Press sapped Enron, Lay asserts

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HOUSTON (AP) -- Enron Corp. founder Kenneth L. Lay blamed the press yesterday for undercutting his company's strengths in the weeks before it crashed by highlighting problems that he said were already resolved.

Yet he said more problems, including the restatement of previously announced earnings that wiped out nearly $600 million in profit for the previous four years, further pushed Enron toward bankruptcy protection as investor confidence eroded in October and November 2001.

The restatement is unrelated to criminal counts against Mr. Lay, but he noted that it added to the firestorm that he said the press ignited.

"Obviously, that was a devastating blow to the financial markets and us," an agitated and sometimes bristling Mr. Lay told jurors in his fraud and conspiracy trial.

The former chairman and chief executive appeared to be trying to control the examination by defense attorney George Secrest in his second day on the stand, saying, "I'm not sure where you're going with that," when Mr. Secrest asked him to differentiate strategic from non-strategic assets. Mr. Lay then affably explained that a strategic asset is considered to be strategic to a certain business.

Philip Hilder, a former federal prosecutor who represents several former Enron executives, said outside court that Mr. Lay and former Enron Chief Executive Officer Jeffrey Skilling "could not be more different in their demeanor" in court. Mr. Skilling, Mr. Lay's co-defendant in the federal criminal trial, finished nearly eight days on the witness stand last week.

Mr. Hilder's clients include Sherron Watkins, a former Enron executive who won fame for trying to warn Mr. Lay of the financial peril facing the company days after he stepped back into the CEO role, following Mr. Skilling's abrupt resignation in August 2001.

Mr. Hilder said Mr. Lay appeared to be "taking control of the questioning and charting his own course" to "reinforce his version of reality," while Mr. Skilling let his lead attorney, Daniel Petrocelli, guide his testimony.

The government says Mr. Lay and Mr. Skilling conspired with each other and their staff to hide accounting tricks and failing business ventures until the company collapsed into bankruptcy proceedings in December 2001.

Both defendants say there was no fraud at Enron other than that committed by former Chief Financial Officer Andrew Fastow and a few others, who skimmed millions of dollars from secret scams. Mr. Lay, who began testifying Monday, continued to insist yesterday that Enron cratered in a storm of bad press, a skittish post-September 11 market and Fastow's greed.