On Tuesday, Sen. Peter Fitzgerald (R-Ill.) addressed former Enron chief executive Kenneth Lay, as Lay appeared before the Senate Commerce Committee, invoking the 5th Amendment. Here is a transcript of Fitzgerald’s comments.
“Mr. Chairman, during the past several weeks, I’ve spent a significant amount of time going over the rubble that is Enron. I was disappointed to learn that you, Mr. Lay, have no intention of testifying this morning, because I have lots of questions I think are important to ask you. And you know what, Mr. Lay, I thought that after any role you may have played in bankrupting a $100 billion-a-year company, devastating the retirement savings of thousands of your employees, spreading fear through millions of Americans concerned about their investments, and calling into question the very integrity of our capital markets — I thought that you might think it was important to answer those questions too. But apparently you do not. Apparently you do not think that it’s the least you can do.
“As part of the investigation under way by my subcommittee, the Consumer Affairs subcommittee, I’ve looked at literally hundreds of documents — partnership agreements, financial statements, annual reports, minutes of board meetings, letters — and I’ve heard or read the testimony of the many others who have already testified before this committee or other congressional committees. There’s a great deal of information out there. You can’t help but get angry once you begin to put together the pieces of the puzzle.
“Do you know what I’ve seen Mr. Lay? I’ve seen ridiculously complex transactions that boil down to simple games. For example, over and over again Enron would transfer questionable assets to partnerships, and the partnerships would pay Enron inflated amounts for the questionable assets. And where did the partnerships get the money they paid to Enron? The partnerships raised their money from lenders or investors who often were relying on some form of guaranty or credit support from Enron itself, sometimes in the form of Enron’s own stock. Enron seems to have installed insiders as general partners of these partnerships perhaps because honest outsiders wouldn’t have consented to pay Enron such inflated amounts for such questionable transactions. Even though Enron was really just indirectly borrowing money, it nevertheless often appears to have reported the transactions on its income statements in a way that encouraged the false perception that these essentially borrowed proceeds were recurring earnings — all the while, of course, keeping the ballooning debts off its own balance sheet and parked precariously on the partnerships’ books. As earlier debts came due, Enron would indirectly borrow even more money — both to pay off maturing obligations and to book even more fictitious income. This game kept driving Enron’s earnings per share and stock price higher and higher — and making senior managers, whose personal portfolios were packed full of Enron stock, richer and richer. This game worked until some investors and some reporters began to ask questions. At that point, new investors and new lenders became more difficult to attract, and the pyramid began to collapse.
“So what have I concluded? Mr. Lay, I’ve concluded that you’re perhaps the most accomplished confidence man since Charles Ponzi. I’d say you were a carnival barker, except that might not be fair to carnival barkers. A carny will at least tell you up front that he’s running a shell game. You, Mr. Lay, were running what purported to be the seventh largest company in America.
“What’s incredible to me is how long you kept it going — and how almost nobody called you on it. There were a couple that couldn’t be fooled though, weren’t there? Why is it, Mr. Lay, that occasionally, some people will take a stand?
“Sherron Watkins took a stand. Sherron Watkins — a good life, a nice house, a great kid — she had everything to lose when she essentially told you your company was a sham.
“She had every reason to walk away, but she stood and spoke.
“And you, Mr. Lay? You have every reason to stand and speak, but you will walk away.
“You will raise your right hand, you will take the 5th, and you will walk out that door. And when you walk out that door, it will be a stunning coda to the collapse of Enron.
“Mr. Chairman, I would encourage my fellow committee members not to allow the absence of Mr. Lay’s testimony to be an impediment in our continuing search for the explanations and ramifications of this significant event.”
