Shaking Ken Lay's Cool

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If you meet former Enron founder Ken Lay in an elevator he's a kind, cordial, grandfatherly guy. But under cross-examination this week in the Enron fraud and conspiracy trial, Lay appeared to be an angry, defiant, defensive man. It was the demeanor people had expected when co-defendant Jeff Skilling testified, not from Lay.

Jurors swiveled their seats 45 degrees to the left so they could look directly at Lay as he testified about being "on the battlefront" in the final months of Enron before it collapsed under a pile of debt in 2001. Lay blamed Enron's collapse largely on his former CFO Andy Fastow and described a witchhunt to destroy the company led by Wall Street Journal reporters and short sellers.

Then prosecutor John Hueston pointed out that Lay's son, Mark L. Lay, was a short seller himself in March 2001. Hueston, famous for having never lost a case, anticipated every answer Lay gave, and promptly displayed documents to rebut them. It was beautifully choreographed. When Lay disputed a statement from former Enron Treasurer Ben Glisan and grumbled that Glisan's story at trial was different from what he said in 2001, Hueston presented a newspaper article dated October 2001 in which Glisan gave an identical statement.

Hueston essentially accused Lay of witness tampering, pointing out that Lay had called a witness nine days before he was scheduled to testify. The prosecutor argued that Lay was trying to make sure their two stories were consistent; Lay said he simply wanted to reconnect with the man and confirm facts. The exchange had a spooky, Big-Brother-is-watching quality, since Hueston knew about voice mails Lay had left and early-morning phone calls Lay had made to potential witnesses at home.

Prosecutors expect to wrap up their cross-examination of Lay by Monday. In the second day of cross-examination, Hueston emphasized that while Lay was encouraging employees to take advantage of Enron's bargain stock price in fall 2001, Lay himself was selling stock. The shares Lay bought in the fall were publicly reported. But since he sold stock back to the company, the sales did not have to be reported until year-end — after Enron was bankrupt. Because of that, in October 2001, investors thought Lay owned more than double the amount of stock he actually had. Lay testified that he sold the shares back to the company — rather than through his broker on the open market, in which case they would have been immediately reported — because it was "a lot more efficient." That was "a very unconvincing explanation," in the view of one courtroom observer, Houston attorney Michael Wynne, who is building his own case against banks that funded Enron in its last days.

Lay's testiness on the stand also got bad marks from courtroom observers. Lay accused the prosecutor, for example, of "mincing words" and making bizarre assumptions that made no business sense. "Lay is not helping himself by being so contentious, and frankly, arrogant," says Wynne. "He speaks with the cadence of Richard Nixon."

Like Nixon, Lay's face naturally falls into a frown. On the stand, his brows drew together. His tongue flicked back and forth hitting the corners of his mouth. He tried to win the jury over during direct examination by talking about the three paper routes he had growing up and summers laboring on farms in Missouri. Lay, once a multimillionaire, also testified that he now drives a 13-year-old car and all his savings are gone.

But even during questioning by his own lawyer, Lay appeared to avoid answering some questions directly, saying only what he wanted to say, when he wanted to say it. "Ken Lay wants you to believe he relied on his lawyers while at Enron, but he's not relying on them at trial," says Houston attorney Joel Androphy, author of a the textbook White Collar Crime. Lay's lead attorney, Mike Ramsey, has not returned to the courtroom after heart surgery. While his team of three attorneys, along with Lay's daughter Elizabeth Vittor, have been in charge since, Lay appears to be taking control of his defense himself. "He's thinking that he knows how to handle this," says Androphy. "You say to yourself, Is that the way he was at Enron? He disregarded the lawyers? Maybe he disregarded whistle-blower Sherron Watkins too."