A Houston federal grand jury has charged former Enron Chairman and CEO Kenneth Lay with an unknown number of crimes today under a sealed indictment. The indictment will be unsealed in a hearing tomorrow morning, at which time Mr. Lay is expected to make his initial appearance in the criminal case. At the same time, the Securities and Exchange Commission is expected to charge Mr. Lay with an assortment of civil securities fraud charges.
Mr. Lay served as Enron’s chief executive for 15 years and was running the company when it collapsed into bankruptcy in December 2001. The indictment is expected to charge Mr. Lay for his alleged role in a broad scheme to manipulate Enron’s financial statements, similar to the charges that are pending against former Enron CEO and COO, Jeffrey Skilling and former chief Enron accountant, Richard Causey. Assuming that the indictment is as broad as the one against Messrs. Skilling and Causey, Mr. Lay will be facing what amounts to a life sentence in prison.
Meanwhile, this NY Times piece provides a good overview of the going concern liquidation of Enron’s assets that has been taking place in the company’s chapter 11 case.

On the heels of an extraordinary front page NY Sunday Times interview, the Chronicle reports that former Enron CEO Ken Lay is in Washington, D.C. this week to lobby for a meeting between the Lay’s lawyers and the prosecutors working on the Enron Task Force.
I expect that Lay will be indicted soon, maybe even before the July 4th weekend.

In an unusually bold move in connection with an incredibly difficult case to defend, former Enron chairman and CEO Kenneth Lay is the subject of a wide-ranging interview on the Enron criminal investigation that appears in this NY Times Sunday front page article.
Normally, a defense attorney would never allow a client under scrutiny from multiple grand juries to discuss the subject of those investigations on the front page of the NY Times. However, the Enron case is not normal, and Mr. Lay’s able defense attorneys likely figure that Lay will be indicted and has nothing to lose at this point in attempting to mount a public relations campaign in a probably futile attempt to counter the extraordinarily negative image that anyone related to Enron evokes throughout American society.

Mr. Lay said that he had remained silent on the advice of lawyers, but is coming forward now to explain his views of a story that he says has become infused with myths. While not saying so explicitly, he suggested that he was motivated by a desire to tell his side both to the prosecutors on the Justice Department?s Enron Task Force who have been investigating him and the citizens of Houston who may well sit in judgment on him.

That said, the article is simply astounding given Lay’s current situation:

“If anything, being friends with the Bush family, including the President, has made my situation more difficult,” Mr. Lay said in a recent interview, “because it’s probably a tougher decision not to indict me than to indict me.”

Now, on the eve of what may be the government’s final decision on whether to charge him with a crime, Mr. Lay is talking for the first time about the company’s collapse in 2001 and the scandal that enveloped it. In more than six hours of interviews with The New York Times, Mr. Lay remained steadfast in his expressions of innocence, even as he acknowledged, as head of the company, accountability for the debacle rests rightfully with him. “I take full responsibility for what happened at Enron,” said Mr. Lay, 62. “But saying that, I know in my mind that I did nothing criminal.”

And even though Mr. Lay takes full responsibility, that does not stop him from pointing the finger of fault against others, including his probable main accuser:

As Mr. Lay describes it, the Enron collapse was the outgrowth of the wrong-headed and criminal acts of the company’s finance organization, and specifically its chief financial officer, Andrew S. Fastow. He says that both he and the board were misled by Mr. Fastow about the activities and true nature of a series of off-the-books partnerships that played the decisive role in the company’s collapse.

In the end, Mr. Lay said, the Enron story is one of corrupt executives in a finance organization led by Mr. Fastow, the former chief financial officer, who took advantage of the company for their own personal benefit and ultimately destroyed it. Mr. Fastow has pleaded guilty to fraud and is cooperating with the government.
?At our core, regrettably, we had a chief financial officer and a few other people who in fact mismanaged the company?s balance sheet and finances and enriched themselves in a way that once we got into a stressful environment in the marketplace, the company collapsed,? he said. ?But by the same token, most and I mean 98 percent of the people who worked at Enron were good, honest, hardworking individuals. They were not crooks.?

And what about Mr. Lay’s former net worth of almost a half billion?:

The years since the Enron collapse have transformed Mr. Lay. The changes in his financial status are stunning. At the beginning of 2001, Mr. Lay said, he had a net worth in excess of $400 million ? almost all of it in Enron stock. Today, he says his worth is below $20 million, and his total available cash not earmarked for legal fees or repayment of debt is less than $1 million.

The article goes on to do a reasonably good job of explaining Lay’s Enron stock sales during the company’s demise in late 2001, most of which were forced sales to meet margin calls. Those stock sales are reportedly a big part of the current criminal investigation against Lay, who continues to maintain his innocence of any criminal wrongdoing:

Despite the rumblings that criminal charges against him could well be imminent, Mr. Lay says he is sanguine. ?I know in my mind I did nothing wrong and nothing criminal,? he said. ?But I?d say if it does happen, it?s a great miscarriage of justice.?
But, if faced with indictment, would Mr. Lay consider pleading guilty? ?Absolutely not.?

Read the entire article.

Mike Ramsey, the Houston-based criminal defense attorney who is representing former Enron CEO and Chairman Ken Lay, has requested another meeting with the Enron Task Force to plead his case that Mr. Lay should not be indicted.
Ramsey’s move in requesting the meeting with prosecutors is unusual, but the Enron case is such a hot button item culturally and politically that creative tactical decisions are necessary. Ex-Enron CEO Jeff Skilling asked for a similar meeting before he was indicted earlier this year, but it did not do much good — Skilling was indicted on 35 felony counts a few days later.
Lawyers close to the case have said federal prosecutors plan to ask a grand jury any day to indict Lay on charges relating to the last few months he was at the helm of Enron as the company plummetted into bankruptcy in late 2001.

U.S. District Judge Sim Lake approved an agreed order that allows ex-Enron CEO Jeff Skilling to receive what could be approximately $1 million in annual interest earnings off a portion of the $66 million in assets that Judge Lake froze earlier pursuant to the Enron Task Force‘s request. Here is Judge Lake’s freeze order in the Skilling case.
As part of the deal that led to the agreed order, Skilling will abandon his appeal of Judge Lake’s earlier freeze order that granted the Task Force’s motion to freeze about $55 million of Skilling’s liquid assets, his River Oaks home in Houston, and a Dallas condo.
The judge’s new order allows $3.7 million from the frozen assets to be applied to a margin debt balance and also states that, if Skilling is convicted, the government could seek forfeiture of what remains of the $23 million funds in trust that one of Skillings’ law firm holds to defend Skilling in criminal and various civil lawsuits.
Skilling has pleaded not guilty to 35 charges in a 57 page indictment that accuses him and former Enron chief accountant Richard Causey of a wide range of securities fraud, false statements, insider trading and conspiracy charges. The Task Force alleges they lied and schemed to pump up Enron’s stock price to enrich themselves at the expense of the company and its shareholders. Defense lawyers for Skilling and Causey are expected to defend the cases primarily on the grounds that all of the deals that Skilling and Causey approved at Enron were were reviewed by numerous outside lawyers, consultants, and accountants who approved the deals.

U.S. Magistrate Frances Stacy told ex-Enron CEO Jeff Skilling this afternoon that he must quit drinking alcohol, get both alcohol and mental health treatment, be subject to a curfew and get a job or do volunteer work in order to remain free pending his criminal trial in connection with the collapse of Enron. Judge Stacy, handling the matter for U.S. District Judge Sim Lake, added those restrictions to Skilling’s $5 million bond because of a bizarre escapade in New York City last month that landed Skilling in the hospital for a night. Judge Stacy declined to add $2 million to his $5 million as prosecutors requested, which was the absolute right decision.
Prosecutors have said Skilling violated his bond by being seriously drunk, trying to lift a woman’s blouse in search of an FBI wiretap, and attempting to steal a car’s license plate. Defense attorneys contended the government has gotten its facts wrong about the incident and Skilling, though he had been drinking, was a victim.
Earlier posts on Skilling’s New York adventure can be reviewed here.

As noted earlier here, the Enron Task Force has requested that the Court in its criminal case against former Enron CEO Jeff Skilling impose additional conditions on Skilling’s pre-trial release because of Skilling’s well-publicized bender in New York City on April 9 that resulted in Skilling’s brief hospitalization in New York.
Now, Skilling’s lawyers on Wednesday filed pleadings in the criminal case that basically assert that Skilling’s New York adventure was no big deal and accuses the government of prejudicing the jury pool by improperly releasing Skilling’s high blood alcohol level in the Task Force’s pleadings. The Task Force is asking that Skilling be placed under a midnight curfew, restricted more in his travel, report weekly to probation department officials, and post an additional $2 million bond as a result of the New York incident.
Interestingly, Skilling’s pleading does not contest that Skilling’s blood alcohol content was measured at .19 during his brief hospitalization, but notes that hospital workers said that he appeared “only mildly intoxicated.”
New York City hospital workers obviously have high standards for concluding that someone is “very intoxicated.”

The bizarre tale of former Enron CEO Jeff Skilling‘s hospitalization in New York a couple of weeks ago took another twist as the Enron Task Force filed pleadings in the pending criminal case against Skilling today contending that Skilling’s conduct violated terms of his pre-trial release arrangement.
As expected, Skilling was stone drunk when he was hospitalized (he had a blood alcohol level of .19, which is very drunk). In its pleading filed today, the Task Force does not specify any proposed modification to the terms of Skillings’ pre-trial release, probably because they are still scratching their heads over the incident themselves.
On a serious note, Skilling is facing a criminal trial in an extremely unfavorable venue that, if he loses, probably will result in what amounts to a life sentence in federal prison. Such pressure must be generating incredible stress on Skilling, in addition to the stress he is enduring from his decimated business career. People will do unusual things under rxtraordinary stress. My sense is that Judge Lake will understand that will move the case past this incident without much comment.

Former Enron CEO Jeffrey Skilling was taken to a hospital early today after several people called police saying he was pulling on their clothes and accusing them of being FBI agents. New York police found Skilling at 4 a.m. at the corner of Park Avenue and East 73rd Street and determined he might be an “emotionally disturbed person.”
Update: This Chronicle follow up story contains Skilling’s contention that he and his wife were attacked and that no bizarre behavior as reported in the initial story took place. The NY Times is calling the matter a “police incident.”