AnalysisEnron founder turned into a symbol for all that is wrong with capitalism, writes Dennis Staunton
The massive heart attack that killed Kenneth Lay yesterday has brought a dramatic end to an extraordinary story of ambition and success that turned into a parable of greed and corruption. Once a close friend of President George W Bush, who nicknamed him "Kenny boy" and a contender for high political office, Lay ended his life as an object of derision and the butt of jokes on late-night television shows.
During the Enron trial, Lay told the jury that he had been blessed in his life to achieve the American dream. "I guess you could say in the last few years I've achieved the American nightmare," he said.
Within hours of his death yesterday, websites were buzzing with tasteless jokes and angry postings claiming he had cheated justice by dying before being sentenced for fraud and conspiracy during the collapse of Enron.
Lay and his successor as Enron chief executive, Jeffrey Skilling, were convicted in May and were expected to face a lifetime in prison.
The jury found that both men had lied to investors, employees and regulators so they could conceal the financial weaknesses of the energy conglomerate. Lay was also convicted of four separate bank fraud charges.
Born in Missouri in 1942, Lay grew up in poverty, the son of a preacher who worked two or three jobs at a time to feed his family. Despite their poverty, the Lays were generous to the poor, feeding and sheltering beggars who came to the door. Lay was an energetic donor and organiser of charitable projects until he died.
He studied economics at the University of Missouri and went to work after graduation at Humble Oil and Refining, which later became Exxon Mobil.
"All I knew about the industry was that there was a filling station down the street where you put gas in your car. I knew it was pretty dirty and the people there were pretty surly, but that's about it," Lay recalled later.
Expecting to be called up for the Vietnam War, he joined the Navy and served his time at the Pentagon, where he attracted attention with a brilliant analysis of the impact on the US economy of withdrawing from Vietnam.
On his release from the Navy in 1971, Lay was supposed to return to Humble Oil, but his old economics professor, who had been chosen by Richard Nixon to serve on the federal energy regulatory commission, took Lay on as his executive assistant. Two years later, when he left government service, Lay got in touch with the head of a company that his commission regulated - Jack Bowen of Florida Gas, who appointed him vice-president for new energy ventures. When Bowen became chairman of Transco Energy in 1981, he brought Lay to Houston. Four years later, Lay was president and in 1984, he become chairman and chief executive at Houston Natural Gas, a Houston pipeline company. Within a year, he merged it with Nebraska rival InterNorth, creating Enron.
Hiring aggressively, Lay built Enron into a high-profile, widely admired company, the seventh-largest publicly traded company in America. Enron's success helped Lay to cultivate politicians such as the Bushes, for whom he became a top donor and to fund a luxurious lifestyle.
When Skilling joined the company in 1990, he set about transforming Enron from an energy and pipeline company into a complex trading operation and Lay drifted away from the day-to-day running of the business. Enron collapsed after it was revealed its finances were based on fraudulent partnerships and schemes, not the profits it reported to investors and the public.
Lay always maintained his innocence, claiming Enron's troubles were the result of stealing by more junior executives and stock market panic inspired by hostile press coverage.
When Lay and Skilling went on trial, the abrasive Skilling was viewed as a risk for the defence, while Lay was expected to charm the jury with his sunny personality and down-to-earth style. Instead, Skilling impressed jurors by answering questions clearly and patiently while Lay came across as bitter and defensive.
Even after the jury found him guilty, Lay protested his innocence and promised to appeal the verdict.During his lifetime, Lay hoped to be remembered as a brilliant, dynamic entrepreneur who worked hard for charities and helped to improve the social and cultural life in Houston. He has instead become a symbol of all that was wrong with American capitalism in the last decade of the 20th century and of the perils of underregulated industry.
As Washington Post legal analyst Andrew Cohen pointed out yesterday, Lay has borne much of the blame for Enron's collapse, which others should share.
"The failure at Enron was a system-wide failure of corporate America. In short, it was the failure of a great many people, whose culpability is both known and unknown, but who, unlike Lay, will be able to spend another day, another week, another month, another year on this earth," he wrote.
Lay's most enduring legacy may in fact be positive - the Sarbanes-Oxley Act that introduced tougher accounting rules for US firms after Enron's collapse.
