelNorth Petroleum Corporation.[16]
  3. ↑ Dynegy, Enron's rival, purchased Northern Natural Pipeline from Enron in November 2001 and then sold it in July 2002 to Warren Buffett's Berkshire Hathaway.[17]

References

  1. 1 2 "Ken Lay Biography and Political Campaign Contributions". Campaign Money. Retrieved 17 October 2015.
  2. 1 2 "Follow the Enron Money". CBS News. 12 January 2012. Retrieved 17 October 2015.
  3. 1 2 3 Stritof, Sheri. "Kenneth and Linda Phillips Lay Marriage Profile". About. Retrieved 17 October 2015.
  4. ↑ Crawford, Kristen (2004-07-12). "Lay surrenders to authorities". CNN Money. Retrieved 2010-03-02.
  5. 1 2 3 Pasha, Shaheen and Jessica Seid (2006-05-25). "Lay and Skilling's day of reckoning". CNN Money. Archived from the original on 2010-10-18. Retrieved 2010-03-02.
  6. 1 2 Mulligan, Thomas S.; Bustillo, Miguel (July 6, 2006). "Death Puts Lay Conviction in Doubt". Los Angeles Times. Retrieved 2010-03-02.
  7. ↑ Fowler, Tom (17 October 2006). "Judge vacates conviction of Ken Lay". Associated Press. Retrieved 2010-03-02.
  8. ↑ United States v. Lay, Criminal Action No. H-04-0025, 456 F.Supp.2d 869 (S.D. Tex. 2006), at .
  9. ↑ Bratton, William W. (May 2002). "Does Corporate Law Protect the Interests of Shareholders and Other Stakeholders?: Enron and the Dark Side of Shareholder Value". Tulane Law Review (PDF)|format= requires |url= (help). New Orleans: Tulane University Law School (1275): 61. SSRN 301475.
  10. ↑ Handbook of Texas Online. Retrieved 2010-03-02.
  11. 1 2 3 4 5 6 "Biography: Ken Lay". biography.com. Archived from the original on 2010-07-15.
  12. 1 2 3 4 5 6 7 8 "Dr. Kenneth Lee Lay Obituary". Houston Chronicle. Retrieved 26 July 2016.
  13. 1 2 3 4 5 "Ken Lay". nndb.com. Retrieved January 6, 2018.
  14. ↑ "Substitute the name "ExxonCompany, U.S.A." for the name "Humble Oil and Refining Company"" (PDF). Nuclear Regulatory Commission. December 20, 1972. Retrieved January 6, 2018.
  15. ↑ Graham, Judith (February 1, 2002). "Pipeline retirees in Omaha hurt by Enron collapse: Former subsidiary once was the pride of Nebraska city". The Chicago Tribune. Retrieved January 6, 2018.
  16. ↑ "Belco Oil & Gas Corp. History". fundinguniverse.com. Retrieved January 6, 2018.
  17. ↑ Sorkin, Andrew Ross (July 30, 2002). "Berkshire to Buy a Gas Pipeline From Dynegy". New York Times. Retrieved January 6, 2018.
  18. ↑ Roger Stone; Saint John Hunt (2016). "5: JEB Goes to Venezuela". JEB! and the Bush Crime Family: the Inside Story of an American Crime Dynasty. Skyhorse Publishing. ISBN 978-1510706798.
  19. ↑ Commentary: Ken Lay's Audacious Ignorance. Businessweek (2006-02-05). Retrieved on 2013-07-12.
  20. ↑ Bajaj, Vikas; Eichenwald, Kurt (July 6, 2006). "Kenneth L. Lay, 64, Enron Founder and Symbol of Corporate Excess, Dies". The New York Times.
  21. ↑ OsterDowJones. (Dec. 14, 2000) Who will Bush pick to run Treasury?
  22. ↑ "Kenneth Lay: Bush Pioneer". Texans for Public Justice. Retrieved 2010-03-02.
  23. ↑ Ackman, Dan (February 2, 2002). "Lay Lays an Egg". Forbes.com. Retrieved 2010-03-02.
  24. ↑ Johnson, Carrie (10 June 2006). "A Woman of Conviction". Washington Post. Retrieved 17 October 2015.
  25. ↑ Jeremy W. Peters and Simon Romero (5 July 2006). "Enron Founder Dies Before Sentencing". The New York Times. Retrieved 2010-03-02.
  26. ↑ Shaheen Pasha (5 July 2006). "Enron founder Ken Lay dies". CNN. Retrieved 2010-03-02.
  27. ↑ Moreno, Sylvia (July 13, 2006). "Lay Is Remembered As a 'Straight Arrow'". The Washington Post. Retrieved 2010-03-02.
  28. ↑ "Lay victim of `lynching,' speaker at service says". The Chicago Tribune. July 13, 2006. Retrieved 2006-07-13.
  29. ↑ "Ken Lay's memorial attracts power elite". CNN. July 12, 2006. Retrieved 2006-07-13.
  30. ↑ "Enron's Kenneth Lay Defended at His Memorial Service". Bloomberg. July 12, 2006. Retrieved 2010-03-02.
  31. ↑ "Judge Vacates Conviction". The New York Times. October 17, 2006. Retrieved 2006-10-17.
  32. ↑ "Experts See Lay's Death Erasing Conviction". The New York Times. July 7, 2006. Retrieved 2006-06-07.
  33. ↑ Engber, Daniel (July 6, 2006). "Can't the Feds Get Lay's Money?". Slate.com. Retrieved 2010-03-02.
  34. ↑ Hays, Kristen (August 16, 2006). "Prosecutors to oppose wiping Lay's record clean". Chicago Sun-Times. Retrieved 2006-08-16.
  35. ↑ Associated Press (August 16, 2006). "Prosecutors will oppose clearing Lay's record, filing says". USA today. Retrieved 2010-03-02.
  36. ↑ Pasha, Shaheen (July 5, 2006). "Enron founder Ken Lay dies". CNN.com. Retrieved 2010-03-02.
  37. 1 2 Morrison, Mark (July 4, 2006). "Ken Lay's Dark, Ironic Legacy". Bloomberg L.P. Retrieved June 14, 2016.
  38. ↑ Portfolio.com staff (30 April 2009). Portfolio's Worst American CEOs of All Time. CNBC
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