Enron: Lay signed off on deal

February 12, 2002 Posted: 2114 GMT

By Staff Writer Luisa Beltran

NEW YORK (CNN/Money) -- A document obtained by CNN/Money Tuesday showed former Enron Corp. Chairman and CEO Kenneth Lay may have approved deals with at least one of Enron's off-the-books partnerships.

Lay, who was subpoenaed to appear at a congressional hearing Tuesday, sat through 90 minutes of attacks from congressional investigators before he declined to testify, citing advise from his lawyer.

Meanwhile, a deal approval sheet from June 2000, appears to have Lay's signature, which authorizes a transaction between Enron and LJM2 Co-Investment LP.

Formed in 1999, LJM2 was a partnership established, led and part-owned by former Enron CFO Fastow.

Enron allegedly used the LJM2 partnership and others like it to produce hundreds of millions of dollars of earnings and to hide millions in debt. Snowballing concern about these partnerships, which are under federal investigation, spooked investors and eventually forced Enron to seek Chapter 11 bankruptcy protection in December.

Lay and his wife have said in recent interviews that he wasn't fully informed about the operations of those partnerships.

The deal-approval sheet, in which Enron sold access to its nationwide fiber-optic network to LJM2 for nearly $91 million, carries a number of signatures including those of Chief Accounting Officer Richard Causey and Chief Risk Officer Richard Buy.

On the last line, the names of Jeff Skilling, then the company's president and chief operating officer and Enron's then-vice chairman Joseph Sutton are typed in. However, the signature appears to be that of Kenneth Lay, who was chairman and chief executive at Enron at the time. Congressional investigators also believe the signature to be Lay's, sources familiar with the situation said.

Lay resigned as CEO of Enron in December 2000 and Skilling assumed that post. Skilling then resigned last August from Enron and Lay resumed his role as CEO of the energy trader.

The document indicates that Lay was more involved in the activities of LJM than previously believed.

Another document, a deal approval sheet from July 2000,  involves the $10 million sale of Enron's stake in three European power plants to LJM2. The sheet, for a project known as "Margaux," contains Skilling's signature of approval.

Skilling, who did testify last week, repeatedly told a congressional panel that he did not know the company was using off-the-books partnerships to hide debt.

A key lawmaker cast further doubt earlier this week on Skilling's testimony. Rep. John Dingell (D-Mich.), ranking member of the House Energy and Commerce Committee, sent a letter Monday to Skilling's attorney, Bruce Hiler, where he pointed to a document from an October 2000 meeting that shows the former CEO had knowledge that the partnerships were used to inflate profits at Enron.

Lay, once mentioned as a possible energy secretary for the Bush administration, invoked his Fifth Amendment right under the U.S. Constitution against self-incrimination and refused to testify before the Senate Commerce Committee.

He is the latest Enron-related executive to refuse to testify. Instead, Lay sat stone-faced through blistering attacks from Republican and Democratic senators on the panel. In fact, some of the most vicious attacks came from Republicans, whose party benefited heavily from Enron's generous political donations.

"I'd say your were a carnival barker, except that wouldn't be fair to carnival barkers," Sen. Peter Fitzgerald, R-Ill., said. "A Carney will at least tell you up front that he is running a shell game. You, Mr. Lay, were running what was purported to be the seventh-largest corporation in America."

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Sen. John McCain, R-Ariz., expressed his disappointment in Lay's decision not to testify. McCain read from a 1999 speech Lay gave, talking about "strength of character." Lay and other top executives of the bankrupt energy trader had failed to follow those words, McCain said.

Lay said he was deeply troubled about invoking the Fifth Amendment. "I come here today with profound sadness about what has happened to Enron, its current and former employees, and stakeholders," he said. "I have been instructed by my counsel not to testify based on my Fifth Amendment right. I cannot disregard my counsel's instructions."

Lay told the Senate panel that he would not answer questions of any other congressional committee and subcommittee. A Lay spokeswoman later confirmed that the former CEO will invoke his Fifth Amendment right at a separate House panel Thursday.

Enron's ousted chief financial officer, Andrew Fastow, also declined to testify last week. Fastow is credited as the mastermind behind the Enron partnerships that helped hide the energy trader's debts and ultimately led to a restatement of earnings that caused investors, customers and trading partners to lose confidence in the company. Enron filed the biggest bankruptcy in U.S. history on Dec. 2.

William Powers also appeared at the Senate hearing Tuesday. Powers is the author of a report by Enron's independent directors, that says Enron executives used off-book-partnerships to hide $1 billion in debt and inflate profits.