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By then, Lay was in the middle of a personal stock sell-off. On Aug. 20 he exercised options to buy 25,000 shares at $20.78 a share. The next day he exercised an additional 68,000 shares at $21.56. On both days, the stock closed around $36, which meant Lay netted nearly $1.5 million before taxes. He continued to be a huge booster for the stock for another month. As late as Sept. 26, Lay would try to reassure Enron employees that "our financial liquidity has never been stronger." But as the stock fell last fall, company employees were told that they would be unable to move any assets held in Enron stock into other securities in their 401(k) plan while the company switched plan administrators.
The end was near. On Oct. 15 Vinson & Elkins issued a nine-page report stating that Andersen approved of the Condor and Raptor deals and that Enron had done nothing wrong. On Oct. 16 the company announced a $618 million third-quarter loss and a $1.2 billion reduction in shareholder equity. On Oct. 31 the SEC opened a formal inquiry into Enron. Last week, a Vinson & Elkins spokesman said the law firm was "not in a position to talk about our engagement with Enron or any other client."
Enron too said as little as possible last week as the company tried to reorganize itself and as Lay and other top executives tried to fend off lawsuits filed by angry employees and other investors. The law makes it extremely difficult to confiscate the personal assets of corporate officers in punishment for actions on behalf of the company, but if there were ever a chairman who courted that fate, it is Lay. Last week he put three properties in Aspen up for sale, for $16 million, and huddled with his lawyers in preparation for congressional hearings next month. Few in business have ever fallen so far so fast: the man who once could raise Cabinet officials with a single telephone call and rated the only one-on-one meeting with the Vice President on energy policy last year can't show his face in Houston for fear of reprisals.
While Enron suffered in silence last week, Andersen was tripping over its own attempts at damage control. Andersen has the most to gain by coming clean because if it doesn't, it stands to lose a lot of business. So with help from an army of just-hired p.r. agents, the Chicago company worked overtime to show that in its work for Enron, it was merely trying to serve a secretive and aggressive client who was pushing the envelope on accounting rules that aren't very clear anyway. Last week, two days after TIME reported that Andersen ordered the destruction of documents in October, the company sent CEO Joe Berardino out in public to strike a contrite tone. Andersen placed three auditors in its Houston office on leave and took out full-page ads in the newspapers promising to "deal with these issues, candidly and directly... Without question, this is the most difficult and challenging episode in our firm's history."