July 08, 2004
Kenny Boy surrenders

The last and biggest domino has fallen.

Former Enron Chairman Ken Lay, the man who guided the energy giant to greatness and was at the helm when it crumbled, turned himself into the FBI this morning and was whisked away in handcuffs to Houston's federal courthouse to enter a plea.

"Nice of you all to show up this morning," he told a throng of reporters gathered at dawn outside the FBI's headquarters on East T.C. Jester. Wearing a blue jacket and tie, the 62-year-old businessman, philanthropist and long-time city booster entered the building without further comment.

Accompanied by three FBI agents, Lay was driven in an unmarked sedan to the courthouse, where the handcuffed defendant smiled amiably at photographers as he walked a media gantlet into the courthouse for an appearance before U.S. Magistrate Judge Mary Milloy.

"I have done nothing wrong, and the indictment is not justified," Lay said in a prepared statement Wednesday evening.

Does your heart good, doesn't it?

It appears Lay will be added to the existing case against former CEO Jeff Skilling and ex-chief accounting officer Rick Causey. They are charged with insider trading, securities fraud, wire fraud, conspiracy and lying on Enron financial statements.


Matt Hommel, who worked on Enron Online and now consults for Texas Instruments, said Lay had a job to do "and he blew it."

"Am I bitter? I'm not sure what word would describe it, but you couldn't print it anyway," Hommel said. "Lay did things that should be illegal. If it turns out they weren't, we need to change the law."

John Olson, a former analyst with Merrill Lynch who has said Lay pressured his former bosses to fire him for less-than-stellar reviews of the company, said he hopes the indictment will clear the air about who really knew about Enron's woes and when.

The indictment will also help restore investor confidence in the markets, Olson said.

"It had gotten so bad that at one point people said you shouldn't invest in any company in Houston. It's very important that we get these issues behind us as best we can," Olson said.

Politicians were quick to make hay of the indictment.

"It's about time," said Sen. Peter Fitzgerald, R-Ill., chairman of the consumer affairs subcommittee of the Senate Commerce Committee, which held Enron hearings in 2002. "Enron was as obvious a pyramid as Giza. That it could have been built without Lay noticing was always a ludicrous suggestion."

Colorado Luis thinks that the timing of Kenny Boy's indictment is conveniently favorable for the Republicans, as it distracts from the attention that Kerry/Edwards is getting, plus it makes the government look tough for taking on the Enron evildoers. I see where he's coming from, but I think in the end this arrest will only serve to remind people that Lay was and is a good buddy of the President, despite Bush's odious prevarication on the topic. The Financial Times (via The Stakeholder) gets it right:

The White House can claim that Mr Lay's prosecution demonstrates its commitment to spare no-one - even former donors - in its crackdown on white-collar crime. Indeed, Mr Lay has said in recent interviews that his status as a former friend of the Bush family has made him more, not less, of a target for prosecutors.

The rash of corporate fraud also did not appear to hurt Republicans, the traditional party of big business, in mid-term Congressional elections two years ago.

Even so, the Lay indictment could still damage the president if it adds to a perception articulated by opponents that his administration is run chiefly by and for large corporate interests, with little sympathy for ordinary voters.

The Enron link has re-emerged as the White House has been fending off allegations about its relationship with another politically-connected Texas energy company, Halliburton. Democrats have accused the administration of rewarding the energy services company formerly run by vice-president Dick Cheney with billions of dollars of wasteful contracts in Iraq.

While neither George W. Bush nor his father ever worked for Enron, the relationship with Mr Lay runs deep. Their alliance was a natural one given their overlap in Houston energy and Washington political circles.

Mr Lay supported George H.W. Bush's presidential campaign, and later praised him for pushing deregulation of the energy industry that helped Enron to prosper. The company later hired James Baker, Mr Bush's former secretary of state, to try to land business deals in Kuwait after the first Gulf war.

President Bush, in turn, offered Mr Lay the post of commerce secretary - which Mr Lay declined - and invited him and his wife, Linda, to stay at the White House.

Here's a photo essay of Ken Lay's life and times, and a sidebar story on the recent prominence of the perp walk for white-collar criminals.

Finally, here's the sad story of the demise of Jus' Stuff, Linda Lay's upscale resale shop.

Jus' Stuff has been closed for the summer, but the property is being shopped.

"I can confirm that Jus' Stuff is closed for summer vacation, and there has been an offer on the property," said Lay spokeswoman Kelly Kimberly.


Lay and her daughter opened Jus' Stuff in May 2002 and hawked furniture, antiques and knicknacks the Lays and their friends planned to chuck. Many of the items came from vacation homes the couple unloaded.

The store also offered decorative and design services.

It's unclear if the shop will sell with the inventory or even if the buyers would keep the property, owned by the Lays' real estate company, as a store.

The upscale, secondhand furniture store was dark but chock full of goods Wednesday.

The stand-alone building sits amid houses on West Gray and is valued at $76,830, according to the Harris County Appraisal District. The land is valued at $100,000, bringing the total appraisal value to $176,830.

"If the building is up for sale, I'd guess it would sell pretty well," said Blake Tartt III, a local commercial real estate broker and president of New Regional Planning. "It's a great location. The property doesn't have a lot of parking. But it's on an excellent street that is improving."

Others in the real estate business speculated the property would likely sell for land value because the building, built in 1961, is so old.

But some say 5,000 square feet of land in the Montrose area would be ideal for a small business and could sell for much more.

Hmm. Tiffany and I drove past Jus' Stuff two or three months ago on a Saturday afternoon and it was closed at the time. Either Linda Lay has been keeping banker's hours, or it went on summer vacation before the kids got out of school.

If I recall correctly, the building Jus' Stuff is in used to be a pet shop. Parking is indeed limited, with a tiny lot and the adjoining side road your best options - you can't park on that part of West Gray. There has been a lot of new construction in that area (it's maybe three or four blocks from where I used to live), though it's mostly been on the smaller interior roads than on West Gray, which is the main thoroughfare. I agree that it won't be hard to find a buyer if they're really selling.

Posted by Charles Kuffner on July 08, 2004 to Enronarama | TrackBack

Unfortunately, indicting Ken Lay is one thing, convicting him is another.

Posted by: William Hughes on July 8, 2004 8:47 AM

I love the expression on the police officer's (? FBI agent's?) face.

Posted by: Karin on July 8, 2004 8:56 AM