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Last Updated: Wednesday, 5 July 2006, 16:06 GMT 17:06 UK
Kenneth Lay: A fallen hero
By Ben Richardson
Business reporter, BBC News

Enron ex-boss and founder Ken Lay
Mr Lay portrayed himself as a victim of his workers' dishonesty

Ken Lay's rise to the top of the business world came to an abrupt halt with the collapse of Enron, the energy trading giant he helped to create.

As investigators picked through the wreckage of a company that had hidden billions of dollars in debts in search of evidence of Mr Lay's role in the scandal, the executive from Missouri protested his innocence.

Even after he was found guilty of fraud, conspiracy and other charges, Mr Lay vowed to clear his name.

But his death of a heart attack means that instead of getting another chance to tell his side of the story, Mr Lay will ultimately be remembered as the man who presided over one of the biggest corporate scandals in US business history.

Ripple effect

The tragedy of Enron and Mr Lay is that for many years they were held up as a shining example of the American dream.

Kenneth Lay was born in Tyrone, Missouri, 64 years ago and spent his childhood in an environment that was far less luxurious than his later years.

His father owned a general store, and the young Mr Lay delivered newspapers and mowed lawns to raise cash.

Although he served a brief stint as an officer in the US navy, Mr Lay was essentially an economist.

ENRON TIMELINE
1985: Enron formed
Oct 2001: Enron reports $638m third quarter loss and $1.2bn fall in shareholder equity
Oct 2001: Securities and Exchange Commission begins inquiry into firm
Nov 2001: Enron shares sink to 10-year lows as buyout deal falls through and further losses are revealed at the firm
Dec 2001: Enron files for Chapter 11 bankruptcy
2002: Criminal investigation launched
2004: Skilling and Lay charged over Enron collapse Former finance chief Andrew Fastow pleads guilty to criminal charges and agrees a 10-year jail term
Jan 2006: Enron trial begins
May 2006: Enron trial ends with guilty verdicts for Skilling and Lay on 25 out of 34 charges
July 2006: Ken Lay dies of a heart attack

The holder of an economics degree and PhD, he began his career as a corporate economist with Exxon and later taught both micro- and macroeconomic theory as an assistant university professor.

It was while lecturing in Washington that Mr Lay developed his beliefs about how energy markets should change: the ideas behind the rise of Enron.

Working for the Federal Energy Regulatory Commission, Mr Lay became a keen advocate of the liberalisation of gas and electricity monopolies. Mr Lay also lectured on government-business relations at George Washington University.

Back in Houston, Mr Lay appeared to settle into a more humdrum job as the president of a local gas company.

But this led to him taking the reins at Enron after its birth in February 1986 following the merger of two local pipeline firms.

Rise...

From small beginnings, Enron multiplied its market capitalisation more than ninefold in a decade, became the US's seventh biggest company and the world's largest energy trading firm.

Enron's belief in - and its ability to proselytise - the idea of prising open markets, and trading energy futures just like other commodities, caused The Economist to describe Enron as an "evangelical cult" with Mr Lay as the "messiah".

"We like to think of ourselves as the Microsoft of the energy world," Mr Lay has been quoted as saying.

His success at Enron earned him directorships elsewhere, and he had a place on several boards including that of PC and computer services firm Compaq.

In business circles he had undoubtedly made it - his success underlined by the fact that his golf partners during the 1990s regularly included President Bill Clinton.

He was also a popular figure around Houston, a supporter of a large number of charities and a trustee of the First United Methodist Church.

And his high-profile career saw him serving on a host of impressive sounding committees, including the 1990 Houston Economic Summit of Industrialized Nations during which he played host to former UK prime minister Margaret Thatcher.

...and fall

A little over a decade later, however, Mr Lay's life would look very different.

Ken Lay and his wife Linda arrive at court in Houston
The Enron trial attracted worldwide attention and massive pressures

Enron went bankrupt in 2001, with debts of $31.8bn (18bn), leaving 4,000 people jobless and wiping out many investments.

The company's shares plummeted, prompting a global sell-off and questions about the veracity of corporate accounting.

But the Enron crisis went much deeper than money.

It blew into the political arena because of Mr Lay's close relationships with the government, and with President George W Bush in particular.

Nicknamed "Kenny Boy" by the president himself, Mr Lay and Enron poured substantial sums into Mr Bush's various campaigns in what appeared to be a relentless quest for political influence.

But when the scandal broke, Mr Lay found his high-powered connections were of little use as he became the focal point for the bitter feelings of employees who had lost their jobs and savings.

Isolation

An increasingly isolated figure, Mr Lay looked to assign the blame for Enron's problems elsewhere.

He had been a well-meaning boss, he claimed, who had been too busy to check facts and had been duped by the people working for him.

"I have done nothing wrong, and the indictment is not justified," Mr Lay said when federal prosecutors first charged him.

He later went on to say that the collapse of Enron had been the worst moment in his life.

But if Mr Lay had hoped his pain would win the sympathy of jurors, or that they would take into account his success in turning an unspectacular natural gas pipeline company into a financial powerhouse, then he was mistaken.

Wendy Vaughan, one of the jurors at the trial of Mr Lay and his co-defendant Jeffrey Skilling, said that she wanted to believe what they were saying but "there were places in the testimony I felt their character was questionable".

Mr Lay had intended to appeal against his conviction.

But with his death, Ms Vaughan's assessment of him - and many which are less charitable - will stand unchallenged.


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