Ex-Enron chief Lay may talk

Former CEO Skilling's testimony could have legal consequences

? Former Enron chairman Kenneth Lay could testify at a Senate hearing Tuesday, a week after pulling out of two scheduled appearances when some in Congress suggested he had engaged in criminal activity.

Lay’s spokeswoman said Friday he hadn’t decided what to do about his scheduled testimony, but Sen. Byron Dorgan sounded optimistic that Lay would answer questions.

It is customary for witnesses to inform a congressional panel if they intend to invoke their Fifth Amendment right against self-incrimination and “they are not doing so at this point,” said Dorgan, citing discussions between lawyers for Lay and the Senate Commerce Committee.

“Ken Lay is still weighing his options for how he will handle the hearing on Tuesday,” said spokeswoman Kelly Kimberly.

Lay decided last Sunday not to testify at two scheduled congressional hearings, after a number of comments by senators and House members on TV talk shows about alleged criminality, including one that Lay had to know Enron was a giant pyramid scheme.

Meanwhile, legal experts said that Thursday’s House testimony by former Enron chief executive officer Jeff Skilling could have serious legal consequences.

In a three-hour appearance before a House subcommittee, Skilling said he knew few details about the web of partnerships that brought the company to ruin, and the former Enron executive insisted he was never warned of any problems with the partnerships.

Skilling was contradicted by Enron treasurer Jeff McMahon and was questioned by congressmen who said they didn’t believe Skilling’s story. The former CEO said he was unaware Enron was using the off-the-books partnerships to “conceal liabilities or inflate profitability.”

The partnerships kept hundreds of millions of dollars in debt off the company’s balance sheet.

ABC News reported Friday night about a meeting Skilling attended of one of the partnerships, LJM2, in Palm Beach, Fla., in October 2000. The report, based on an interview with LJM2’s office manager, is an “unsupportable attack” against Skilling, said his lawyer, Bruce Hiler.

“My client walked into a meeting in Palm Beach, and gave about 10 or 15 minutes of remarks on Enron; he then left the meeting and went to the airport,” said Hiler. “He did not see any materials that were used or passed out that the meeting. As part of his job responsibilities he would on occasion speak to third-party investors with whom Enron may deal.”

When she was asked whether Skilling was willing to come back to Capitol Hill for more questioning, a spokeswoman, Judy Leon, said “He’s responding to all the invitations.”

“Presumably Skilling’s counsel believed that his testimony would assist in defusing the torrent of daily criticism that has been heaped upon Skilling in the media,” said Mark J. Krudys, a former federal prosecutor who has handled securities fraud cases.

However, “Skilling may be found criminally culpable if prosecutors can prove that he deliberately closed his eyes to the obvious,” Krudys said.

Skilling’s testimony “probably demonstrates the wisdom of the adage that you should not allow your client to testify to Congress if the client has any potential exposure,” said Marvin Pickholz, a former assistant director of enforcement at the Securities and Exchange Commission who now defends accounting firms.

Four other current and former Enron executives have done so, as has David Duncan, the chief auditor for the Enron account at the Arthur Andersen accounting firm.

In another development Friday, the Pentagon disclosed that it is one of the federal agencies along with the White House that the Justice Department has directed must preserve all Enron-related documents.

The department’s Feb. 1 letter requests the Pentagon general counsel’s assistance in preserving all records “which relate in any way to Enron’s financial condition and/or business interests.”