BYLINE: LAURA GOLDBERG, KAREN MASTERSON, PATTY REINERT, KRISTEN
MACK, MARY FLOOD
BODY:
Ken Lay resigned Wednesday as chairman and chief executive officer of Enron
at the request of the committee representing the company's creditors.
"I want to see Enron survive, and for that to happen we
need someone at the helm who can focus 100 percent of his efforts reorganizing
the company and preserving value for our creditors and hard-working
employees," Lay, 59, said in a statement released Wednesday night.
"Unfortunately, with the multiple inquiries and investigations that
currently require much of my time, it is becoming increasingly difficult to
concentrate on what is most important to Enron's
stakeholders."
The committee representing creditors in Enron's bankruptcy
asked Tuesday night that Lay step aside. A source close to Enron
said it did so because of the many allegations being leveled at the company and
Lay had become a distraction. Lay, who will stay on the board of directors,
oversaw the company's growth from a staid pipeline business into an energy
powerhouse that dealt in natural gas, electricity and other commodities.
After a decline that began early last year, the company began rapidly collapsing
in October amid charges it had improperly inflated profits and concealed debt by
using questionable accounting techniques. Thousands of employees were
subsequently put out of jobs and still more lost their retirement savings.
Thomas A. Roberts, a corporate lawyer helping oversee Enron's reorganization,
said Lay had been considering stepping down since before Christmas.
Lay couldn't be reached for comment.
He is scheduled Feb. 4 to testify before two congressional committees. Enron
spokesman Mark Palmer said he did not think Lay has changed plans to do so.
The directors asked Lay to stay on the board to help with the restructuring and
the creditors committee apparently didn't object, Palmer said.
Lawyers representing the creditors committee couldn't be reached Wednesday
night.
The board and creditors committee are in the process of selecting a
"restructuring specialist" to serve as acting chief executive officer.
The board, itself the target of lawsuits, will soon select a new chairman.
Lay notified the remaining Enron employees of his resignation in a e-mail sent
Wednesday night. He told them he was proud of what Enron and its employees had
accomplished over the years and praised them for the help they had given to
other employees and their communities.
He said he was proud of: the pipeline network Enron had built, the passion
employees felt toward opening new energy markets and how groups of intelligent
people got together to create such innovations as EnronOnline, the company's
internet trading portal.
After Enron filed for bankruptcy on Dec. 2 and then began firing workers, some
employees and former employees initially gave Lay the benefit of the doubt. But
as more information has come to light, anger toward Lay has increased.
Former employee Crystal Reyna said Lay's action is self-serving and overdue.
"Resignation is just another way out, a way to get rid of
responsibility," she said. "I would have expected him to resign
earlier. It's a good thing he did. I figured it was coming; it was just a matter
of timing."
Lay will still be held responsible for what happened while he was at the helm.
"He isn't going to get away with it," she said.
Nathan Childs, another ex-employee, echoed Reyna: "If he's guilty of
everything they say he's guilty of, then I'm glad he resigned. But it's a little
too late.
"I'm surprised it took so long for them to ask. I don't think he would have
done it on his own."
"He's resigned and he's rich, and I'm out of a job and I have no
money," Michelle Cormier, 33, fired Dec. 3 from Enron Energy Services after
16 years with the company, said Wednesday night. "He has something to fall
back on."
Lay, a native of Missouri who holds a Ph.D. in economics from the University of
Houston, became chairman and chief executive of Enron in February 1986 following
the merger of two Houston pipeline companies in July 1985.
He's held both jobs except for six months last year when Jeff Skilling took over
the CEO's spot. Skilling unexpectedly resigned the job in August, citing
personal reasons, and Lay again took daily control of the company.
In October, the company released an earnings report that included a $ 638
million third-quarter loss and a $ 1.2 billion reduction in shareholder equity.
Some of the losses were related to partnerships run by Enron's former chief
financial officer that had done business deals with the company.
In late November, major credit rating agencies downgraded Enron's bonds to
"junk" status and Dynegy terminated a planned merger agreement.
On Dec. 2, Enron filed for Chapter 11 bankruptcy protection.
John Olson, a stock analyst at Sanders Morris Harris in Houston who was raising
questions about Enron long before many others, said the resignation was
expected.
"The feeling was that he was going to go when he perceived he became too
much of a lightning rod . . . It's certainly the best for the company given its
major challenges right now," he said.
Philip Hilder, attorney for Enron executive Sherron Smith Watkins, who in August
wrote Lay a memo harshly criticizing the accounting practices, said, "Given
the course of events over the last week (the resignation) was inevitable."
But, he added, "I don't think it's particularly good news for employees . .
. Ken Lay was synonymous with Enron and his resignation has got to shake the
confidence of those who remain."
White House spokeswoman Jeanie Mamo said Wednesday Lay's resignation doesn't
change the president's focus on the criminal investigation, which will continue,
as will reviews of policies to protect people's pensions.
U.S. Rep. Ken Bentsen, D-Houston, said Lay's announcement was "no great
surprise when you consider the fact that he had lorded over a company that
collapsed as a result of what appears to be great mismanagement, if not
fraud."
"I don't think he had any other choice but to step aside," he said,
adding that he doesn't expect Enron to be resurrected.
"I've been highly skeptical of whether we would ever see Enron rise
again," Bentsen said. "The chairman and CEO ultimately has to take
responsibility for that."
House Majority Whip Tom DeLay, R-Sugar Land, said he is focused on finding out
what happened at Enron.
"It's been a very hard time for too many Houstonians," he said.
"This doesn't change that fact, nor the fact that we still need
answers."
GRAPHIC: Mug: Ken Lay (p. 12)
TYPE: Series
NOTES: Chronicle reporters Karen Masterson, Patty Reinert,
Kristen Mack and Mary Flood contributed to this report, as did the Associated
Press and Reuters wire services.
LOAD-DATE: January 25, 2002
Copyright 2002 The Houston Chronicle Publishing Company
The Houston Chronicle