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Ken Lay
Former Chairman and CEO; Enron Corporation
Presided over the largest corporate fraud in American history at the time; $74 billion in shareholder losses
Overview
Kenneth Lee Lay was the founder; chairman; and CEO of Enron Corporation; once the seventh-largest company in America by revenue ($101 billion in 2000). Under Lay's leadership; Enron perpetrated one of the most elaborate corporate frauds in history; using special purpose entities (SPEs); mark-to-market accounting; and systematic deception to hide billions in debt and inflate profits. When the fraud collapsed in late 2001; Enron's stock fell from $90 to $0.26; destroying $74 billion in shareholder value; eliminating 20,000+ jobs; and wiping out $2 billion in employee pension funds. Employees had been encouraged to invest their 401(k) savings in Enron stock even as executives were secretly selling their own shares. Lay was convicted of 10 counts of securities fraud and related charges in May 2006. He died of a heart attack on July 5, 2006; before sentencing; his conviction was posthumously vacated under the legal doctrine of abatement ab initio because he did not have the opportunity to appeal.
Key Affiliations
Controversies & Concerns
Presided over systematic accounting fraud at Enron using special purpose entities (SPEs) to hide $38 billion in debt off Enron's balance sheet while inflating revenue
Encouraged employees to buy Enron stock and invest retirement savings in the company while executives secretly sold $1.1 billion in personal holdings; Lay personally sold $70+ million in stock
Enron's collapse destroyed $74 billion in shareholder value and $2 billion in employee pension funds; 20,000+ workers lost their jobs
Arthur Andersen; one of the Big Five accounting firms; was convicted of obstruction of justice for shredding Enron audit documents; the firm collapsed; eliminating 85,000 jobs worldwide
Close personal relationship with George W. Bush; was the largest individual donor to Bush's campaigns; Bush called him "Kenny Boy"; lobbied successfully for energy deregulation that enabled Enron's California energy market manipulation
Enron traders manipulated California's energy market during the 2000-2001 crisis; using strategies with names like "Death Star" and "Fat Boy" to create artificial scarcity that caused rolling blackouts and cost California ratepayers $40+ billion
Conviction on all counts was vacated after his death; meaning legally he died an innocent man despite overwhelming evidence of guilt
Related Investigations (1)
Criminal Charges & Violations
4 documented violations
15 U.S.C. § 78j(b)Securities fraud (6 counts)(Securities Fraud)
18 U.S.C. § 1343Wire fraud (4 counts)(Financial Crime)
18 U.S.C. § 371Conspiracy(Financial Crime)
18 U.S.C. § 1001Making false statements to banks(Fraud)
Known Associates & Connections
Jeff Skilling
Enron CEO; convicted of conspiracy and securities fraud; sentenced to 24 years (later reduced to 14)
Andrew Fastow
Enron CFO; architect of SPE fraud schemes; cooperated with prosecutors; sentenced to 6 years
Sherron Watkins
Enron VP who warned Lay about accounting fraud in August 2001 memo; named Time Person of the Year 2002
Sources & Documentation
3 documented sources from official records, investigations, and reports
Personal Information
- Born
- April 15, 1942
- Birthplace
- Tyrone, Missouri, USA
- Also Known As
- Kenny Boy
Education
- •University of Missouri; B.A. Economics 1964
- •University of Houston; Ph.D. Economics 1970
Key Timeline
April 15, 1942
Born in Tyrone, Missouri to a preacher and salesman family
1970
Earned Ph.D. in Economics from University of Houston
1985
Founded Enron through merger of Houston Natural Gas and InterNorth
1990s
Transformed Enron from pipeline company into energy trading giant; aggressively lobbied for deregulation
2000
Enron named "America's Most Innovative Company" by Fortune for sixth straight year; stock peaked at $90.75
2000-2001
Enron traders manipulate California energy market; causing rolling blackouts and $40+ billion in costs
August 2001
CFO Jeff Skilling abruptly resigns; Sherron Watkins writes anonymous memo warning of accounting fraud
October 22, 2001
SEC opens formal investigation into Enron
December 2, 2001
Enron files for bankruptcy; then the largest in U.S. history ($63.4 billion in assets)
January 2002
Arthur Andersen begins shredding Enron documents
May 25, 2006
Convicted on all counts by federal jury in Houston
July 5, 2006
Dies of heart attack in Aspen, Colorado before sentencing; conviction posthumously vacated