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Silent Lay savaged by senators over Enron

Former Enron Corp chairman and presidential friend Kenneth Lay was the target of blistering attacks by lawmakers on Tuesday, when he declined to testify about the energy giant's collapse amid dubious business dealings and questionable accounting.

Once mentioned as a possible energy secretary in the administration of President George W Bush, a grim-faced Lay was forced to listen to 90 minutes of statements by members of the Senate Commerce Committee, who accused him of presiding over a financial sham.

Lay, who withdrew from voluntary testimony last week citing a "prosecutorial" atmosphere in Congress, was compelled to appear by subpoena but exercised his constitutional right to remain silent.

Some of the harshest criticism came from Republicans, whose party was the biggest beneficiary of Enron's generous political donations over the years to lawmakers of all stripes.

"I'd say you were a carnival barker, except that wouldn't be fair to carnival barkers -- a carny will at least tell you up front that he's running a shell game," said Sen Peter Fitzgerald, an Illinois Republican.

Committee chairman Ernest Hollings said he hoped the Enron saga would lead to campaign finance reform, and referred to Lay by a nickname used by Bush in better times.

"There's no better example than Kenny boy (of) cash-and-carry government," said Hollings, a South Carolina Democrat.

Lay, before saying his legal counsel had advised him to not testify, told the packed hearing: "I come here today with a profound sadness about what has happened to Enron, its current and former employees, retirees and other stakeholders."

MASSIVE PROBE

Ten congressional committees are now probing the Enron debacle in addition to the US Justice Department and the Securities and Exchange Commission.

Knowing in advance that Lay would not testify, the Senate committee also scheduled testimony for Tuesday from William Powers, the Enron board member and University of Texas Law School dean who has issued a scathing report on the company's dealings with outside partnerships. The report said the partnerships helped hide debt, inflate profits and enrich certain employees.

Once the seventh largest US company, Enron's rapid decline to the biggest US bankruptcy filing ever on December 2 has cost thousands of jobs and wiped out billions of dollars in shareholder equity.

The Powers report says Lay was "captain of the ship", and failed to make sure he and other top executives kept an eye on the activities of partnerships created and managed by then Enron chief financial officer Andrew Fastow.

The report also criticises former Enron president Jeffrey Skilling and the board for failing to watch over Fastow, and charges Enron's auditor Andersen and the company's law firm, Vinson & Elkins, for poor advice about the partnerships.

Lay is not the first former or current Enron executive to exercise his Fifth Amendment right against self-incrimination.

Last week, two former and two current Enron employees declined to speak before a House Energy and Commerce subcommittee. And a fired senior partner at Andersen did the same last month.

Testimony was heard last week from Skilling, but lawmakers have challenged his credibility in maintaining he was unaware of any financial problems when he resigned on August 14 citing personal reasons.

Sen John McCain, at Tuesday's hearing, reminded Lay of a 1999 speech he gave on business ethics in which he said it was the responsibility of the board to "ensure legal and ethical conduct by the company and by everybody in the company."

The Arizona Republican said senior management at Enron "made a mockery of (Mr) Lay's words and turned the principles he described on their head."

The Senate Banking Committee on Tuesday will hear from five former SEC chairmen on accounting and investor protection issues arising from Enron's demise.

Current SEC Chairman Harvey Pitt, an attorney who once represented big accounting firms such as Andersen, has made a proposal to revamp oversight of the accounting profession.

The House Financial Services Committee on Monday floated a bill to set up an accounting oversight board which would have a two-thirds majority of non-accountants and a 60-percent boost to the SEC's budget.

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