House of Cards

Enron's collapse may have been engineered from the top, but low-level employees played parts, too

At the request of the board of directors, Lay once again took charge of the company. He told the Powers committee in January that at a management retreat about a month after his return, he solicited comments about Enron's problems. That led to a one-hour discussion of off-balance-sheet transactions, which most of the two dozen attendees admitted they had used on occasion. According to notes of his interview, Lay said the consensus was that "so long as the vehicles were valid, they made a lot of sense."

Lay acknowledged that he had been consulted on the formation of most of the partnerships run by Fastow, but claimed not to have known they were being used to conceal huge debts and losses until October, when the company reported a quarterly loss of more than $500 million. By then, Lay had been working hard to rally the company's employees, starting with the "Lay It On The Line" survey. There is a somewhat surprising ambivalence among former Enron employees interviewed for this story about Lay's culpability in the company's collapse, although everyone believes he failed to respond quickly enough to Sherron Watkins' detailed warning of the accounting high jinks. For that reason--and because he was, after all, CEO and chairman of the board--nearly everyone agrees he bears ultimate responsibility.

Diana Peters is convinced Lay was "a patsy" who was "duped" by Skilling and Fastow. She believes Lay was sincere when he asked employees to "Lay It On The Line," and she senses nothing sinister in his exhortation in a September 26 online chat to "[t]alk up the stock and talk positively about Enron to your family and friends."

Margaret Ceconi suspects Enron was bankrupt for two years before its December collapse.
Deron Neblett
Margaret Ceconi suspects Enron was bankrupt for two years before its December collapse.
Diana Peters had to take the first job offered to her after Enron's collapse. "I want somebody to go to jail," she says.
Troy Fields
Diana Peters had to take the first job offered to her after Enron's collapse. "I want somebody to go to jail," she says.

"I think he really thought he could make things better, smooth things out and move it forward," Peters says. "I don't think he had any intention of deliberately screwing anybody, excuse my French."

John Allario, creator and Webmaster of, one of a handful of electronic gathering places for disenfranchised workers and an outlet for their frustrations, was initially encouraged by Lay's efforts at leadership, but eventually changed his mind. "At the time, I thought it was a very proactive thing for Lay to be doing," he says. "He had just taken over, and this was one of his efforts to get his hands around what the company was thinking. In hindsight, it seems like a well-planned PR campaign to give me that exact feeling of comfort, that Ken was at the helm and looking out for me."

Lay acknowledged in his Powers committee interview that cashing in more than $100 million in stock options might have suggested to Wall Street that he was ripping the parachute from the back of Enron shareholders and bailing out. Lay's attorney, Earl J. Silbert, has defended the stock sales, saying Lay needed capital to repay millions of dollars in loans he had received from the company. But according to notes from his interview, Lay never mentioned the loans to the Powers committee. Instead, Lay explained that he "wanted to liquidate some of his stock to diversify because he had approximately 75 percent of his assets in Enron stock plans."

Ceconi doubts that explanation. She figures that, based on what she saw, Enron had been technically bankrupt for almost two years, and the top brass knew it. Meanwhile, she says, Lay "was encouraging people to invest in the company and selling his own stock. He was like Jeff Skilling...he did choose to turn the switch on in the first place to start selling shares every week."

It's safe to say that, in contrast to the mixed emotions about Lay, the contempt for Skilling and Fastow is shared by all former employees. They orchestrated a solution to the company's problems that wasn't a solution at all, says Michael L. Miller of the Severed Enron Employees Coalition. Miller is angry that Skilling only increased the pressure on a struggling company by trying to justify a higher share price through "deceit." The only honest solution, he says, would have been to admit Enron was overvalued and adjust the balance sheet accordingly.

Still, Miller isn't willing to tar everyone involved in the deception with the same brush. While he believes people such as treasurer Richard Causey and risk manager Rick Buy ignored their duties to shareholders, they may have weighed their options and decided it would all work out in the end.

"These guys became incredibly wealthy riding that train with Skilling," Miller says. "At the same time, I believe they viewed all this off-balance-sheet theatrics as a stopgap until we could get our [assets] sold and generate the 5 or 6 billion in cash that Skilling had been promising Wall Street for a couple years. I don't think they viewed them as a permanent part of the organization's structure, but as something that was necessary to get things off the balance sheet for this year-end, and by next year-end, we'll unwind them. And next year never came."

However it happened and whoever's to blame, the coalition's members seem eager to move on to the more pressing issue of securing $150 million in additional severance. According to the class-action suit, the coalition's claim is based on Enron's failure to give 60 days' notice before termination, per company policy. Many employees also want bonuses owed to them for their work last year; Miller says his would be "in the six figures." As for their lost retirement savings, few coalition members hold out any hope that even a fraction of that will be recovered.

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