Prosecutor challenges Lay’s stock sales

HOUSTON — Federal prosecutors sought Thursday to torpedo Enron Corp. founder Kenneth Lay’s image as a company champion, trying to show he used the ailing energy giant to bail himself out of personal financial woes in 2001.

Lay obtained more than $70 million in loans from Enron throughout 2001 and repaid most with company stock, even as he encouraged employees to buy more shares.

Lay didn’t disclose those stock sales publicly because regulations required that sales of shares back to a company be reported only in the year after they occur. Unlike his co-defendant in his fraud and conspiracy trial, former Enron Chief Executive Jeffrey Skilling, Lay isn’t charged with improper stock sales.

However, Lay did tell workers less than three months before Enron filed for bankruptcy protection that he had bought stock when, in fact, he had sold more shares than he bought.

In a methodical yet blistering cross-examination, prosecutor John Hueston highlighted Lay’s complicated stock activity throughout 2001 to challenge the ex-chairman’s credibility in portraying himself as a loyal company man who put Enron first.

Lay’s demeanor was markedly more subdued than when Hueston first challenged him late Wednesday. At that time, Lay’s trademark public amiability disappeared as he raised his voice, scowled and snarled repeatedly at the prosecutor who secured an indictment against him in July 2004.

On Thursday, Lay often appeared to treat Hueston like an irritant, but answered inquiries in a matter-of-fact tone.

Yet during lengthy questioning later about one of the case’s most arcane aspects, Lay chastised Hueston.

“I think it’s a real waste of the jury’s time. We’ve spent an hour on this,” the ex-chairman said about allegations he had tried to dodge accounting rules requiring writedowns on overvalued assets, specifically Wessex Water LTD, a British utility.

Lay’s cross-examination will continue Monday, and then the ex-chairman’s lawyer, George Secrest, can launch a second round of questioning.

But as U.S. District Judge Sim Lake noted to Secrest, “Mr. Lay covered a lot of what you would probably cover on redirect.”

Lawyers told Lake they expect other defense testimony and the prosecution’s rebuttal case to wrap up by May 11. If so, closing arguments would take place May 15.