From today's Chron:
The Houston federal grand jury investigating Enron has heard from several witnesses this week about the personal finances of former Chairman Ken Lay.
The witnesses are the first indication the grand jury is considering the possibility Lay engaged in insider trading when he sold $70 million in stock last year as the share price spiraled steadily downward. Federal investigators, however, indicated months ago they would look into Lay's stock trades.
In November 2000, Lay and other Enron executives began taking advantage of a new rule allowing options to be exercised and sold regularly year-round as long as it is done on a plan approved by securities regulators.
Almost every workday, Lay exercised a fixed number of options and sold the same amount of stock on the market, netting the difference. From Nov. 1, 2000, until early February 2001, Lay exercised about 4,000 shares per day; from February to April 2001, the amount dropped to about 3,000; and from May 1 through Aug. 21, the amount went back up to 3,500.
Lay began these programmed sales shortly after Enron stock hit a peak of more than $90 per share in August 2000. He continued on a similar pace as the stock began dropping in February 2001 and throughout the year.
Programmed trading has yet to be tested as a defense against insider-trading charges.
Investigators are likely, however, to be interested in several sales outside the programmed schedule that netted Lay as much as $70 million. In each of those transactions, Lay sold about $4 million worth of shares back to Enron. His attorney previously explained that they were used to pay off loans to various banks that were secured with Enron stock.
The first such transaction was on Dec. 28, 2000. Others came in February, April, May (two), June (six), July, late August (four) and early September.
"Between June and August 2001, the pattern of Lay's insider trading was substantially inconsistent with his prior trading behavior, inconsistent with rational behavior assuming Enron's shares were fairly priced by the market but consistent with rational behavior assuming Lay had a reasonable expectation that the price of Enron's shares was inflated," the report said.
The report concluded there was only "remote chance" the sales were not related to his knowledge of information relevant to the company's stock performance.