Lay got ‘more involved’ after Enron CEO quit

HOUSTON – Enron Corp.’s former investor-relations chief on Thursday acknowledged that founder Kenneth Lay had to jump back into nuts-and-bolts management of his company when he resumed the role of chief executive after Jeffrey Skilling resigned less than four months before Enron collapsed in December 2001.

“He had to get more involved, yes,” Mark Koenig said in response to cross examination by lead Lay lawyer Michael Ramsey in his sixth day on the witness stand. Koenig is the government’s first witness in the fraud and conspiracy trial of his former bosses.

“He was involved before, but he took on a whole new duty,” Koenig said. Lay remained chairman of Enron throughout 2001, but he ceded the CEO position to Skilling in February that year. Skilling abruptly resigned six months later.

Lay’s new duties included a hastily arranged conference call with Wall Street analysts on the day Enron announced Skilling’s resignation in mid-August 2001, Koenig said. He said Enron was obligated to make executives available on the call to try to calm any market jitters sparked by the unexpected resignation.

Ramsey’s questioning appeared to try to highlight what Lay claimed publicly when he was indicted in July 2004: Lay knew of no skullduggery, and was like a student cramming for an exam when his hand-picked successor as CEO quit.

“We think the company’s on solid footing,” Lay told analysts on the August 2001 conference call played in court for the jury. On the same call, Skilling tried to reassure analysts that his departure was “purely a personal decision” and he stressed that it had nothing to do with Enron.

Ramsey said he expected to finish questioning Koenig on Monday, when the trial will resume.

At times, U.S. District Judge Sim Lake shut down Ramsey’s efforts to delve into issues that weren’t covered first when prosecutors questioned Koenig. Court rules limit cross examination to areas touched on in direct examination.

In one instance, Ramsey sought to question Koenig about a comment about Lay by California Attorney General Bill Lockyer to the Wall Street Journal in early 2001, the second year the state suffered through a power crunch that led to rolling blackouts and astronomical utility bills. Neither Lay nor Skilling are charged with manipulating California’s power market, but three former Enron traders have pleaded guilty to doing so.

“Do you know of personal threats made against Mr. Lay by the attorney general of California?” Ramsey asked, his voice raised. When a prosecutor objected, Lake cut Ramsey off. “I don’t know of any threats against Mr. Lay that came up on direct,” the judge said.