Why Ken Lay Wants a Refund

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The guilty verdicts may be in against former Enron CEO and chairman Ken Lay, but he is still doing battle with, of all things, his alma mater. Seven years after making a $1.1 million gift to endow a chair in economics at the University of Missouri, Lay is now trying to have the money returned. Last September, in the wake of Hurricane Katrina, he personally sought to have the money — as yet unused — transferred back to Houston to assist 14 charities in relief efforts, including preacher-author Joel Osteen's megachurch. Five months later in February this year, the trustee for Lay's assets went to the campus in Columbia, Mo., seeking the money to pay for legal fees instead. The trustee went home empty-handed, but now university alumni — only recently apprised of the negotiations — are buzzing with indignation. The university, meanwhile, is stuck with the name — and despite the verdicts, isnít moving just yet to make changes.

Lay threatened legal action against his alma mater last fall after he got no action on his request that the $1.1 million be given to such Houston area charities as the American Red Cross, the Catholic archdiocese charities, and five churches, including the one run by Osteen, best-selling author of "Your Best Life Now." Lay's deadline for a reply came and went with no lawsuit, but in February, the trustee for his finances arrived seeking the money for lawyer's fees.

"He came expecting to get a check and made clear it was to clear legal fees," says Scott Charton, director of university communications. The meeting was fairly tempestuous, involving threats of litigation. In any case, according to a statement Missouri released on Monday, the universityís general counsel concluded, after talking to the state attorney general, that there were "legal questions" concerning the propriety of returning the funds. The Missouri constitution doesn't allow public funds to be given to private concerns — either to Lay or his charities. "Our position is: it's university property now. Are we merely a savings account to be withdrawn at some point?" he asks. "If Mr. Lay's money is returned to pay his legal bills, what do we tell the next donor who wants a cash refund because of a personal reversal of fortune years after making a gift?"

"This has all the smell of a Richard Scrushy effort," says Mizzou alum Thomas Battistoni, a New York litigator who until recently sat on an alumni board for the MU College of Arts and Science, overseers of the economics department — and hence the chair. Scrushy, the former head of HealthSouth Corp., poured over $700,000 into Birmingham, Ala., churches and ministries during his felony trial in 2004, a coincidence noted with more than a little skepticism by his prosecutors. (Scrushy was acquitted). Battistoni raises similar questions about Layís attempt to divert the money to charities in the fall before his trial started, but he doesn't believe the money is "tainted" since it was donated before the shenanigans at Enron began.

"It was a gift to the University of Missouri in 1999. It should not be used to enhance Mr. Lay's image in Houston when juries are about to be selected," Battistoni told TIME after learning of the attempt to reclaim the money. Lay's spokeswoman Kelly Kimberly rejected the Scrushy parallel, noting that the Lays were long-time philanthropists, who gave nearly $25 million to non-profits between 1999 and 2001.

Hovering over the entire saga is the question of whether it's such a good idea now to have an economic chair named after Ken Lay, given Enronís spectacular collapse. Members of the alumni board have bandied about the question of retracting Lay's name. Although discussions with Lay are ongoing, the university is required by its agreement to honor the name. Lay's family has a longtime connnection with Missouri: his late mother worked at the university bookstore while his father, a Baptist preacher, had strong ties to the community in Columbia. "It's not the university's goal to be antagonistic with a fine family," says Charton. The final call is up to the MU Board of Curators, an appointed board, which oversees university affairs.

The search for an academic to fill the chair continues, meanwhile, with over 60 candidates screened in the last eight months. Battistoni suggests one solution to the controversy would be to make ethics part of the lesson. "If the university is going to do a chair in economics named after him, to be true to its own values, the university should set it up as the Ken Lay Chair in Economics and Business Ethics."