No tears for Ken Lay

Don't cry for Kenny Boy, America. I for one refuse to mourn the death of a slimeball. Ken Lay’s death makes me sad, but only the way Himmler’s suicide at Nuremberg makes me sad: the bastard escaped his just punishment. Now it seems Kenny Boy's croaking may help his survivors benefit from his crookery. Read the NY Times article about it. I’ve also blogged an obit, and a previous blog about Lay and his 15 houses, lest we forget how he profited from his fraud. Don’t forget he died in the lap of luxury, snacking on the lush fruits of his slimeballness.


1. Lay's Death Complicates Efforts to Seize Assets
By SIMON ROMERO

In yet another bizarre twist to the Enron saga, the sudden death of Kenneth L. Lay on Wednesday may have spared his survivors financial ruin. Mr. Lay's death effectively voids the guilty verdict against him, temporarily thwarting the federal government's efforts to seize his remaining real estate and financial assets, legal experts say.

"The death of Mr. Lay in all likelihood will render the government's hard-fought victory null," said Christopher Bebel, a former federal prosecutor based here who specializes in securities fraud.

But while the death of Mr. Lay may have limited government efforts in his criminal case, he remains the subject of civil lawsuits by the Securities and Exchange Commission and former investors and Enron employees. Those lawsuits could still proceed, with the aim of taking control of some of Mr. Lay's remaining assets.

Mr. Lay and Jeffrey K. Skilling , the two chief executives who guided Enron through its rise and fall, were found guilty in May of fraud and conspiracy, and were free on bail pending their sentencing.

Just last Friday, the Justice Department had moved to seize a total of $183 million in assets belonging to the two men.

The bulk of those assets belong to Mr. Skilling. Five years ago, Mr. Lay's personal fortune was valued as high as $400 million. But a large part of that was tied to the value of Enron's stock, which is now virtually worthless.

Mr. Lay testified at his trial that his net worth had declined to liabilities of $250,000, hampered by mounting legal bills and poor-performing investments. But his finances were apparently not so dire. According to legal documents filed at the federal courthouse here Friday, Mr. Lay had holdings in an investment account at Goldman Sachs valued at $6.3 million.

In addition, prosecutors said that Mr. Lay's full-floor luxury apartment in this city's River Oaks district had at least $1.5 million in value that could be forfeited to the United States.

The government's forfeiture effort ahead of the planned sentencing of Mr. Lay and Mr. Skilling this fall, however, has been thrown into doubt, at least in relation to Mr. Lay's assets since the death of a criminal defendant before his sentencing and the appeal process may void the criminal case against him.

"Technically, he was found guilty, but that's extinguished as of today," said Joel M. Androphy, a prominent defense lawyer in Houston.

A person involved in the government's action against Mr. Lay, who did not want to be identified because of the sensitivity of the case, said that Mr. Lay's death did not necessarily rule out proceeding with forfeiture actions, explaining, "The family at the end of the day cannot sit on the fruits of the fraud." But, this person said: "Even if the verdict is nullified, he paid for his actions with his life. That is more tragic."

The civil lawsuits against Mr. Lay may continue with efforts to seize his remaining assets, but even those moves may be complicated by his death since technically there was no conviction of Mr. Lay in the criminal case to rely upon as proof.

Still, lawyers in the civil lawsuits may proceed against Mr. Lay's remaining assets through motions inspired by admiralty law. Under that law, the government or a private party can take action against property (or the ship) without going after the owner (the captain), legal experts said.

Lawyers involved in the civil lawsuits, however, have already signaled that they were more interested in seeking compensation from institutions with deeper pockets that may have profited from improper dealings with Enron, like Wall Street investment banks, rather than focusing on Mr. Lay. Shortly after Enron filed for bankruptcy protection in late 2001, Mr. Lay still had extensive real estate holdings, including three beachfront homes in Galveston, Tex., and two luxury homes in Aspen, Colo., one with five bedrooms and the other with four bedrooms. All those properties have since been sold.

Any life insurance policies bought by Mr. Lay may also be shielded from federal seizure efforts since state laws normally cover such payments. While jurors found Mr. Lay guilty, his death may also complicate any efforts to go after life insurance proceeds, even if the original policies were acquired with ill-gotten gains.

Attention now shifts to Mr. Skilling, Mr. Lay's protégé. The sentencing of Mr. Skilling is now set for October instead of September at the request of his Los Angeles-based lawyer, Daniel Petrocelli, who had a previously scheduled trial involving the rock band The Eagles.

Mr. Skilling has more assets open to federal seizure than Mr. Lay had, including more than $50 million in cash and securities in a Charles Schwab account, $4.6 million in value at his 9,000-square-foot home in Houston and a condominium worth nearly $580,000 in Dallas, according to the government's forfeiture documents.

Mr. Petrocelli said the government's efforts to go after the assets of his client and those of Mr. Lay illustrated an overreaching of federal authority. "The issue is the recklessness and overzealousness with which the government has pursued the Enron case right from the inception," Mr. Petrocelli said.

At issue, too, are Mr. Skilling's obligations to his lawyers. Mr. Petrocelli's law firm, O'Melveny & Myers, is awaiting more than $20 million of payments from its client for work carried out since last September. "Jeff wants to pay his lawyers, to whom he owes tens of millions of dollars," Mr. Petrocelli said, "and would like to satisfy family obligations including child support."

Lawyers for Mr. Lay may also be left with unpaid invoices. Michael Ramsey, a lawyer for Mr. Lay who experienced his own heart problems during the trial, declined to comment on Wednesday, saying simply, "I am not well."

For Mr. Skilling, an even more pressing concern may be his sentencing before Judge Simeon T. Lake III, with sentencing experts saying Mr. Skilling could get more than 20 years of jail time in a medium- or maximum-security prison, in line with federal sentencing guidelines. If anything, Mr. Lay's death may warrant even harsher scrutiny of Mr. Skilling's crimes by Judge Lake.

"Jeff Skilling is quite literally the last man standing in the Enron scandal," said Robert A. Mintz, a former federal prosecutor now in private practice in New Jersey.


2. Kenneth L. Lay, 64, Enron Founder and Symbol of Corporate Excess, Dies
By VIKAS BAJAJ and KURT EICHENWALD

Kenneth L. Lay , the son of a Baptist preacher in rural Missouri who rose to the pinnacle of corporate America as head of Enron before becoming a symbol of corporate excess, died yesterday in Aspen, Colo. He was 64.

The cause of death was coronary artery disease, a forensic pathologist who performed the autopsy, Dr. Rob Kurtzman, told reporters yesterday in Grand Junction, Colo.

Mr. Lay's sudden death — family and friends say he did not have a history of heart disease — came six weeks after he was convicted of 10 charges of conspiracy, fraud and lying to banks and almost four months before he was to be sentenced for those crimes. He faced years in prison.

As the chief executive of Houston Natural Gas in the 1985, Mr. Lay helped engineer the company's merger with InterNorth of Omaha; the combined company would be named the Enron Corporation a year later. Enron went on to become the nation's seventh-largest company, pioneering and dominating the trading of natural gas and electricity. But in December 2001, the company collapsed amid accounting scandals.

Kenneth Lee Lay was born in April 15, 1942, in Tyrone, Mo., the second of three children of Omer and Ruth Lay. His family moved frequently during his childhood as his father, a lay preacher, tried to establish himself in various trades and business ventures. When Mr. Lay was 6, the family's fledging chicken business was wiped out when a large shipment of birds was killed in a truck accident.

He learned the value of money early, supplementing the family's meager income by delivering newspapers, cutting grass and baling hay.

Those childhood lessons would be reinforced when he studied economics under the tutelage of Pinkney Walker, an economics professor at the University of Missouri who became his mentor.

In the late 1960's, Mr. Lay landed his first real job, with the Houston-based Humble Oil and Refining, later part of Exxon . As one executive responsible for setting up Humble Oil's corporate development department, Mr. Lay received what seemed a princely salary of $13,000 a year. It was around this time that he married his college girlfriend, Judith Ayers. They had two children.

While working at Humble, Mr. Lay began to pursue a doctorate in night school at the University of Houston . Then, with the draft board back in Missouri eager to get hold of him, Mr. Lay applied to the Navy's officer candidate school in Rhode Island and was accepted, heading out in January 1968. That led to his first experience in Washington; after officers' school, he was assigned to the Pentagon as an economist.

When his time in the military was up, Mr. Lay was preparing to return to the corporate world when he heard from Mr. Walker, who had been named by President Richard M. Nixon to the Federal Power Commission. Mr. Walker persuaded his star student to join him as his technical assistant.

After Washington, Mr. Lay did return to the business world, leaving for a job at the Florida Gas Corporation. His next big break came in 1981, when he moved to Houston, a city that would remain his home for decades to come. There, he joined a larger pipeline company, Transco, as president and chief operating officer.

The 1980's was a decade of crucial developments in Mr. Lay's life. It was then that he would marry his second wife, create Enron and forge ties to political leaders.

In 1981, as his first marriage was failing, he followed a former boss to Transco, a pipeline company in Houston. He later married Linda Phillips Herrold, who had once been his secretary at Florida Gas.

When Mr. Lay was at Transco, many of the pipeline industry's financial contracts at the time were built on a faith that oil prices would continue rising; the arrangements required the companies to buy a set percentage of a gas well's production, at preset, ever-increasing rates.

But when oil prices fell in the early 80's, the cost of gas dropped, too, leaving the pipeline companies on the hook for buying fuel at excessive prices. The problem hit Transco hard. So Mr. Lay corralled a group of Transco analysts, and urged them to play around with a new idea: setting up a spot market for gas, which would allow producers to sell the gas directly to customers — taking the pipeline operators and distributors out of the middle.

The idea was a rollicking success and alleviated Transco's financial bind. Mr. Lay emerged as something of a legend in the industry, a man who had transformed near certain disaster into a new business. Plenty of other companies sat up and took notice.

By May 1984, Mr. Lay was approached by a smaller rival, Houston Natural Gas, or H.N.G., about taking over the company as chairman and chief executive. He took the job, assuming the helm of a major corporation for the first time at the age of 42.

In less than a year, H.N.G. was on the path to becoming Enron. Internorth, an Omaha energy company, was fighting off a corporate takeover and, as a defensive maneuver, approached Mr. Lay about merging the two companies. Mr. Lay was intrigued, and on May 2, 1985, the merger of the two companies was announced. The merged company became loaded down with high-interest debt, used to finance the deal.

By 1986, after some internal struggles, Mr. Lay was fully in charge of the company, which by then had been rechristened Enron.

At Enron, Mr. Lay recruited Jeffrey K. Skilling , a McKinsey & Company consultant, in 1988 and the two began moving it away from its staid pipeline business and pushed it deeper into trading, first in natural gas and later in electricity.

As he moved up the ranks of Houston's business elite, Mr. Lay also made connections in the city's deep political pool. He would establish a close relationship with Vice President George H. W. Bush , making large campaign contributions and heading critical committees. He was co-chairman of Mr. Bush's 1992 re-election committee and the chairman of the Republican National Convention held in Houston that year.

His relationship with the Bush family was solidified in July 1990, when Mr. Lay helped to orchestrate the World Economic Summit in Houston at the request of the first President Bush. What had seemed to be an organizational mess before Mr. Lay stepped in proved to be an international showcase.

Mr. Lay continued his close contact with Washington — remaining close friends with Mr. Bush, later golfing with President Bill Clinton , and eventually establishing a close relationship with George W. Bush , while he was the governor of Texas.

When the younger Mr. Bush set off on his quest to win the 2000 presidential election, Mr. Lay served as a major player, playing host at big fund-raisers and contributing plenty of his own money to the effort. After Mr. Bush won the election, Mr. Lay was considered for the job of Treasury secretary, but was passed over.

Still, there was no disguising his close relationship to the Bush family; at the inauguration, the first President Bush and his wife flew to Washington with Mr. Lay on an Enron corporate plane. Mr. Lay's survivors, all of Houston, include his wife, Linda; a son, Mark; a daughter, Elizabeth Vittor; and three stepchildren, Robyn Lay, Beau Herrold and David Herrold.

People who found themselves on the other side of Mr. Lay's goals and ambitions found him determined, strong-willed and effective. Curtis L. Hébert Jr., the chairman of the Federal Energy Regulatory Commission , frequently disagreed with Mr. Lay on how much and how quickly the nation should deregulate electricity markets.

Neither convinced the other, but Mr. Lay did not have to. His Republican colleagues frequently outvoted Mr. Hébert.

"Ken Lay was a charming fellow and always presented himself as such, even though we didn't agree," Mr. Hebert said. "I think that was part of his success."

It was, perhaps, also part of his eventual failure.

Bill Burton, a Texas lawyer who had known Mr. Lay for more than 10 years, compared Mr. Lay to Icarus, the figure in Greek mythology who was given wings made of feather and wax but fell into the sea when he flew too close to the sun.

"The Enron and Ken Lay stories are best told in an English literature class, or a classics class," Mr. Burton told an interviewer in 2002, "where you are trying to explain what hubris is all about."


3. From Huffington Post:
Mo' Money: I Don't Get It
By John Seery

Okay, ex-Enron smart guys Ken Lay and Jeff Skilling were convicted last month of fraud and conspiracy. But their criminality strikes me as but the tip of an iceberg, not legal so much as cultural. I still can't get my head around the widely reported fact that prior to Enron's downfall, Ken Lay and his wife owned 15 homes, mostly in Texas and Colorado. (By the way, for a $30 ticket, you can now take the "Lifestyles of Houston's Rich and Infamous: The Enron Tour," a five-hour excursion through Houston's posh neighborhoods where former Enron executives once maintained their lavish mansions.) Ken and Linda Lay are reportedly still living in their 33rd floor luxury Houston condo with its hand-carved gothic interior, valued at $7.9 million in 2002. He sold his four Aspen properties in 2002 and 2003 for a total of $23.879 million. In 2002 Linda opened her store Jus' Stuff to sell off some of the family furnishings, including a bronze, life-sized Eve statue for $13,000 and a red-and-brown padded bench ornamented with angels for $5,200.

But back to those 15 houses: Why would a sentient, functional human being want fifteen houses? What do you do with fifteen houses? Did any of those houses feel like a home? Would you remember where the bathrooms are in fifteen different floor plans? Did Ken and Linda hang out with their neighbors in any or all of those houses? Did they keep fifteen duplicate sets of their favorite spices, paintings, books, china, pajamas, underwear and other toiletries in those houses, or did they furnish every one of them uniquely? What a hassle. Sorry, I just don't get it. I don't see the attraction. Mind you, I understand--I think I do--the basic human motivations that fuel our capitalist system (though the latter-day version certainly departs from Ben Franklin's frugality or Max Weber's notion of an ascetic work ethic). I understand wanting to surround yourself (and your loved ones) with comfortable and beautiful material items. I understand and appreciate luxury and even extravagance. But maintaining fifteen residential homes (not just as property investments) seems beyond the pale--and I don't think you have to be a commie pinko to be baffled by such perverse behavior. At what point did Ken and Linda decide that they needed to jump from, say, five to ten homes? And what was the trigger that prompted them to cross the threshold from fourteen to fifteen? What were they feeling ? Were they happy at that point, finally, or was number sixteen in the offing? Did acquiring each house seem like a new triumph, or did the sense of accomplishment wear thin around the eight or nine mark? Did they exult in their plentitude--for instance, did they see themselves as somehow closer to God with each new purchase, members of the elect? (Ken's father was a Baptist minister.) Or were they simply dog-eat-dog, top-of-the-heap, out-of-control consumerists--people who had just lost perspective, caught up in a never-ending whirlwind of acquisition?

Yet Ken Lay was hardly the richest man in America--not even near the uppermost echelon--and that's what gives me the creeps. Linda Lay complained on television that the $300 million that Ken had appropriated to himself over Enron's final three-year period was not enough. Many of our top CEO's are routinely pulling in multimillion dollar "pay packages" per year over multiple years, and not because their actual corporate performances warrant such salaries. These well-positioned folks basically win the equivalent of a mega-millions lottery year after year (e.g., former Exxon Mobil Corp. Chairman Lee R. Raymond made $686 million from 1993 to 2005)--and they yearn for more! I'm thinking: If you reach--let's just pick a round figure--a personal net worth of $100 million, you should probably quit your day job and try your hand at something else. Diversify your lifestyle portfolio. Take up a hobby, like woodworking or gardening. Smell the roses. Join a gym, go regularly, and get in shape. Hang out with some friends at Starbucks. Learn to play a musical instrument, and start a band. Or listen to live music. Volunteer your services, in a face-to-face setting. Read. Then read some more. Go back to school. Spend more time with your kids, or grandkids. Lose the business suits: wear comfortable clothes. I think Bill Gates , at fifty years old, is finally getting the idea that there may be more to life than beating Microsoft's competitors.

The canards that people throw around, both critics and defenders, to explain why today's super-rich want to get even richer don't make complete sense to me. The word "greed" is simply a gloss, an empty abstraction. It doesn't explain why any sane person would want to appropriate billions unto himself or herself. Sure, I like to eat a slice of chocolate cake every now and then. My young children might think that they would like to eat the whole cake at one sitting, but I teach them that they'd get a tummy ache and grow fat and/or diabetic. But we've got grown adults in America gorging themselves, as it were, on chocolate cake after chocolate cake after chocolate cake. This is not "rationally self-interested" behavior any more, as the economists so often put it. It's completely over the top. It defies common sense. Call in the anthropologists and clinical psychologists to study it better. The word "addiction" doesn't arrest it. It's more like a freak show.

Western literature is replete with warnings against excessive wealth. Aristotle thought that money making should be seen as an instrumental activity, but not as the point and purpose of life itself. Jesus said very clearly that you cannot serve both God and mammon. Dante put the Gluttons in the 3rd circle of his Inferno, where they'd wallow in garbage and excrement for all of eternity; he put the Wasters, those who in life lacked moderation in thinking about money, in the 4th circle of hell, where their souls would be dragged down for all time by enormous weights; and he put the Usurers in the 7th circle, where they will squat with leather purses hanging around their necks, with their eyes forever fixed on their purses. Walt Whitman, in "Democratic Vistas," saw over-exercised commercial ambitions as a threat to the future of American democracy: "The depravity of the business classes of our country is not less than has been supposed, but infinitely greater...In business (this all-devouring modern word, business) the one sole object is, by any means, pecuniary gain. The magician's serpent in the fable ate up all the other serpents; and money-making is our magician's serpent, remaining to-day sole master of the field. The best class we show, is but a mob of fashionably dress'd speculators and vulgarians." Andrew Carnegie, in "The Gospel of Wealth," advocated aggressive wealth accumulation but then thought that rich people should eventually turn their attentions and monies over to charity--and if a rich person didn't properly dispose of his wealth, Carnegie proffered this public verdict as his epitaph: "The man who dies thus rich dies disgraced."

We have plenty of brainy people in this country who produce charts and graphs and equations supposedly demonstrating that if outlandishly rich people continue to do their thing unabated, all boats will rise, the economy will grow and grow, the profit motive should therefore be left entirely unregulated, in any official or unofficial way. Paul Krugman suggests that the Democrats should face reality and realize that class concerns largely define political loyalties. Myself, I continue to be haunted by Goethe's Faust : It would seem that we are living in a country populated by a lot of people who apparently have bargained away their souls for the prospect of experiencing worldly insatiability.