Lay's rise to power, fall from grace elicit little sympathy
© St. Petersburg Times
Kenny Boy's Tale
(sung to the theme from the Beverly Hillbillies)
Come and listen to my story 'bout a man named Lay
Poor Missouri boy, worked hard in school then moved away.
Got his first job in oil, even earned a Ph.D,
Had no clue he was on the road to bankruptcy.
Well the big thing we hear, Ken Lay's a millionaire,
Our Prez calls him "Kenny Boy," one of Houston's debonair.
But now his biz is toast, and his wife swears they are plain broke,
Gee, I guess his fired employees know just who is blowin' smoke.
En-ron, that is, fool's gold, Texas tease
* * *
In his luxurious Houston home, Lay once even had a pillow emblazoned with, in hindsight, a bittersweet message: "Happiness is a positive cash flow."
Tomorrow, a soft-spoken Lay faces a far more negative scene. The man who nurtured Houston's Enron Corp., then watched it pancake into bankruptcy, is scheduled to confront Senate and House panels demanding an explanation for the company's sudden collapse.
Among many tough questions Lay, who resigned last month from Enron, will face: How did Enron executives cash out millions of dollars in Enron stock while thousands of employees saw more than $1-billion of their retirement savings evaporate?
Lay's rise to multimillionaire and political influential is well documented. What is not so well known is that before Lay became rich and a pal of (and heavy campaign contributor to) George W. Bush and other U.S. presidents, even before Enron was imagined as a fast-lane trader of gas and electricity, and a corporate model for power deregulation, Lay spent time in Central Florida as a vice president for Florida Gas Co.
For nearly seven years, Lay was one of Florida's own.
Florida Gas was the business inspiration of a small group of Texans who saw an opportunity to pipe in natural gas to a Sunshine State that lacked natural energy resources and depended on imported oil to keep its power plants running. The Texans opened their business (then called Houston Corp.) in 1957 in downtown St. Petersburg's old Florida Federal building, which is now the city's municipal services building at Central Avenue and Fourth Street.
In 1962, the company changed its name to Florida Gas and relocated to Winter Park to be closer to company holdings. By the early 1970s, company president and West Point graduate Jack Bowen enjoyed an Orlando area real estate boom when Walt Disney Co. built and opened its Magic Kingdom theme park. Florida Gas profited directly when it sold off land that would become SeaWorld.
In 1973, during the Nixon administration, Bowen was contacted by the deputy undersecretary for energy in the U.S. Interior Department. He was looking for a job in the private sector. Bowen hired a 32-year-old as vice president for corporate development.
His name was Ken Lay.
Some of Lay's Florida Gas co-workers, now retired and still in Winter Park, remember Lay with high regard. In a recent Orlando Sentinel story, former Florida Gas government affairs vice president Wiley Cauthen, 66, called him a "super leader." Former Florida Gas marketing chief Jim Dowden, 62, keeps a framed picture of Lay and says he still gets a Christmas card from Lay every year. They remain loyal to Ken Lay even in the Enron scandal.
Lay came to Florida with his wife, Judy. They met as students at the University of Missouri. Before Ken Lay would leave Florida, the couple separated. After a divorce, Lay married his secretary, Linda Phillips.
Fast forward more than 20 years. Amid a criminal investigation of Enron, lawyers have told Ken Lay to avoid interviews. But Linda Lay, still Ken's wife, appeared last Monday morning in a seemingly well-rehearsed interview on NBC's Today show.
Her hard-to-believe message? Husband Ken was caught as off guard by Enron's collapse as the company's 20,000-plus employees. That's a tough idea to sell, as Lay will find out on Capitol Hill on Monday.
Linda's second, and more remarkable message during the Today interview? The Lays are in danger of personal bankruptcy. That's got ex-Enron workers ranting. Me, too.
Here's a quick look at the Lays' assets. The couple holds about $8-million in stock not related to Enron. They live in a luxury high-rise apartment valued at $7.1-million in an exclusive part of Houston. They also own other Houston properties valued at about $10.5-million.
In Aspen, Colo., the couple own four properties. Three (a lot and two homes) are up for sale for a combined $15.5-million or so. The couple are keeping another Aspen home worth about $3-million.
Linda Lay said nearly everything the couple own is for sale. But few of the assets listed above are on the market.
That's one weep-on-cue interview that backfired.
Back at Florida Gas in the late 1970s, Bowen, the man who hired Lay, left for Houston to run a company called Transco Energy. Florida Gas was purchased by another company in 1979. Soon after, Lay, then Florida Gas president, contacted Bowen about job prospects in Texas.
Again, Bowen hired him. He liked Lay's style of giving managers freedom to operate, make mistakes and grow. "Ken enjoyed getting out on the pipeline, going to compressor stations, talking to people, and making sure he really listened," Bowen recalled.
Even today, many Enron workers in Houston like Lay and think other executives, especially former CEO Jeff Skilling and ex-chief financial officer Andrew Fastow, are more responsible for the company's troubles. Skilling and Fastow are tentatively scheduled to testify Thursday before the House Energy and Commerce subcommittee.
From 1981 until 1984, Lay worked at Transco as president.
The next year, Lay laid the foundation for Enron. He joined Houston Natural Gas, engineered a merger with InterNorth of Omaha and soon renamed the resulting company Enron.
On Monday, Lay gets his chance to tell his side of the Enron debacle.
Before the Senate Commerce committee, members will question Lay about the nearly 3,000 partnerships created by Enron, including nearly 900 that are offshore tax havens.
Lay also must explain how he could have been in the dark on Enron's internal accounting shenanigans, as he claims, even though minutes of Enron board meetings he attended show that board members knew many details.
In August, Lay defended Enron's financial health in an interview with a Houston reporter following the sudden resignation of Skilling (then Enron's CEO).
"There are no accounting issues, no trading issues, no reserve issues, no previously unknown problem issues," Lay said. "There is no other shoe to fall."
Eight weeks later, Enron's financial picture began to crack. In December, Enron entered Chapter 11 bankruptcy. In late January, Lay resigned.
For a company with no other shoe to fall, there are enough shoes to fill a department store.
When Lay was younger, he earned a Ph.D. studying how the government failed to see how the Vietnam military build-up would affect the U.S. economy.
Tomorrow, he will be asked how Enron failed to see how it was built on a financial house of cards.
This time, we'll all decide what his grade should be.
-- Information from Times wires was used in this report. Robert Trigaux can be reached at email@example.com or (727) 893-8405.
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