Kenneth Lay

Last updated
Kenneth Lay
Ken Lay.jpg
Mugshot of Lay upon his arrest in 2004
Born
Kenneth Lee Lay

(1942-04-15)April 15, 1942
DiedJuly 5, 2006(2006-07-05) (aged 64)
Occupation Businessman
Political party Republican [1] [2]
Spouse(s)Linda Lay
Judith Ayers [3]
ChildrenElizabeth Ayers Lay Vittore
Mark Kenneth Lay
Robyn Anne Herrold Lay Vermeil
Todd David Herrold
Robert Ray (Beau) Herrold [3]

Kenneth Lee Lay (April 15, 1942 – July 5, 2006) was the founder, CEO and Chairman of Enron and was heavily involved in the Enron scandal, a major accounting scandal that unraveled in 2000 in the largest bankruptcy ever to that date. Lay was indicted by a grand jury [4] and was found guilty of 10 counts of securities fraud in the trial of Kenneth Lay and Jeffrey Skilling. [5] Lay died in July 2006 while vacationing in his house near Aspen, Colorado, three months before his scheduled sentencing. [6] A preliminary autopsy reported Lay died of a myocardial infarction (heart attack) caused by coronary artery disease; his death resulted in a vacated judgment. [7] [8] [9]

Chairman leading or presiding officer of an organized group such as a board, committee, or deliberative assembly

The chairman is the highest officer of an organized group such as a board, a committee, or a deliberative assembly. The person holding the office is typically elected or appointed by the members of the group, and the chairman presides over meetings of the assembled group and conducts its business in an orderly fashion.

Enron Defunct American energy company

Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. It was founded in 1985 as a merger between Houston Natural Gas and InterNorth, both relatively small regional companies. Before its bankruptcy on December 3, 2001, Enron employed approximately 29,000 staff and was a major electricity, natural gas, communications and pulp and paper company, with claimed revenues of nearly $101 billion during 2000. Fortune named Enron "America's Most Innovative Company" for six consecutive years.

Enron scandal

The Enron scandal, publicized in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the de facto dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world. In addition to being the largest bankruptcy reorganization in American history at that time, Enron was cited as the biggest audit failure.

Contents

Lay left behind "a legacy of shame" characterized by "mismanagement and dishonesty". [10] In 2009, Portfolio.com ranked Lay as the third-worst American CEO of all time. [11] His actions were the catalyst for subsequent and fundamental corporate reform in regard to "standards of leadership, governance, and accountability". [10]

Portfolio.com was a website published by American City Business Journals that provideed news and information for small to mid-sized businesses (SMB). It was previously the website for the monthly business magazine Condé Nast Portfolio, published by Condé Nast from 2007 to 2009.

Lay was one of America's highest-paid CEOs; between 1998 and 2001, he collected more than $220 million in cash and stock in Enron and sold 1.7 million shares. [12] [13] [14] [15] However, during his trial in 2006, Lay claimed that Enron stock made up about 90% of his wealth, and that his net worth at that time was negative $250,000. [16]

Net worth is the value of all the non-financial and financial assets owned by an institutional unit or sector minus the value of all its outstanding liabilities. Net worth can apply to companies, individuals, governments or economic sectors such as the sector of financial corporations or to entire countries.

Early life

Lay was born in the Texas County, Missouri, town of Tyrone, the son of Ruth (born Rees) and Omer Lay. [17] Lay's father was a Baptist preacher and Lay grew up in poverty. Later in Lay's childhood, his family moved to Columbia, Missouri, and Lay attended David H. Hickman High School and the University of Missouri, where he studied economics, receiving a Bachelor of Arts in 1964 and an Master of Arts in 1965. [18] [19] He served as president of the Zeta Phi chapter of the Beta Theta Pi fraternity at the University of Missouri. [19] He earned a Doctor of Philosophy in economics from the University of Houston in 1970. [18] [19] [20] He worked at Humble Oil as an economist from 1965 to 1968 in the Corporate Planning Department. [18] [19] [20] [lower-alpha 1] In 1968, Ken entered the Officer Candidate School for the United States Navy where, from 1968 to 1971, he rose to the rank of lieutenant and was the special assistant to the Navy Comptroller and Financial Analyst at the Office of Assistant Secretary of the Navy in the Department of the Navy at The Pentagon. [19]

Texas County, Missouri County in the United States

Texas County is a county located in the southern portion of the U.S. state of Missouri. As of the 2010 census, the population was 26,008. Its county seat is Houston. The county was organized in 1843 as Ashley County, changing its name in 1845 to Texas, after the Republic of Texas.

Tyrone is an unincorporated community in southern Texas County, Missouri, United States. The community is located on Missouri Route H, approximately 1.5 miles west of Missouri Route 137. It consists of several houses.

Columbia, Missouri College town in the U.S state of Missouri

Columbia is a city in the U.S. state of Missouri. It is the county seat of Boone County and home to the University of Missouri. Founded in 1821, it is the principal city of the five-county Columbia metropolitan area. It is Missouri's fourth most-populous and fastest growing city, with an estimated 121,717 residents in 2017.

Career

Lay worked from 1971 to 1972 as a technical assistant to commissioner and vice chairman (federal energy regulator) of the Federal Power Commission and served as the energy deputy under secretary for the United States Department of Interior until 1974. [18] In 1974, he returned to the business world as an executive at Florida Gas Transmission [18] and was president of Continental Resources from 1981 to 1982. [19] [20] In 1982, he joined Transco Energy Company, owner of the Transcontinental Pipeline, in Houston and held the positions of president, chief operating officer and director until 1984 when he became chairman and CEO of the Houston Natural Gas Company. [19] [20] By the time energy was deregulated in the 1980s, Lay was already an energy company executive and he took advantage of the new climate when Omaha-based InterNorth [lower-alpha 2] bought his company Houston Natural Gas and changed the name to Enron in 1985. [19] [lower-alpha 3] He was also a member of the board of directors from 1993 to 2001 of Eli Lilly and Company [20] and a director at Texas Commerce Bank. [25]

The Federal Power Commission (FPC) was an independent commission of the United States government, originally organized on June 23, 1930, with five members nominated by the president and confirmed by the Senate. The FPC was originally created in 1920 by the Federal Water Power Act, which provided for the licensing by the FPC of hydroelectric projects on the land or navigable water owned by the federal government. The FPC has since been replaced by the Federal Energy Regulatory Commission.

Florida Gas Transmission is a natural gas pipeline which brings gas from Texas, Louisiana, Mississippi, and Alabama into Florida. The pipeline is owned 50% by Energy Transfer Partners (Owner/Operator) and 50% by Kinder Morgan Partnership each respectively representing units in Citrus Corporation (CitCor). Its FERC code is 34.

Continental Resources

Continental Resources, Inc. is an American petroleum and natural gas exploration and production company based in Oklahoma City. The company was founded by Harold Hamm in 1967 at the age of 21 as Shelly Dean Oil Company, originally named for his Mr. Hamm's two daughters. In 1990 Shelly Dean re-branded itself as Continental Resources and since the early 2000's has become a leading upstream oil and natural gas company that primarily uses hydraulic fracturing and horizontal drilling to produce from low permeability formations in the lower 48 continental United States.

Political involvement

Lay was a friend of the Bush family including former President George H. W. Bush. He made monetary contributions, led several committees in the Republican Party and was co-chairman of Bush's 1992 re-election committee. [26] As President, Lay flew Bush and his wife to Washington on an Enron corporate plane. [27] In December 2000, Lay was mentioned as a possible candidate for United States Secretary of the Treasury under George W. Bush. [28]

Bush family American family prominent in the fields of politics, sports, entertainment, and business

The Bush family is an American family that is prominent in the fields of politics, sports, entertainment, and business, founded by Obadiah Bush and Harriet Smith.

George H. W. Bush 41st president of the United States

George Herbert Walker Bush was an American politician who served as the 41st president of the United States from 1989 to 1993 and the 43rd vice president of the United States from 1981 to 1989. A member of the Republican Party, he held posts that included those of congressman, ambassador, and CIA director. Until his son George W. Bush became the 43rd president in 2001, he was usually known simply as George Bush.

Republican Party (United States) Major political party in the United States

The Republican Party, also referred to as the GOP, is one of the two major political parties in the United States; the other is its historic rival, the Democratic Party.

From 1989 to 2002, Lay's political contributions totaled $5.8 million, with 73% going to Republicans, and 27% going to Democrats. [2] From 1999 to 2001, he gave $365,410 to the Republican Party. [1]

Enron bankruptcy and trial

Lay's company, Enron, went bankrupt in 2001. At the time, this was the biggest bankruptcy in U.S. history. In total, 20,000 employees lost their jobs and in many cases their life savings. Investors also lost billions of dollars. On July 7, 2004, Lay was indicted by a grand jury in Houston, Texas, for his role in the company's failure. Lay was charged, in a 65-page indictment, with 11 counts of securities fraud, wire fraud, and making false and misleading statements. The Trial of Kenneth Lay and Jeffrey Skilling commenced on January 30, 2006, in Houston. [5]

Lay insisted that Enron's collapse was due to a conspiracy waged by short sellers, rogue executives, and the news media. [29] [5] On May 25, 2006, Lay was found guilty on six counts of conspiracy and fraud by the jury. In a separate bench trial, Judge Lake ruled that Lay was guilty of four additional counts of fraud and making false statements. Sentencing was scheduled for September 11, 2006 and rescheduled for October 23, 2006. [30]

Death

Lay died on July 5, 2006, while vacationing in Colorado. The Pitkin, Colorado Sheriff's Department confirmed that officers were called to Lay's house in Snowmass, Colorado, near Aspen at 1:41 am Mountain Time Zone. Lay was taken to Aspen Valley Hospital, where he was pronounced dead at 3:11 am MDT. The autopsy indicated that he died of a heart attack brought on by coronary artery disease, and found evidence that he had suffered a previous heart attack. [6]

A private funeral for about 200 people was held in Aspen four days after his death. His body was cremated and his ashes were buried in an undisclosed location in the mountains. [31] [32] A memorial service was held a week after his death at the First United Methodist Church in Houston. It was attended by over 1,000 guests including George H. W. Bush and James Baker. [33]

On October 17, 2006, the conviction was overturned due to abatement ab initio, a legal doctrine which says the death of a defendant during an appeal results in a vacated judgment. [34] [35] The government opposed Lay's attorneys' motions of appeal and the United States Department of Justice issued a statement saying it remained committed to pursuing all available legal remedies for victims of the fraud. [36] [37]

Personal life

At the time of his death Lay was married to his second wife, whom he married in 1982. He had two children, three stepchildren, and twelve grandchildren. [3] [18]

See also

Notes

  1. On January 1, 1973, Humble Oil Refining merged with its parent, Standard Oil of New Jersey, to form Exxon Company, USA. [21]
  2. In 1983, Northern Natural Gas, owner of the Northern Natural Pipeline [22] merged with Arthur Belfer's Belco Oil & Gas Corporation to become the BelNorth Petroleum Corporation. [23]
  3. Dynegy purchased Northern Natural Pipeline from Enron in November 2001 and then sold it in July 2002 to Warren Buffett's Berkshire Hathaway. [24]

Related Research Articles

Andrew Stuart "Andy" Fastow is a former financier and convicted felon who was the chief financial officer of Enron Corporation, an energy trading company based in Houston, Texas, until he was fired shortly before the company declared bankruptcy. Fastow was one of the key figures behind the complex web of off-balance-sheet special purpose entities used to conceal Enron's massive losses in their quarterly balance sheets. By unlawfully maintaining personal stakes in these ostensibly independent ghost-entities, he was able to defraud Enron out of tens of millions of dollars. The U.S. Securities and Exchange Commission subsequently opened an investigation into his and the company's conduct in 2001. Fastow served a six-year prison sentence for charges related to these acts. His wife, Lea Weingarten, also worked at Enron, where she was an assistant treasurer; she pleaded guilty to conspiracy to commit wire fraud, money laundering conspiracy and filing fraudulent income tax returns, and served jail time before early release to a halfway house.

Donald Evans American cabinet official

Donald Louis Evans is an American businessman. He was the 34th U.S. Secretary of Commerce. He was appointed by his longtime friend George W. Bush and sworn into office on January 20, 2001. On November 9, 2004, the White House announced that Evans intended to resign by the end of January 2005.

Richard Alan Causey is one of the prominent figures in the Enron accounting scandal. Causey was Enron's Executive Vice President and Chief Accounting Officer.

InterNorth Inc. was a large energy company headquartered at the Northern Natural Gas Building in Omaha, Nebraska, in the United States, specializing in natural gas pipelines but also a force in the plastics industry, coal and petroleum exploration and production. It was a predecessor to Enron Corporation.

Jeffrey Skilling Former CEO of Enron Corporation

Jeffrey Keith Skilling is a convicted felon and former American businessman best known as the CEO of Enron Corporation during the Enron scandal. In 2006, he was convicted of federal felony charges relating to Enron's collapse and eventually sentenced to 24 years in prison. The Supreme Court of the United States heard arguments in the appeal of the case March 1, 2010. On June 24, 2010, the Supreme Court vacated part of Skilling's conviction and transferred the case back to the lower court for resentencing.

Sherron Watkins is an American former Vice President of Corporate Development at the Enron Corporation. Watkins was called to testify before committees of the U.S. House of Representatives and Senate at the beginning of 2002, primarily about her warnings to Enron's then-CEO Kenneth Lay about accounting irregularities in the financial statements.

The idiot defense is a satirical term for a legal strategy where a defendant claims innocence by virtue of having been ignorant of facts of which the defendant would normally be expected to be aware. Other terms used for this tactic include "dumb CEO defense", "dummy defense", "ostrich defense", "Ken Lay defense", and "Sergeant Schultz defense".

Houston Natural Gas Company (HNG) was a gas utility headquartered in Houston, Texas. The company was acquired by InterNorth Inc. in 1985, with HNG executives taking top positions at InterNorth. Following the transaction, InterNorth was renamed Enron Corporation, and the company headquarters was moved from InterNorth's base in Omaha to the former HNG offices in Houston. The company is notable for former CEO Kenneth Lay who became CEO of the newly formed Enron.

Chesapeake Energy Corporation is a company engaged in hydrocarbon exploration. It is headquartered in Oklahoma City. The company is named after the founder's love for the Chesapeake Bay region.

<i>Enron: The Smartest Guys in the Room</i> 2005 documentary film on the rise and fall of the company directed by Alex Gibney

Enron: The Smartest Guys in the Room is a 2005 American documentary film based on the best-selling 2003 book of the same name by Fortune reporters Bethany McLean and Peter Elkind, a study of one of the largest business scandals in American history. McLean and Elkind are credited as writers of the film alongside the director, Alex Gibney.

Jason Leopold American journalist

Jason Arthur Leopold is an American senior investigative reporter for BuzzFeed News. He was previously an investigative reporter for Al Jazeera America and Vice News. He worked at Truthout as a senior editor and reporter, a position he left after three years on February 19, 2008, to co-found the web-based political magazine The Public Record, Leopold's profile page on The Public Record now says he is Editor-at-Large. Leopold returned to Truthout as Deputy Managing Editor in October 2009 and was made lead investigative reporter in 2012.

Robert L. Bradley Jr. is CEO and founder of the Institute for Energy Research, and the author of several books on energy economics. He is also an adjunct scholar of the Cato Institute and the Competitive Enterprise Institute in Washington, D.C.; a senior fellow at the Texas Public Policy Foundation in Austin, Texas; and a visiting fellow of the Institute of Economic Affairs in London.

The trial of Kenneth Lay, former chairman and CEO of Enron, and Jeffrey Skilling, former CEO and COO, was presided over by federal district court Judge Sim Lake in 2006 in response to the Enron scandal.

Simeon Timothy Lake III is an American judge and attorney who has served as a United States District Judge of the United States District Court for the Southern District of Texas since 1988. His notable trials include the trial of Enron Chairman Ken Lay and former Chief Executive Officer Jeff Skilling.

Lou Lung Pai is a Chinese-American businessman and former Enron executive. He was CEO of Enron Energy Services from March 1997 until January 2001 and CEO of Enron Xcelerator, a venture capital division of Enron, from February 2001 until June 2001. He left Enron with over $280 million. Pai was the second-largest land owner in Colorado after he purchased the 77,500-acre (314 km2) Taylor Ranch for $23 million in 1999, though he sold the property in June 2004 for $60 million.

Richard Kinder is an American billionaire businessman. He is the co-founder and executive chairman of Kinder Morgan Inc., an energy and pipeline corporation.

Rebecca P. Mark-Jusbasche, known during her international business career as Rebecca Mark, is best known as the former head of Enron International, a subsidiary of Enron. She was also CEO of Azurix Corp., a publicly traded water services company originally developed by Enron International. Mark was promoted to Vice Chairman of Enron in 1998 and was a member of its board of directors. She resigned from Enron in August 2000.

Oscar Sherman Wyatt, Jr. is an American businessman and self made millionaire. He was the founder of Coastal Corporation and a decorated bomber pilot in World War II. In 2007 the U.S. federal court in Manhattan tried him for illegally sending payments to Iraq under the Oil-for-Food Program.

References

  1. 1 2 "Ken Lay Biography and Political Campaign Contributions". Campaign Money.
  2. 1 2 "Follow the Enron Money". CBS News . January 12, 2012.
  3. 1 2 3 Stritof, Sheri. "Kenneth and Linda Phillips Lay Marriage Profile". About. Retrieved 17 October 2015.
  4. Crawford, Kristen (July 12, 2004). "Lay surrenders to authorities". CNN .
  5. 1 2 3 Pasha, Shaheen; Seid, Jessica (May 25, 2006). "Lay and Skilling's day of reckoning". CNN .
  6. 1 2 Mulligan, Thomas S.; Bustillo, Miguel (July 6, 2006). "Death Puts Lay Conviction in Doubt". Los Angeles Times .
  7. Fowler, Tom (October 17, 2006). "Judge vacates conviction of Ken Lay". Associated Press.
  8. United States v. Lay, Criminal Action No. H-04-0025, 456 F.Supp.2d 869 (S.D. Tex. 2006), at .
  9. Bratton, William W. (May 2002). "Does Corporate Law Protect the Interests of Shareholders and Other Stakeholders?: Enron and the Dark Side of Shareholder Value". Tulane Law Review (PDF). New Orleans: Tulane University Law School (1275): 61. SSRN   301475 .
  10. 1 2 Morrison, Mark (July 4, 2006). "Ken Lay's Dark, Ironic Legacy". Bloomberg News .
  11. "Portfolio's Worst American CEOs of All Time". CNBC . 30 April 2009.
  12. Wayne, Leslie (January 13, 2002). "ENRON'S COLLAPSE; Before Debacle, Enron Insiders Cashed In". The New York Times . (Subscription required (help)).
  13. Ackman, Dan (February 2, 2002). "Lay Lays an Egg". Forbes .
  14. Johnson, Carrie (June 10, 2006). "A Woman of Conviction". The Washington Post .
  15. MULLIGAN, THOMAS S.; BROOKS, NANCY RIVERA (June 18, 2002). "Enron Paid Senior Execs Millions". Los Angeles Times .
  16. Pasha, Shaheen (September 7, 2006). "U.S., Lay estate ink $12M pension settlement". CNN .
  17. Handbook of Texas Online. Retrieved 2010-03-02.
  18. 1 2 3 4 5 6 "Biography: Ken Lay". biography.com. Archived from the original on 2010-07-15.
  19. 1 2 3 4 5 6 7 8 "Dr. Kenneth Lee Lay Obituary". Houston Chronicle . July 7, 2006.
  20. 1 2 3 4 5 "Ken Lay". NNDB . Retrieved January 6, 2018.
  21. "Substitute the name "ExxonCompany, U.S.A." for the name "Humble Oil and Refining Company"" (PDF). Nuclear Regulatory Commission . December 20, 1972. Retrieved January 6, 2018.
  22. Graham, Judith (February 1, 2002). "Pipeline retirees in Omaha hurt by Enron collapse: Former subsidiary once was the pride of Nebraska city". Chicago Tribune .
  23. "Belco Oil & Gas Corp. History". fundinguniverse.com. Retrieved January 6, 2018.
  24. Sorkin, Andrew Ross (July 30, 2002). "Berkshire to Buy a Gas Pipeline From Dynegy". The New York Times . (Subscription required (help)).
  25. Roger Stone; Saint John Hunt (2016). "5: JEB Goes to Venezuela". JEB! and the Bush Crime Family: the Inside Story of an American Crime Dynasty. Skyhorse Publishing. ISBN   978-1510706798.
  26. "Commentary: Ken Lay's Audacious Ignorance". Bloomberg News . February 5, 2006.
  27. Bajaj, Vikas; Eichenwald, Kurt (July 6, 2006). "Kenneth L. Lay, 64, Enron Founder and Symbol of Corporate Excess, Dies". The New York Times . (Subscription required (help)).
  28. Cameron, Sue (July 5, 2006). "Obituary: Ken Lay". Financial Times .
  29. Peters, Jeremy W.; Romero, Simon (July 5, 2006). "Enron Founder Dies Before Sentencing". The New York Times . (Subscription required (help)).
  30. Pasha, Shaheen (July 5, 2006). "Enron founder Ken Lay dies". CNN .
  31. Moreno, Sylvia (July 13, 2006). "Lay Is Remembered As a 'Straight Arrow'". The Washington Post .
  32. "Lay victim of `lynching,' speaker at service says". Chicago Tribune. Bloomberg News. July 13, 2006.
  33. Tolson, Mike (July 13, 2006). "Lay praised by family and friends". Houston Chronicle .
  34. Murphy, Kate (October 17, 2006). "Judge Throws Out Kenneth Lay's Conviction". The New York Times . (Subscription required (help)).
  35. Engber, Daniel (July 6, 2006). "Can't the Feds Get Lay's Money?". Slate .
  36. "Lay's Estate And DOJ Prepare For Battle". Law360 . August 17, 2006. (Subscription required (help)).
  37. "Lawyers Seek to Throw Out Lay Conviction". The New York Times. Bloomberg News. August 17, 2006. (Subscription required (help)).