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CNN LARRY KING LIVE

Encore Presentation of 2004 Interview With Ken Lay

Aired July 8, 2006 - 21:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


LARRY KING, HOST: Tonight, former Enron Chief Kenneth Lay: His first prime-time interview since he pled not guilty to 11 criminal counts last Thursday. Those charges could bring him 175 years in prison if, of course, he's convicted.
Kenneth Lay, for the hour, next on "LARRY KING LIVE."

It's a great pleasure to be in Houston, Texas, with the former chairman and chief executive of Enron. Ken Lay has pled not guilty to 11 criminal counts. It's a pleasure to have him on this program.

Why are you doing this? Why are you appearing with us tonight?

KENNETH LAY, FMR. CHAIRMAN & CEO, ENRON: I decided once they did indict, which I never expected to happen, that it was time to start speaking out. I've obviously not said too much the last two-and-a- half years and that has certainly been the advice of my lawyers, but since the prosecutors and the Justice Department decided to indict me, then I decided it's time for me to begin speaking out and speaking what's on my mind.

KING: You realize that most lawyers are confounded by this since they always tell their clients, "Say nothing."

LAY: Well, mine did, too, for a long time. And...

KING: We spoke on the phone about a year ago.

LAY: We did, about a year ago. And still, there's no doubt that this is a little different approach, but probably part of it is the fact that I insisted that I want to start telling my story, but more importantly, I want to start doing whatever I can to get more of the truth out about Enron and the Enron employees and many other things where I believe that there's not -- there are a lot of myths, but not a lot of truth.

KING: What's it like these past two years to have been Ken Lay?

LAY: Well, it was more fun before that, Larry. I guess I'll start off with that.

No, it's been very tough -- been very, very tough. I suppose there's several different ways we could look at that. I mean, number one and foremost,

... I, through my whole life, had lived my life in a certain way to make sure that I would never violate any law -- certainly never any criminal laws -- and always maintained that the most important to me was my integrity, was my character, were my values, and then -- and have always taken that very seriously.

And certainly the last thing I ever expected to happen would be to, "be up close and personal to the criminal justice system." So, that's been very painful to know that, in addition to the collapse of Enron, that in fact there was a criminal investigation going on, about me specifically.

KING: But about -- how about people, the way they treated you -- when the name became a name that was the butt of jokes on late-night television, Kenneth Lay became that guy.

LAY: No, and that's been very painful, too. And I realize -- I intensely don't watch a lot of that, but I do read about quite a bit of that. And I realize that I have been made sport of by an awful lot of folks, particularly the late-night comedians.

But on the flip side, Larry, I think -- and this might surprise many people in your audience. I mean, for the most part, I -- my wife, our family -- are treated very kindly and very warmly by most of the people we come in touch with. And...

KING: Even Enron employees and the like who might be -- have a reason to be angry?

LAY: Even Enron employees. I mean, I was thinking as I was driving out here for this interview, if I go back over the last two- and-a-half years and think about the number of people -- even in this town -- I mean, that have maybe gone out of their way to make an unpleasant gesture my direction, it's probably less than you can put on one hand.

KING: Really?

LAY: Quite the contrary. It's amazing -- and my wife and I talk about this quite often, but amazing the number of people, even complete strangers but also former Enron employees, that go out of the way to be very kind and generous in their comments and warm and supportive and all the other things that they are.

KING: How do you explain it to yourself, since a lot of people were admittedly hurt?

LAY: Oh, admittedly hurt. And certainly, one of the most painful things for me is, in fact, that so many people were hurt. I mean, I -- I always took my role as a leader -- and certainly chairman and CEO of a major company -- very seriously as to our employees and trying to create opportunities for them and create opportunities where they could even, as I said many times, could realize their God-given potential and maybe realize more potential than even they realize they had.

And of course, through doing that, be able to provide financially and otherwise for their families in a way that they'd never really dreamed of. So, at the very end for the Enron collapse to have occurred, and obviously occurring in such a short period of time and absolutely wiping a lot of people out financially -- I'm sure emotionally and otherwise, too -- where they could not, in fact, realize their dreams, whether it be education for their kids or new home or their retirement, whatever, it's been incredibly painful.

KING: So, why -- how do you explain the lack of a lot of anger?

LAY: Well, I think many people, first of all, probably don't necessarily hold me personally accountable, or at least responsible, for what happened at Enron.

I think, secondly, they remember me over a long number of years when, in fact, I was doing a lot of things to help them and their families and their fellow employees and really bringing together a company that was a very exciting company for them to work at.

And I think the latter is something that comes up repeatedly -- even now, even when I'm traveling abroad, but around this country, where former Enron employees will come up to me and tell me that they continue to try to find a place where they can have even some small part of excitement and fulfillment that they had at Enron.

KING: And they don't hold you responsible?

LAY: Well, I'm sure some do, Larry. I mean, you read the papers and you listen to the hearings before Congress and elsewhere. No, I would not be at all -- I would not want at all to kind of mislead you or the viewers. I mean, there's certainly a lot of people out there that probably do hold me responsible and have a great deal of angst against me because of what happened.

I'm just saying...

KING: You don't run into them.

LAY: I -- or my wife or my family -- rarely run into that.

KING: OK. I want to cover some political things first. Have you heard or spoken to President Bush since all of this?

LAY: President Bush...

KING: Current President Bush.

LAY: Current President Bush. Not since sometime back in 2001, and that would have been before all of this occurred.

KING: He didn't call you to offer any condolences, feel bad, or anything? I mean, you two were very close, weren't you?

LAY: I considered us reasonably close and, certainly, I shared his business council and did some other things. But again, Larry, I'm realistic about that. I mean, it's not good -- it wasn't good for him and maybe not good for me, for us to talk after this all started happening. And I might say not just him, but I have intentionally not talked to any of my really, what I consider close, political friends in Washington -- on the Democratic side and the Republican side.

KING: Because you had them on -- Ann Richards, on this program, who's in strong defense of you.

LAY: I saw that at the time. And I even called -- I didn't reach Ann that next day, but I did call her office. I think she was traveling somewhere the next day. But I worked very closely with Ann when she was governor, and I was also chairman of her business council. And we worked very closely, particularly on education, but some other areas, too.

No, Ann's a lot of fun to work with.

KING: Were you apolitical?

LAY: I think if people would look at the numbers, they'd say, OK, I've supported more Republicans or at least given them more contributions than I have Democrats. But still, I gave a lot of support, financial and other types of support, to Democrats.

And again, I would say that it's not 50/50, but it'd be pretty close to that as far as people I would consider as friends on either side of the aisle.

KING: Another current thing: Today's "Washington Post" reports that Enron, part of investigation of Tom DeLay's corporate fund- raising, that he raised $100,000 from Enron to support the redistricting plan that he had for Texas.

Is that true?

LAY: I honestly don't recall that, Larry. And I wouldn't deny it either, because we were a supporter of Tom DeLay's through the years, but I just don't recall that particular contribution or even that particular campaign. And keep it in mind that a lot of that happened after Enron's collapse. I mean, obviously it was kicked off in 19 -- with election, I guess, in the year 2000, but really didn't get done until -- as you know, until just a few months ago.

KING: So, it may have been -- it may be true?

LAY: It may be true. I just don't know.

KING: You also served, is this true, on the board of Mrs. John Kerry's -- one of her foundations?

LAY: Well, it's The Heinz Center in Washington -- The Heinz Center...

KING: Her late husband...

LAY: ... for Economic Science and the Environment. And I participated in setting that center up. I mean, I was one of the founding directors. I was working with some other good friends, primarily in the environmental community in doing that. And of course, that center was set up, as you know, in honor of...

KING: Late senator.

LAY: ... of the late Senator John...

KING: Are you friendly with Mrs. Heinz? Well, the former Mrs. Heinz -- Mrs. Kerry?

LAY: I'm very -- I am friendly with Ms. Heinz. I mean, I'm not against -- been contacting her recently, but I was still on that board up until a year or so ago.

And I think it's a great center and doing some great work and was pleased to serve on that.

KING: You like her?

LAY: I like her very much.

KING: Did you leave the board?

LAY: I left the board. I had offered throughout, ever since Enron's collapse, to step off the board. And I think as -- I kept talking to the chairman of the board, and we finally decided it would be in the center's best interest that I step off the board.

KING: We'll be right back with Ken Lay on "LARRY KING LIVE." Don't go away.

(COMMERCIAL BREAK)

KING: We're back in Houston with Ken Lay on this edition of LARRY KING LIVE. Have you had dealings with the -- Dick Cheney and the energy policy task force? Have you thought of that?

LAY: Well, I have not had any dealings with them since Enron's collapse. I did, in fact, have some interaction with them in the spring of 2001, I guess it was, Larry.

KING: Would you care if their minutes were released?

LAY: No. No. And I'll even say when I was planning to testify before the Congress, before the Senate, the Senate Commerce Committee in early 2002, we'd already decided, my legal team and I had already decided that if, in fact, there were any questions raised about that, we would be happy to release to that committee all of the notes, memos, et cetera that, in fact, I used or were presented before those meetings.

KING: So you had nothing to hide.

LAY: Absolutely nothing to hide. I mean, I think Vice President Cheney was trying to get input from a lot of people, including me. And we certainly were trying to provide input. I will say that probably more of what we recommended was not put into the plan than was, but that's the way it typically is, because he had a lot of input from a lot of different parties.

KING: Do you think, Ken, there was anything political in your indictment at this time, in the midst of a campaign? Do you think?

LAY: Well, Larry, first of all, I think it would be just strictly speculation. I mean, as you well know, there has been some speculation that after going for two and a half years and not indicting and of course going through two totally different teams that investigated only me, very large teams, each about a year apiece and decided there wasn't anything to indict, it is a little unusual that it occurred just a couple of -- the indictment did come down from a third team, about two weeks before the Democratic convention.

But the one thing I think, in my mind, at least, for sure, is that if there hadn't been the political interest, the media frenzy, political frenzy around the Enron collapse back toward the end of 2001, particularly early 2002, odds are this investigation of Enron would have been closed down a long time ago.

KING: With no indictments?

LAY: No, no, quite the contrary. If you look at the first year of the investigation, and, again, keep in mind, I mean, the Justice Department started off with, you know, what they at least advertise as the best and brightest people they had in the country, particularly on financial issues, and they were picking the team, FBI, U.S. attorneys, others, from all over the country, as well as the SEC and the IRS and the Labor Department and everybody else, to come to Houston and investigate what happened at Enron. And indeed, during that first year, they had already indicted before the end of that first year or had plea agreements with at least three or four or five of the people in the finance group, including Andy Fastow and Michael Kopper and so forth.

KING: Indictments you thought were logical?

LAY: Well, I mean, I think now, knowing everything we know, I didn't necessarily know everything even -- I knew most everything...

KING: Knowing what you know now.

LAY: But knowing what I know now, I still think probably that -- now, first of all, there probably was criminal conduct there. I mean, anytime employees receive money on -- receive money from transactions with the company they work for and from banks and so forth, that's a pretty good indication that there was some intent there to permit it to, in fact, perform a crime. But I think since then, the investigation certainly continued and continued very aggressively. But I'm afraid that increasingly, there had been people drawn in and maybe even persuaded to plea, where, in fact, I am not persuaded there is criminal intent or criminal conduct. But time will tell.

KING: Senator Edwards said I think yesterday that Enron is a legit campaign issue, you agree? LAY: But I think that's up to the politicians. I mean...

KING: Do you know Senator Edwards?

LAY: I don't know Senator Edwards. But, again, I would clearly prefer it not be, and I don't think there's any -- I mean, let me make sure I'm very clear on this -- I mean, I don't have any reason to believe that there's any political involvement in what the Justice Department's done over the last even two and a half years, nonetheless, the last few months. I'm just saying that I think because of the interest that was created by all of the hearings and the statements by senators and congressmen early on and the media frenzy and so forth, this investigation has probably gone on a lot longer and there's been a lot more motivation to try to get as many scalps as possible, versus really say, OK, here we found the crime, these are the people that did it. Let's indict them and let's get on to more important business.

KING: All right, help us as a person who doesn't understand finance as much and everything. As a CEO, does the Truman doctrine apply, the buck stops here? In other words, if something happens in the company, knowledge or non-knowledge shouldn't be an issue, you have to take the fall.

LAY: Well, the buck stops here from this standpoint, Larry. And I've said, I take responsibility for what happened at Enron, both good and bad. But I cannot take responsible -- responsibility for criminal conduct that I was unaware of. Just like I would presume that Harry Truman, if he were alive today, and certainly George W. Bush or President Clinton or everybody else would not be willing to take responsibility for criminal conduct that might occur anywhere in the government, or any -- or the CEO of any other company would be willing to do that.

KING: How much does a CEO know? In other words, in the involvements of a huge company, were you a hands-on guy?

LAY: It depends how you want to define hands on. But let me go at it this way, Larry. I mean, first of all, I think I knew a lot, and across the whole company I knew a lot. But, now, keep it in mind that Enron was a company with about 30,000 employees in about 30 different countries around the world. We had 500 plus employees were vice president and above. We had a management committee that was made up of about 24, 25 of the most senior officers in the company, which, in fact, ran and were responsible for each of the major staff functions, like finance and legal and accounting and risk management, and so on and so forth. Human resources.

And, also, that ran each of the major businesses, both -- and quite often major businesses within their individual companies. So...

KING: Like a little government?

LAY: Well, it's...

KING: A profit-making government. LAY: I just as soon not kind of necessarily use the analogy of the government, but I do think, just like any large company, you have to delegate quite a bit of authority to your lieutenants, to your senior officers, and they have to delegate quite a bit of authority on down.

KING: When did you know then -- when did you know, we got to break here in a second, something was wrong?

LAY: Well, the first time that I really got concerned that there might be something wrong was well into October, Larry. And really, more like the third to fourth week of October when some things began to be revealed about these related-party transactions and Andy's involvement in them and potentially's Andy's income that he was receiving from them, all of which didn't fit what we'd been told. We as a board or me as a CEO for over two years.

KING: Were you shocked?

LAY: Very shocked.

KING: Let me get a break. We'll be right back with Ken Lay. Don't go away.

(BEGIN VIDEO CLIP)

ANDREW WEISSMAN, ENRON PROSECUTOR: With today's arrest of Ken Lay, the top echelon of Enron has now been called to account for their crimes.

Lay is the 31st defendant to be charged as part of the work of the Enron task force. 11 of those charged have been convicted by plea or by a jury and the rest remain pending trial.

(END VIDEO CLIP)

KING: We're back with Ken Lay. Sherron Watkins who was a key employee says she warned you about Andrew Fastow's off-the-books partnerships and that you didn't want to hear bad news. How do you respond to that?

LAY: I think that mischaracterizes it. Sherron of course initially sent me an anonymous letter, not early, shortly after I came back in as CEO in mid-August, 2001. And even that anonymous letter got my interest enough that I sent that down to my general counsel with a note that it probably should be investigated to see if we'd find out if there was anything there we should be concerned about.

Well, Sharon, about a week or two later, week, ten days, two weeks later through our head of human resources set up a meeting with me to come in and see me personally. We had about a 30-minute meeting. A very meaningful meeting, I think. The standpoint of what she was concerned about and she brought with me to that meeting, of course, the same letter somewhat modified, signed which was certainly good. But more importantly, several other documents, some other concerns and even identified some people that she thought supported her position on these transactions. Well, I handed that to my general counsel that same afternoon and told him that, indeed, I thought that he should take those materials and he and his team as well as with our outside legal counsel should, as I put it, use her road map, use her identified sources of support and try to determine whether, in fact, there was a problem with these transactions.

KING: In other words, you did take action to look into it?

LAY: Absolutely.

KING: Why did she get the impression that you didn't?

LAY: Well, you need to ask Sherron Watkins that. Let me say Sherron Watkins stayed with the company right on through the rest of that year and worked very closely with us in many areas, but, indeed, the outside law firm did interview all the people she'd recommended, also interviewed some other people that she did not have on her list, did meet with Arthur Anderson a time or two, met with her on the front end. As a matter of fact, I advised that the law firm should first meet with Sherron to make sure they really understood what she's saying, what her concerns were and then they went about following her road map to see if in fact, there was a problem. And then even when they came back to me, within about two or three weeks and reported that, indeed, they couldn't find anybody, including the people on her list that supported her position, and they also couldn't find anybody that thought there was a serious problem with those transactions.

KING: How did they, since it wasn't you, how did they pull this off? Was it Mr. Fastow? Was he a genius?

LAY: I don't think anybody has questioned Andy's intelligence. Andy is a very intelligent individual.

KING: He's going to testify. He's one of the government witness against you.

LAY: I'm sure he'll be in the trial...

KING: His wife went to jail.

LAY: Which is very sad, Larry...

KING: Did you like her?

LAY: Well, as far as like individuals, they're both God's children. Just like we all are and they're lovely people and, I mean, as far as the context of just the individuals, but they have small children. It's just an enormous tragedy on that family.

KING: Is he the main culprit?

LAY: Well, from everything we know, he at least was the -- at least orchestrated it and led it. He was the one that went to Jeff Skilling and then from Jeff Skilling, he came to me to recommend that we do what we ended up doing on those related-party transactions with board approval, of course. Took it to board, had a good lively debate on it. But at the end of the day we felt that, in fact, there's a good business reason to do those transactions at the time and we thought we had adequate safeguards.

KING: So would you say he pulled it off?

LAY: He pulled it off and, indeed, a number of our safeguards failed us, too. But he pulled it off and we know now that he was misleading me and the board as far as the balance sheet and liquidity position but also the amount of time he was spending on these related- party transactions.

KING: You bear no anger?

LAY: I've prayed and gotten over that, Larry. I mean, I certainly still find it disgusting as to what happened because of what he did. And, obviously, it caused an enormous amount of pain for all of our employees and of course more for some than others. But all of our employees, retirees, investors, creditors, everybody else. So just enormous damage was done by what he did. But I try. I mean, again -- he's got a higher being to answer to some day than certainly me or anybody on this earth. And from my standpoint I try not to dwell on anger. I just try to move forward.

KING: But he had to be brilliant to pull it off. In a sense, fooling all you bright people.

KING: He had to be pretty smart about it and he had to be pretty careful about whoever he brought in to his circle to kind of participate in it. And, indeed, we know from other situations and other companies or other places. I mean, if you get three, four, five people that are very smart and have a fairly orchestrated method of doing things, they could mislead some very smart people for some period of time. Usually not forever, but for some period of time.

KING: Ken Lay is our guest. We'll be right back. Don't go away.

(COMMERCIAL BREAK)

KING: His first interview, first major appearance. Ken Lay is our guest. Pled not guilty to 11 criminal counts, fraud and conspiracy. He's rejecting all those counts, right?

LAY: Absolutely.

KING: OK. Jeff Skilling appeared on this show. What do you see him in this picture?

LAY: Larry, I guess a couple of things. Because number one, I'm assuming everybody is innocent until proven guilty. And let me say that that somehow, has been missed by many people who have been observing what's been going on at Enron for the last two and a half years. I mean, in too many cases it looks like the individuals are assumed guilty until proven innocent.

So, number one, I'm assuming he's innocent.

Number two, I don't have any personal information that would indicate that he or Mr. Causey are guilty of any criminal conduct. I suppose they -- I mean, they certainly probably would share with me responsibility for maybe putting too much trust in Andy Fastow, but -- and there may be other things where we misjudged or miscalculated. But again, as far as being involved in this, I don't think that there has ever been any allegation that either one of those two individuals received any financial benefit from those different entities, like...

KING: Do you talk to them, by the way?

LAY: No. I mean, for quite some time, our lawyers -- I mean, my lawyers and their lawyers and the lawyers really of all the people involved in the Enron investigation have advised that it's not wise for us to talk directly.

KING: Ken, explain these stories that you sold -- that you made money off of this.

LAY: Well, let me say, first of all, it's no secret that I did sell some stock during 2001, and particularly, I mean, even in the second half of 2001. But keep it in mind that over the years, I had borrowed money and I'd used Enron stock as collateral, primarily because over 90 percent of all of my net worth was in Enron stock.

KING: You borrowed from banks?

LAY: Borrowed from banks to make investments...

KING: Enron stock was the collateral.

LAY: ... and that was the collateral. But as the stock price started dropping in 2001, and of course even more sharply in the second half of 2001, I was getting cash calls and margin calls from my banks. And, again, since virtually all of my net worth, but even more importantly, all of my liquid net worth was in Enron stock, the only way I could meet those cash calls was with Enron stock. I was using a revolver, a loan revolver with the company that had been part of my compensation package since really the late '80s, in various forms and fashions. So it wasn't something brand new in 2001, and the alternative for me doing this -- and what I was trying to sell as little shares -- as few shares as I could to meet the cash calls. But if I'd let the banks take charge of it, which the banks had the right to do, I was concerned that they will sell a lot more and maybe sell all of the portfolio.

KING: So you still had some faith in the company?

LAY: I had a lot of faith in the company. Larry, when we went bankrupt, I still had about over a million shares of Enron stock I owned outright, and had about six million options, which up until late 2001 were very valuable.

KING: Are you financially OK?

LAY: Well, I guess it depends how you say financially OK. I...

KING: In your own...

LAY: Well, I mean, I -- the facts are that about 95 percent of my net worth disappeared in 2001. We went from something over $400 million to something under $20 million. If you take out the money that has been reserved for legal fees and settlements that are pending. And indeed, on the liquid side, we probably have less than $1 million of liquid assets.

KING: What are your legal fees going to be?

LAY: Oh, millions. They already have been millions. And at this point in time, it's almost impossible to say. Of course, if you want to take the worst case, I mean, I have billions of dollars of claims against me by plaintiff lawyers. So...

KING: You have civil suits.

LAY: Civil suits. And so -- but even just to pay the legal fees for those lawyers that are defending me, it's still running millions of dollars out of my pocket.

KING: Are you earning anything now?

LAY: Very little. I'm earning some and particularly earning some on past investments that have turned out -- including real estate that my wife invested money in, and other things where we were able to sell those things off and get more money out of them than we invested in them.

KING: What do you make of what happened to Arthur Andersen?

LAY: Larry, that is another very sad story. Now, I guess I'll start with the predicate that I think Arthur Andersen let us down as a client, but even having said that, I think still, as to those individuals that were actually involved in the Enron account, that's a very small number of people in a firm of, of course, several tens of thousands of employees. And I would have thought there would be a better way -- I still think there was a better way to in fact handle that than to destroy the whole firm, and destroy the jobs and the livelihoods and maybe retirements of all of the employees and retirees of Arthur Andersen, and, indeed, reduce the number of competitors in the big accounting firm arena from five to four.

KING: If you became a consultant, is -- was Enron, is -- and is another Enron preventable? Assuming that the same kind of people are in place who wanted to do bad things.

LAY: Very hard to say, Larry. And I've asked myself that question many times, and, again, with 20/20 hindsight, you can see some things that maybe could have been done differently.

But based upon the facts we had at the time -- I say we -- I had, the senior management had, the board had. Based upon the information we had at the time, I expect we'd make the same decisions today.

With 20/20 hindsight, you make different decisions. Now, as to what really happened within that finance group, certainly I thought -- the board thought we had in place adequate controls, I mean, including Arthur Andersen approving all the transactions, including arm's length negotiations on the value of all the transactions, including the chief accounting officer, the chief risk officer looking out for Enron side of the transaction, including, not supposed to have any employees working directly for Andy involved on Enron's behalf, and we kept adding other controls to that, even in the two years subsequent to when it was set up.

But at the end of the day, all of the controls failed.

KING: We'll be back with more of Ken Lay. Don't go away.

(COMMERCIAL BREAK)

KING: We're back with Ken Lay.

Did Enron's problems or fortunes or misfortunes have anything to do with hurting California and its energy problem? Because a lot of politicians in California blamed Enron.

LAY: Well, they do, and I still think to this day falsely, Larry. I mean, California, for the most part -- I mean, California, California regulators, politicians, et cetera, caused the problem in California.

I mean, they set up and approved a, quote, "deregulation" system. There was not deregulation. Quite the contrary. I mean, it basically allowed for no consumer choice at the retail level, no competition at the retail level. It required that, in fact, the utilities -- except what they could generate themselves, which was 40% of the requirements by all of their other requirements on the spot market. So, you had the situation of selling long, buying short.

And then, you had some very strange things happen on the weather side and on the hydro season...

KING: Did Enron make money off California?

LAY: Enron made money on California. I'm not going to deny that. We also made money across the country at that same time. And again, to the extent that maybe some of our traders did, in fact, do some things that were not appropriate, they could have aggravated the problem in California, just like other traders may have aggravated the problem.

But I'd still maintain today just what I maintain then, that 90, 95 maybe plus percent of the problem was caused by faulty systems, by some very severe weather -- both hot summer in 2000, the coldest winter in 100 years in 2000 and 2001, and indeed, the second lowest hydro season in the northwest and in California in 2000 and 2001.

KING: Do you have, Ken, a good defense? Have you read the indictment? All the charges? Can you say, "On all 11, I've got a good defense?"

LAY: I've read the indictment as of this past weekend -- probably more importantly, my legal team has read the indictment. And yes, I have good defenses and, indeed, there are a lot of misinformation in there, a lot of false assumptions and conclusions in there.

And indeed, we think on each and every point we can defend me and defend me very satisfactorily.

KING: Is it going to be an entanglement case for the jury? Is there going to be a lot of things here above the layperson's heads?

LAY: Well, it's a complicated case and, of course, it's made a lot more complicated, Larry, by trying to put Jeff Skilling, Rick Causey, and myself all on the same case.

KING: They want to try you all together?

LAY: Well, that's just what they did last Thursday, try to wrap us all in together. And yet, at the same token, the indictment against me makes it very clear that they're not saying -- as a matter of fact, they're saying I didn't have any involvement in any of the transactions we've been talking about, any of the things that caused Enron's collapse.

KING: In essence, are they saying, what, you lied? Or...

LAY: Well, they're saying primarily when I stepped back in as CEO in mid-August 2000, when Jeff Skilling suddenly or unexpectedly resigned, that somehow I was charging back in there and just couldn't wait to kind of assume the mantle of leading this conspiracy that they maintained had been going on for two years, of which I was not involved.

And again, I think all their facts are wrong. I think their assumptions, conclusions are dead wrong. But indeed, I think the law is on our side. Most importantly, the law's on our side.

KING: Your daughter is a lawyer. Is she assisting in this defense?

LAY: Very much so. My daughter, Elizabeth Vittor, she -- in fact, my wife and I persuaded her to come to work for me in December of 2001 when this all began to break, believing that it'd be very helpful to have her kind of help oversee all of the legal matters and the activity -- the lawyers and their...

KING: She's not the prime attorney, though, right?

LAY: Well, not the prime attorney, but she's been intimately involved in all of the strategy. She's a very, very bright young lady, very savvy, good judgment.

KING: Is that a good idea, though, when they say your family member gets too emotionally involved and you don't want someone -- you want someone to care, but not that much.

LAY: Well, she's obviously emotionally involved because she loves her father, and her father loves her. So, you're going to have that situation, but with the same token, it's nice to have somebody -- not that the other lawyers don't -- but really does, first and foremost, want to make sure that her father's taken care of legally.

And let me say, our whole legal team...

KING: Who's your -- who's the main lawyer?

LAY: Mike Ramsey, as far as the activities...

KING: He's criminal...

LAY: ... here in Houston. He's criminal. He's here in Houston. But we have a whole team -- Earl Silbert in Washington, D.C...

KING: You have Earl?

LAY: We have him. And...

KING: Former prosecutor.

LAY: Former U.S. prosecutor for over 20 years. Jim Sharp, former assistant U.S. prosecutor for a long time. We have Carrington, Coleman in Dallas, which has some excellent lawyers on the civil side. So, we have a number of really key advisers here that are involved.

KING: Can we say, since you're being so open, you will probably testify?

LAY: I would guess the odds are I will testify.

KING: We'll be back with our remaining moments with Ken Lay here in Houston. Don't go away.

(COMMERCIAL BREAK)

KING: We're back with Ken Lay. This is our remaining moments.

What is it like to be handcuffed?

LAY: Don't recommend it, Larry.

KING: It wasn't you, it's that all felony arrests have to -- is that the rule?

LAY: Well, that's the rule on all arrests of executives from Enron. I'm not sure if it's necessary across the board, but...

KING: What'd they think, you were going to flee?

LAY: I doubt it. I think it's more of a visual.

KING: Do you get bail? LAY: I got bail.

KING: How much?

LAY: Well, the -- initially the prosecutors were asking for about $6 million and it got reduced to half a million dollars, just a signature bond.

KING: What do you say to employees and people who lost -- what do you say?

LAY: I'm incredibly sorry. I grieve for them. I honestly still grieve for them and probably will to the day I die, Larry. I mean, as I said earlier, I always taken the responsibility of my employees seriously. I always try to provide opportunities for them and, indeed, let them realize growth and potential and even financial success like they probably never dreamed of. Indeed, Larry, we had the most creative, the brightest, most accomplished group of employees, certainly in our industry, maybe in many other industries. We were competing with the best and biggest companies in the world for the best talent and they loved working at Enron, just like I did. But I grieve for all that they've lost and we, I mean, even having lost what we lost, I mean, we're so much better off. My family is so much better off than most of them. And it pains me each and every day of my life.

KING: You are a religious person, right?

LAY: I am.

KING: Have you always had this faith?

LAY: I have. My father was a Baptist minister and ordained a Baptist minister while I was very young, probably 2, 3-years-old. But I mean, even before that, both my parents came from very religious families, had a very strong faith. So, I grew up in the church. I mean, I can recall as a very young boy sitting in the front pew and maybe falling asleep in my mother's lap with my father preaching.

KING: Does that sustain you?

LAY: That certainly sustains me and my wife and my whole family. No, it gives you a strength and an understanding that is very necessary, particularly in times of trial like this. But I very strongly believe that there is a God and that God is in charge of what's going on in our lives. He's in charge of all of this. I can't tell you the reason that...

KING: He's putting you through this?

LAY: I think he's allowing me to go through this and there is a purpose for this. And maybe even before eternity, maybe, in fact, I'll find out what that purpose was. But indeed, whatever it is, I'm prepared to do what I can to make the best of it and come out of it with the best. KING: There was a famed figure in the Reagan administration, Mr. Donovan who was secretary of labor, who had many acquisition accusations and was eventually cleared. And had that quote, "How do you get your good name back?"

How do you get, ever, your name back?

LAY: And first of all, reminded -- minded of Mr. Donovan and that quote many times. But, you know, there is no place to go when this is all over to get your reputation back. The only way you get it back is to rebuild it. And I hope on the other side of this the good Lord willing, I'll have enough years and enough health that I can, in fact, do some meaningful things still in business. I've got some things going on now that could become very significant over time and make a very meaningful difference to energy efficiency and environment and education and some other things.

But, secondly, I think one of the other losses for Linda and me, is that we've not been able to continue a lot of the philanthropy and giving and so forth that we were able to do in better times. And we'd love to get back to that.

KING: So you are not going quietly into the sunset, if found not guilty on all charges. You will be an activist.

LAY: I will be an activist. I can't tell you all the areas I'll be an activist in, I don't suppose I'll even know that until we get through this. But even before the indictment, I was able -- I mean, I had a lot of things going on that, in fact, are very meaningful and substantive and could be very large at time.

KING: You fear jail?

LAY: I don't fear...

KING: Always a possibility.

LAY: I don't fear jail because I know I'm not guilty. I know I did nothing wrong. I did nothing criminal and I also believe my God will get me through this.

KING: They're going to sentence her Friday, do you feel any association with Martha Stewart?

LAY: Well, only to the standpoint, again, it's been an era where, I mean, not just Enron, but an era where, in fact, it's been very difficult to get necessarily, shall I say objective treatment some time. But I've not followed her case that closely, I don't know Martha Stewart. Certainly aware of everything she's done and she seems to be a very accomplished person and probably can contribute a lot to society in the future, as well as she has in the past.

KING: Do you think there is a general mood to be out after bigness, successful business people?

Do you think there's mood in the country? LAY: Well, I don't -- hopefully that's waning somewhat now that the markets are improving, and the economy is improving and so forth, but I think certainly over the last three years or so, two and a half years, there has been a mood of trying to punish people that might have, in fact, been responsible for people losing a lot of money or jobs.

KING: Are you going to ask for a quick trial?

LAY: We're going to ask for a quick trial. We're going to work as hard as we can to get it. I want to be first.

KING: I think you're entitled to it.

LAY: We are entitled to it. It's a matter will there be a lot maneuvers, I'm sure, by the parties to prevent it.

KING: You want it as quick as you can.

LAY: We want it as quick as we can. We want to get on with it and we want -- and I do want to be first and get ahead of the rest of the guys.

KING: You want to be tried first?

LAY: I'd like to be tried first and get through it.

KING: Great meeting you, nice meeting you. Thank you, Ken.

LAY: Nice meeting you, Larry.

KING: Ken Lay, the former chairman and chief executive of Enron.

I'll be back in a couple of minutes.

(COMMERCIAL BREAK)

KING: Thanks for joining us on this edition of LARRY KING LIVE. "NEWS NIGHT" with Aaron Brown is next and I'll see you tomorrow night. Good night.

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