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Last Updated: Tuesday, 25 April 2006, 20:23 GMT 21:23 UK
Enron feared witch hunt, Lay says
Enron founder Kenneth Lay
Enron founder Kenneth Lay leaves the court room in Houston
Enron executives thought the firm was the victim of a witch hunt when stories broke about its financial problems, company founder Kenneth Lay has said.

Speaking during his second day in the witness box, Mr Lay reiterated that he thought Enron's finances were healthy.

Enron was bankrupted in 2001 with debts of $31.8bn (18bn), and Mr Lay has been accused of hiding the losses and lying to boost the company's share price.

Mr Lay claims that former finance chief Andrew Fastow was behind the fraud.

No bad news

The problems at Enron were being probed by the Wall Street Journal, which asked the company to comment on partnerships that had been set up by Mr Fastow.

Mr Lay said that he was talked out of replying to the newspaper's questions by Enron's public relations team, even though it was against his better judgement.

"My policy had always been it's better to talk to the press than not talk to the press," Mr Lay told jurors. "At least try to get your viewpoint across and let them at least consider it."

1985 - Enron formed
December 2000- Skilling becomes chief executive
August 2001 - Skilling quits
October 2001 - Enron reports $638m third quarter loss and $1.2bn fall in shareholder equity
October 2001 - Securities and Exchange Commission begins inquiry into firm
November 2001 - Enron shares sink to 10 year lows as buyout deal falls through and further losses are revealed at the firm
December 2001 - Enron files for Chapter 11 bankruptcy
2002 - Criminal investigation of Enron 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
January 2006 - Enron trial begins

However, Enron felt that the newspaper was asking biased questions.

"We thought in fact the Wall Street Journal was on a witch hunt," Mr Lay said on Tuesday in the Houston court room. "We didn't have any information that Mr Fastow had done anything inappropriate."

The partnerships had in fact been used to hide massive losses, and the subsequent investigation and scrutiny was a key factor in Enron's collapse.

Mr Lay has been arguing that Enron's problems were as much about a sudden credit crunch and loss of investor confidence as it was about fraud.

He is facing six charges of conspiracy, and wire and securities fraud, and if found guilty he could spend up to 45 years in jail.

The 64-year-old Mr Lay has been charged along with former Enron chief executive Jeffrey Skilling, who is himself facing 28 charges of conspiracy and fraud.

Both men have denied the charges.

Mr Fastow is one of the prosecution's star witnesses, and has agreed to plead guilty to conspiracy to commit fraud and work with prosecutors in exchange for a 10-year jail sentence.

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