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Ken Lay Pleads Not Guilty; Officials Say Terrorist Attack Could be Likely; Kidnapped Marine Safe in Lebanon
Aired July 08, 2004 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
TOM RIDGE, HOMELAND SECURITY SECRETARY: We live in serious times. This is sobering information about those who wish to do us harm.
(END VIDEO CLIP)
MILES O'BRIEN, ANCHOR: Words of warning about a large-scale terror attack on the United States. What really prompted it? We're in depth this hour.
KYRA PHILLIPS, ANCHOR: A not guilty plea. Former Enron CEO Ken Lay says he did not lie to the public about finances before the colossal collapse. We're live from Houston, Texas, waiting for his comments.
MIGUEL MARQUEZ, CNN CORRESPONDENT: And I'm Miguel Marquez, live in West Jordan Utah, where I've spoke to the family of the now found Marine Corporal. I'll have the reaction. Not quite the reaction you'd expect.
O'BRIEN: Monkey business: harnessing the brainpower of primates to help paralyzed humans. It's research on the cutting edge.
From the CNN Center in Atlanta, I'm Miles O'Brien.
And I'm Kyra Phillips. This hour of CNN's LIVE FROM starts right now.
Two and a half years after Enron collapsed the company's former chairman wore handcuffs today as he surrendered on charges in Houston. Kenneth Lay faces multiple criminal counts, including conspiracy and fraud, in a grand jury indictment unsealed today.
Now a short time ago, a federal prosecutor spoke about the case against the former corporate titan.
(BEGIN VIDEO CLIP)
ANDREW WEISSMAN, PROSECUTOR: This investigation, we believe, has served to re-establish the rule of law that no one is above the law, that no scheme to defraud is too complex or too fancy to be beyond the long arm of the law. Thirty-one...
(END VIDEO CLIP) PHILLIPS: We heard from James Comey. Now we're waiting to hear from Kenneth Lay. Live pictures out of Houston, Texas. As soon as he steps up to the podium and starts addressing reporters, we will take that live.
Now also joining us, also from Houston, with more on the case against the former Enron chairman, CNN's Jen Rogers -- Jen.
Reporter: Kyra, Ken Lay was released from federal custody a short time ago. He left the courthouse. When he exited just an absolute throng of reporters crushed on him and his wife as they tried to get out of here to get to the hotel where we are waiting for him to speak and Michael Ramsey, his attorney.
Now, what I can tell you is that in the courtroom, which was also absolutely packed. And I have attended other former Enron executives' indictments and arraignments down here, this one really much more crowded.
Ken Lay in that arraignment saying, "Not guilty, your honor" when asked what he pled to these 11 counts that have been charged against him today. Now, he was released again after filling out some paperwork and posting a $500,000 unsecured bond. The government had asked for $6 million bond but getting a $500,000 unsecured bond.
Going through what kind of punishment Mr. Lay faces. This happened in court earlier. He faces a maximum of 175 years, according to the prosecutor -- Kyra.
PHILLIPS: All right. Jen Rogers, live from Houston. Now we'll continue to check in with you.
Also we want to remind our viewers once again. Live pictures out of Houston right now. We are waiting for Kenneth Lay to step up to the podium, side-by-side with his attorney, Mike Ramsey.
We will take that live as soon as it happens -- Miles.
O'BRIEN: All right, it appears Ken Lay and his entourage have entered that room. We will, of course, be watching that very closely.
We'll move on with some other stories right now and obviously jump back to that as soon as we need to.
A fresh call for vigilance and a reminder that nothing and no one is immune to terror, especially the upcoming political conventions. Renewed warnings came this morning from the homeland security secretary, Tom Ridge.
CNN's Sean Callebs joining us live now from Washington with a bit more on this.
Hello, Sean.
Reporter: Hi, Miles. Indeed, as the nation prepares to turn its attention to the upcoming Democratic and Republican conventions, a word of warning from the homeland security secretary.
Bush administration officials say they have real and credible information that leads them to believe al Qaeda is in the operational phase of planned large scaled terrorist attacks somewhere on U.S. soil.
Extra security is up in Boston and New York, the two cities that will be hosting the political convections in a matter of weeks. However Homeland Security chief Tom Ridge says authorities have no idea when, where or how an attack could do down. He said the CIA, FBI and other intelligence agencies are working to gain that knowledge.
The threat level will not be raised, however, and will remain at yellow or elevated.
(BEGIN VIDEO CLIP)
RIDGE: We live in serious times, and this is sobering information about those who wish to do us harm.
But every day, every day we strengthen the security of our nation and as a nation we are committed to the absolute protection of our citizens. Efforts each of you make to be vigilant, such as reporting suspicious items or activities to authorities, do make a difference.
(END VIDEO CLIP)
CALLEBS: There are overt concerns in the U.S. that terrorists may try and duplicate chaos that came from organized attacks in Madrid, Spain, this past March that killed more than 200 people.
The attacks are blamed on al Qaeda and widely believed to have a dramatic effect on that country's elections. The ruling party was voted out of office, and new leaders quickly removed Spanish troops from Iraq.
U.S. authorities believe al Qaeda wants to disrupt the Democratic process here and could very well launch a strike before the November general election. Bush administration officials maintain al Qaeda will not disrupt the ongoing war on terror or this nation's resolve.
Senate Majority Leader Bill Frist said this is not a new threat but rather what he calls a fact.
(BEGIN VIDEO CLIP)
SEN. BILL FRIST (R-TN), MAJORITY LEADER: There's obviously no reason for panic or no reason for paralysis. But the fact is that general intelligence that this country is at some increased risk between now and the time of the presidential election. It is important for people to be aware of that.
(END VIDEO CLIP) CALLEBS: Democratic congressional leaders are scheduled to hold a news conference shortly. New York Senator Charles Schumer called Ridge's warning today troubling and worrisome -- Miles.
O'BRIEN: Sean Callebs in Washington, thanks very much.
As we draw closer to the national conventions does Secretary Ridge's briefing today help matters or perhaps make them more frustrating? You can weigh in as we prepare to debate the issue. E- mail us at LiveFrom@CNN.com. We'll share them with you later.
Safe and apparently in good health. That's how U.S. officials describe American Marine Corporal Wassef Ali Hassoun, first reported missing two and a half weeks ago in Iraq. He turned up at the U.S. embassy in Beirut, Lebanon, today, accompanied by members of his family.
Our Jamie McIntyre has the latest now from the Pentagon. Jamie, what do you know?
JAMIE MCINTYRE, CNN CORRSPONDENT: Well, Kyra, now U.S. Marine corps officials are confirming, in fact, that Corporal Hassoun is at the U.S. embassy in Beirut, Lebanon, and is in the, quote, "process of being repatriated back into the U.S. military custody."
We're told that that process will begin in Lebanon and then result in him being transferred to another location for a medical evaluation. Apparently, the Landstuhl hospital in Germany is the location he'll be taken to, although that hasn't been finalized.
At the State Department earlier today, it was acknowledged that Corporal Hassoun apparently turned himself in voluntarily.
(BEGIN VIDEO CLIP)
RICHARD BOUCHER, STATE DEPARTMENT SPOKESMAN: He made contact with us and arranged a place to meet. And we went to pick him up and brought him back to the embassy.
(END VIDEO CLIP)
MCINTYRE: Now the U.S. military has a lot of questions for Corporal Hassoun about the circumstances of his disappearance, initially he was listed as being on unauthorized leave, suspected of possibly being a deserter.
But then his status was changed to captured after he was seen on what appeared to be a hostage tape or a videotape, in which it looked like he was being threatened to be beheaded.
Now there are questions about the authenticity of that and the circumstances under which he left his unit and how he got through Syria and into Lebanon, where again he is now in the custody of the U.S. military.
So a lot of questions for him. But at this point Pentagon officials and military officials are being careful not to jump to any conclusions until they have had a chance to hear his side of the story -- Kyra.
PHILLIPS: Jamie, we'll follow the investigation. Thanks.
Well, the Hassoun story has taken more turns and a mystery novel it seems. That had his family on an emotional roller coaster.
Miguel Marquez is at the family home in West Jordan, Utah. What are they saying, Miguel?
MIGUEL MARQUEZ, CNN CORRESPONDENT: Well, it's been 19 days of twists and turns for this family here in West Jordan and the large extended family in Tripoli.
I spoke to a family member a short time ago by phone. And the reaction wasn't quite what I expected. They had talked all week long about their hope that he be released and their desire to see him released and back in U.S. Hands.
But the relative I spoke with on the phone today expressed none of that. He expressed caution and concern about the information that I was giving him. There was no elation in the voice, either. He didn't even seem to believe the information was true.
Maybe that's understandable, given what they've been through the past 19 days. It's been one thing after another.
The one thing we have not seen, which we've seen in the past in these situations, typically, are pictures -- pictures or video of the corporal. And that's one thing we have not seen from them.
I did ask them about the statement, whether or not the family would make a statement. They had said in the past that once they knew he was in U.S. hands they would make a statement. At this point he said there's no statement for now, and possibly no statement today -- Kyra.
PHILLIPS: Miguel Marquez, live from the family home there in West Jordan, Utah. Thank you -- Miles.
O'BRIEN: Well, Ken Lay apparently is at the podium now. He just pleaded not guilty to a raft of federal charges stemming from the collapse of Enron, the company he founded and was the CEO of.
Let's listen to him as he addresses reporters in Houston.
KENNETY LAY, FORMER CEO OF ENRON: Very interesting day. Indeed it has been a tragic day for me and my family. We also know that an indictment came down that should not have occurred.
As CEO of the company, I accept responsibility for Enron's collapse, as I've said before. However, that does not mean I knew everything that happened at Enron. And I firmly reject any notion that I engaged in any wrongful or criminal activity. Enron's filing for bankruptcy protection on December 2, 2001, was clearly one of the saddest, if not the saddest day of my life, both personally and professionally, and caused enormous and irreversible hardship for thousands of good Enron employees and retirees, as well as many others.
As most of you know, on February 2001, after 15 years on the job, I stepped down as chief executive officer of Enron. By mid-2001, I had also agreed to accept another position outside of the company at year-end and was making plans to leave Enron entirely at that time.
Despite these plans, when Jeff Skilling unexpectedly resigned in August, the board asked me to step back in as CEO, just three and a half months before Enron's collapse. I agreed to do so because of my love for the company and my love and respect and admiration for the employees of the company.
I took major steps to improve investor and employee confidence. Implementing my management style of over 30 years, I solicited recommendations from employees. I wanted to get everyone's best ideas in order to make the company even stronger.
That being said, I believed and still believe that the fundamentals of our core business, our wholesale business, our retail business, and our pipeline business were very strong.
There is continuing misunderstanding about my Enron stock transactions. I believed in the company so much that rather than sell more of my sock over the years, I increased my ownership of Enron stock and borrowed against the stock to Make other non-Enron investments in order to diversify my investments, as my advisors were instructing me to do. I believed that Enron stock would only increase in value over time.
I disposed of some of my Enron stock in 2001 because, as the stock price declined, I received cash and margin calls by bankers and had to use the Enron stock to meet these calls. Even then, I sold as little of my stock as possible to satisfy the calls, because I was convinced that it was undervalued and would increase in value.
In September 2001, I even used a $10 million cash bonus I received from the company to pay down debt, rather than use Enron stock.
The Enron collapse was enormous tragedy. I continue to grieve, as does my family, over the loss of the company, my failure to be able to save it, and the tremendous hardship it caused so many employees, retirees and others. But failure does not equate to a crime.
Although my lawyers and I believe I should not have been indicted, now that I have been, I have instructed my legal team that I want a speedy trial. And I hope it will begin by early September this year. Not only are we ready to go to trial, but we are anxious to prove my innocence.
I also believe, as chairman and CEO of Enron, when it collapsed, it is my duty and obligation to go to trial as soon as possible.
As you know, the indictment entered in the court earlier today is long and complex. And many of the specific allegations and issues in the indictment cannot be addressed until we've had time to fully evaluate them.
But with that caveat, I and the legal team -- do have Mike Ramsey with me and Bruce Collins with me. I and my legal team are now ready to take a few questions. So questions, please.
UNIDENTIFIED MALE: Sir, are you still...
LAY: One at a time here.
UNIDENTIFIED MALE: (UNINTELLIGIBLE) Can you explain what you mean by taking responsibility? What do you think that you did wrong? And do you take any responsibility for the broader problems with investor confidence that resulted from Enron's collapse?
LAY: Scott Padre (ph), I say responsibility. I was chairman and CEO of the company throughout much of the period in question. In that role, ultimately, I have to accept responsibility for anything good and anything bad that went on in the company. And indeed I do that.
But we need to keep in mind, also, that this is a company that had over 30,000 employees in over 30 different countries. Add over 500 vice presidents and above, reporting to a management committee of about 24 or 25 senior executives that ultimately reported to the office of (ph) chairman, made up of myself and one or two other people.
And clearly the company that size and that diverse and growing rapidly, you have a lot of senior officers that have a lot of authority in which you place enormous trust.
And in the process of doing that in over 30 some years I found that, for the most part, those that I put in those positions and I entrusted to those positions have, in fact, justified that trust.
Clearly, in this case there was at least one, Andy Fastow, that betrayed that trust, and betrayed it very, very badly. And that caused an enormous amount of damage at Enron and ultimately caused Enron's collapse.
To the extent that I did not know what he was doing, that he obviously didn't share with me what he was doing, then indeed, I cannot take responsibility for what he did. But I can take responsibility as chairman and CEO for what happened to Enron, because I did in fact have some role in him being in that position.
UNIDENTIFIED MALE: (UNINTELLIGIBLE) The broader issue, confidence in corporate America as a result of Enron, do you take responsibility for that at all?
LAY: Do I take responsibility for that? Well, I mean, there are a lot of companies that had difficulties shortly after if not before Enron's collapse. Some of which, of course, were even bigger bankruptcies than Enron; WorldCom being the notable one.
But a number of very large ones and, of course, a lot of other companies that had some troubles with their accounting and the, again, other things that were related to those companies.
There's been a lot of hearings on this. There's been some legislation passed. We have new laws in place. And I think probably school is still out on how much that has improved the overall situation versus the old laws.
But I think, in fact, this is not a matter so much of needing new laws, just making sure all the existing laws are enforced. And, indeed, for the most part corporate America is very honest and hardworking.
And I think, as I said before at Enron, I think the vast majority, I mean, 99 plus percent of our employees were honest, hardworking people and doing exactly what, in fact, you'd expect those people to do.
But it is amazing the amount of damage that can be done by very few people that are doing things that, in fact, tend to self-enrich them but also create chaos in a company the size of Enron.
UNIDENTIFIED MALE: What were your -- you mentioned Fastow specifically (UNINTELLIGIBLE)
LAY: To my knowledge there were, but somewhat contrary to popular approach today, I think everybody should be innocent until proven guilty. And it seems that we've kind of lost that in many of the Enron cases, in particular, where with the frenzy -- the media frenzy and the political frenzy that went on around Enron, particularly shortly after its bankruptcy.
There were broad assumptions as to guilt of a lot of officers, a lot of individuals at Enron, on the front end of the investigation that -- rather than waiting until the investigation proves out that there is a crime somewhere and that somebody committed that crime.
UNIDENTIFIED MALE: What were your plans in the fall of 2001 and were those plans being driven by accounting concerns about (UNINTELLIGIBLE)?
LAY: It is interesting that that -- the whole issue of goodwill, of course, has become a very big issue in this indictment.
It may not surprise you or some of the other reporters here. I didn't spend a lot of time worrying about goodwill. I mean, we have a lot of things going on at Enron.
Now, I did have some meetings on goodwill, and obviously, there was an issue as to how the new accounting rules that were going in place in early 2002 might impact goodwill and particularly whether there would have to be write offs. And there were -- There was a lot of analysis going on inside the company. I mean, I was aware of some of the analysis going on inside the company and by Arthur Andersen on that very issue.
And I even had a report made to me in the first -- about the end of the first week in October by our chief accounting officer and by the partner in charge of the Enron account at Arthur Andersen.
And it was at that time that it was reported to me that in fact the new accounting rules would have very little impact on goodwill -- on the goodwill we had on the books.
But it was not -- as I said, that was not necessarily front and center, a big issue of the company at the time. Obviously a lot else was going on that we were trying to deal with.
UNIDENTIFIED MALE: Was the decision on whether or not you were going to continue investing in (UNINTELLIGIBLE)?
LAY: You guys want to stop me here in the back I'll be happy to. Well, I'll tell you right here -- right here is our leading expert on that, Bruce Collins. And he's already learned more about goodwill, I think, than most people will.
BRUCE COLLINS, KEN LAY'S ATTORNEY: Maybe a little bit of an expert just in the last few weeks as this issue has come up.
But we've had a chance to look at the work papers of Arthur Andersen. And looking at what they looked at and how they did their analysis, they did not base their determination at all on any growth prospects for Wessex.
So we don't understand the basis for this allegation.
O'BRIEN: All right. As Ken Lay cedes to his -- one of his attorneys -- Do you want to listen to one more question for him? Let's go back to one more time and we'll step back in.
Here's Ken Lay again.
UNIDENTIFIED MALE: (UNINTELLIGIBLE)
LAY: Well, I understand that. And again, I think some of that does come out, a lot of -- a lot of the publicity and so forth, the good media publicity that occurred on Enron early on which did lock in a lot of views about both the culture, the business model, a lot of other things about Enron that I believe were just dead wrong. And of course, we've seen some of that even popularized in TV movies and so forth.
But the same token I come back to the earlier comment and, of course, particularly having now had a chance or had an opportunity, chance, whatever, to go back and look at a lot of the various board minutes and other things related to the transactions that really did cause the collapse of Enron.
And indeed some very bright people were looking at those very same documents, getting those very same reports, very knowledgeable, sophisticated people, my board members, of course other officers, and indeed none of us detected what was going on.
And, of course, as I -- if you go back and look at probably what in the total volume of stuff we were reviewing during that three-year period or so, and approving or disapproving and making decisions on, it represented a very small percent of what we were focusing on for our various decisions.
And again, if you've got a chief financial officer that has reason to be trying to hide things, and certainly not disclose things to the board or me, it is very difficult to pick that up. I'm sorry to say, but it's very difficult to pick that up.
UNIDENTIFIED MALE: (UNINTELLIGIBLE) Watkins?
LAY: Well, and you well know when I got the letter from Miss Watkins and shortly after going back in as CEO, I immediately went and met with my general council counsel, which I typically would do with something that looked of some importance, and asked him. I'd already asked him, based on the anonymous letter to kick off an investigation.
And of course, based upon the more detailed information she gave me in a personal meeting, I took it to my chief -- my general counsel and asked him to -- to share that with our outside law firm and get them to get in there and do an investigation.
And of course talk -- follow the road map she had given. Talk to the people she said supported her position in the company. And determine whether, in fact, it was a problem that needed an even more in depth investigation, maybe by a third party law firm or a third party accounting firm.
And of course that report came back that everything seemed to be OK.
O'BRIEN: We have been listening for Ken Lay. He's going to continue on. We're going to keep monitoring it.
But now let's bring in our senior legal analyst, Jeff Toobin, who has been listening to all this.
Jeff, he's pleaded not guilty to 11 counts. It seems what he's doing is pleading guilty to felonious incompetence, as in his job.
JEFF TOOBIN, CNN LEGAL ANALYST: Well, you know, he's doing the traditional politician move of taking responsibility, which is a meaningless, broad term, but saying, in essence, that he did nothing wrong.
That, however, was an unusually substantive statement for someone who is under criminal indictment. And he did say some things that actually I think will be significant as this story unfolds.
I mean, he really did layout his defense. His defense is: "I was a victim of Andrew Fastow. I didn't know what he was doing. He was stealing from the company. He was leading the company to ruin. And even though I was chairman, and briefly CEO," again he didn't know what was -- what he was doing.
That is -- that is a valid defense if it's true. Prosecutors now have a very clear target to shoot at.
O'BRIEN: All right. A couple things here. Let's remind folks, first of all, about Andrew Fastow, chief financial officer at one time. Pleaded guilty. Ten-year prison sentence. So he's already gone down, so to speak, and is aiding, obviously, in this prosecution.
The big question, I guess, on a juror's mind will be, this is so big, how could it be limited to just one person?
TOOBIN: Very good question. Very, very tough question to answer for Ken Lay.
But it is worth remembering, some of the things he said early in his press conference. He was, by and large, a buyer of Enron stock. You know, he voted with his pocketbook. He accumulated more and more stock and only sold it when he had to for margin calls.
That is significant for someone who's accused of defrauding Enron shareholders, because he was probably the biggest single individual shareholder himself.
You know, as for Andrew Fastow, he was enriching himself through these secrete partnerships. He -- One of the big issues in the trial will be did Ken Lay and Jeff Skilling, the chief executive, did they know what Fastow was doing? Or was Fastow pulling the wool over their eyes in order to enrich himself with these partnerships?
That's going to be a critical factual issue in the trial. And I just, at this point, certainly don't know how it's going to turn out.
O'BRIEN: Jeff, is it possible for Ken Lay to find a jury that is open-minded in Houston, given all that has gone on there, and the number -- I'm sure most everybody in Houston knows somebody who lost a lot of money as a result of all this.
TOOBIN: Very tough. Very tough question. And it intersects that question with another very interesting thing Ken Lay said in his -- in that press conference.
He says he wants a trial by September. He wants a new -- he wants an almost immediate trial. And for a case of this complexity, that is close to an immediate trial.
But will he forego? Will he give up the motions he could file in court that would delay a trial?
For example, will he decide not to move for a change of venue? He probably has a pretty darn good motion for a change of venue, given all the publicity this has in Houston. Maybe they really should move it to El Paso, which is, you know, a relatively remote part of Texas.
But if he makes those motions, he's not going to get a trial in September. It will certainly delay things. Those are some of the legal issues to be sorted out.
O'BRIEN: Why would he be in a rush at this point? Why not exercise every possible motion you can?
TOOBIN: Well, as a former prosecutor, I know that sometimes when you bring a case, you're looking forward to a little time to be able to prepare, to -- to use the time to prepare, gather the evidence.
Sometimes you're not ready as a prosecutor to say, "Hey, let's go right to trial." That's something that can be an advantage for the defense, but they have to give up some advantages if they really want to force the prosecutor to go to trial right away.
O'BRIEN: Interesting. You would think the prosecution would be ready by now. But you're right. It's all this cat and mouse game.
All right. Jeff Toobin, thanks very much. Always appreciate your insights.
TOOBIN: OK, Miles. See you.
O'BRIEN: We're taking your e-mail on the other big story of the day: Tom Ridge's homeland security announcement. Helpful? Frustrating? Motivations behind it? Whatever is on your mind on that. Does it make you scared? Are you over that? E-mail us at LiveFrom dot -- at CNN.com. And we'll do our best to read some of your e-mail later this hour.
Stay with us.
(COMMERCIAL BREAK)
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Aired July 8, 2004 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEO CLIP)
TOM RIDGE, HOMELAND SECURITY SECRETARY: We live in serious times. This is sobering information about those who wish to do us harm.
(END VIDEO CLIP)
MILES O'BRIEN, ANCHOR: Words of warning about a large-scale terror attack on the United States. What really prompted it? We're in depth this hour.
KYRA PHILLIPS, ANCHOR: A not guilty plea. Former Enron CEO Ken Lay says he did not lie to the public about finances before the colossal collapse. We're live from Houston, Texas, waiting for his comments.
MIGUEL MARQUEZ, CNN CORRESPONDENT: And I'm Miguel Marquez, live in West Jordan Utah, where I've spoke to the family of the now found Marine Corporal. I'll have the reaction. Not quite the reaction you'd expect.
O'BRIEN: Monkey business: harnessing the brainpower of primates to help paralyzed humans. It's research on the cutting edge.
From the CNN Center in Atlanta, I'm Miles O'Brien.
And I'm Kyra Phillips. This hour of CNN's LIVE FROM starts right now.
Two and a half years after Enron collapsed the company's former chairman wore handcuffs today as he surrendered on charges in Houston. Kenneth Lay faces multiple criminal counts, including conspiracy and fraud, in a grand jury indictment unsealed today.
Now a short time ago, a federal prosecutor spoke about the case against the former corporate titan.
(BEGIN VIDEO CLIP)
ANDREW WEISSMAN, PROSECUTOR: This investigation, we believe, has served to re-establish the rule of law that no one is above the law, that no scheme to defraud is too complex or too fancy to be beyond the long arm of the law. Thirty-one...
(END VIDEO CLIP) PHILLIPS: We heard from James Comey. Now we're waiting to hear from Kenneth Lay. Live pictures out of Houston, Texas. As soon as he steps up to the podium and starts addressing reporters, we will take that live.
Now also joining us, also from Houston, with more on the case against the former Enron chairman, CNN's Jen Rogers -- Jen.
Reporter: Kyra, Ken Lay was released from federal custody a short time ago. He left the courthouse. When he exited just an absolute throng of reporters crushed on him and his wife as they tried to get out of here to get to the hotel where we are waiting for him to speak and Michael Ramsey, his attorney.
Now, what I can tell you is that in the courtroom, which was also absolutely packed. And I have attended other former Enron executives' indictments and arraignments down here, this one really much more crowded.
Ken Lay in that arraignment saying, "Not guilty, your honor" when asked what he pled to these 11 counts that have been charged against him today. Now, he was released again after filling out some paperwork and posting a $500,000 unsecured bond. The government had asked for $6 million bond but getting a $500,000 unsecured bond.
Going through what kind of punishment Mr. Lay faces. This happened in court earlier. He faces a maximum of 175 years, according to the prosecutor -- Kyra.
PHILLIPS: All right. Jen Rogers, live from Houston. Now we'll continue to check in with you.
Also we want to remind our viewers once again. Live pictures out of Houston right now. We are waiting for Kenneth Lay to step up to the podium, side-by-side with his attorney, Mike Ramsey.
We will take that live as soon as it happens -- Miles.
O'BRIEN: All right, it appears Ken Lay and his entourage have entered that room. We will, of course, be watching that very closely.
We'll move on with some other stories right now and obviously jump back to that as soon as we need to.
A fresh call for vigilance and a reminder that nothing and no one is immune to terror, especially the upcoming political conventions. Renewed warnings came this morning from the homeland security secretary, Tom Ridge.
CNN's Sean Callebs joining us live now from Washington with a bit more on this.
Hello, Sean.
Reporter: Hi, Miles. Indeed, as the nation prepares to turn its attention to the upcoming Democratic and Republican conventions, a word of warning from the homeland security secretary.
Bush administration officials say they have real and credible information that leads them to believe al Qaeda is in the operational phase of planned large scaled terrorist attacks somewhere on U.S. soil.
Extra security is up in Boston and New York, the two cities that will be hosting the political convections in a matter of weeks. However Homeland Security chief Tom Ridge says authorities have no idea when, where or how an attack could do down. He said the CIA, FBI and other intelligence agencies are working to gain that knowledge.
The threat level will not be raised, however, and will remain at yellow or elevated.
(BEGIN VIDEO CLIP)
RIDGE: We live in serious times, and this is sobering information about those who wish to do us harm.
But every day, every day we strengthen the security of our nation and as a nation we are committed to the absolute protection of our citizens. Efforts each of you make to be vigilant, such as reporting suspicious items or activities to authorities, do make a difference.
(END VIDEO CLIP)
CALLEBS: There are overt concerns in the U.S. that terrorists may try and duplicate chaos that came from organized attacks in Madrid, Spain, this past March that killed more than 200 people.
The attacks are blamed on al Qaeda and widely believed to have a dramatic effect on that country's elections. The ruling party was voted out of office, and new leaders quickly removed Spanish troops from Iraq.
U.S. authorities believe al Qaeda wants to disrupt the Democratic process here and could very well launch a strike before the November general election. Bush administration officials maintain al Qaeda will not disrupt the ongoing war on terror or this nation's resolve.
Senate Majority Leader Bill Frist said this is not a new threat but rather what he calls a fact.
(BEGIN VIDEO CLIP)
SEN. BILL FRIST (R-TN), MAJORITY LEADER: There's obviously no reason for panic or no reason for paralysis. But the fact is that general intelligence that this country is at some increased risk between now and the time of the presidential election. It is important for people to be aware of that.
(END VIDEO CLIP) CALLEBS: Democratic congressional leaders are scheduled to hold a news conference shortly. New York Senator Charles Schumer called Ridge's warning today troubling and worrisome -- Miles.
O'BRIEN: Sean Callebs in Washington, thanks very much.
As we draw closer to the national conventions does Secretary Ridge's briefing today help matters or perhaps make them more frustrating? You can weigh in as we prepare to debate the issue. E- mail us at LiveFrom@CNN.com. We'll share them with you later.
Safe and apparently in good health. That's how U.S. officials describe American Marine Corporal Wassef Ali Hassoun, first reported missing two and a half weeks ago in Iraq. He turned up at the U.S. embassy in Beirut, Lebanon, today, accompanied by members of his family.
Our Jamie McIntyre has the latest now from the Pentagon. Jamie, what do you know?
JAMIE MCINTYRE, CNN CORRSPONDENT: Well, Kyra, now U.S. Marine corps officials are confirming, in fact, that Corporal Hassoun is at the U.S. embassy in Beirut, Lebanon, and is in the, quote, "process of being repatriated back into the U.S. military custody."
We're told that that process will begin in Lebanon and then result in him being transferred to another location for a medical evaluation. Apparently, the Landstuhl hospital in Germany is the location he'll be taken to, although that hasn't been finalized.
At the State Department earlier today, it was acknowledged that Corporal Hassoun apparently turned himself in voluntarily.
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RICHARD BOUCHER, STATE DEPARTMENT SPOKESMAN: He made contact with us and arranged a place to meet. And we went to pick him up and brought him back to the embassy.
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MCINTYRE: Now the U.S. military has a lot of questions for Corporal Hassoun about the circumstances of his disappearance, initially he was listed as being on unauthorized leave, suspected of possibly being a deserter.
But then his status was changed to captured after he was seen on what appeared to be a hostage tape or a videotape, in which it looked like he was being threatened to be beheaded.
Now there are questions about the authenticity of that and the circumstances under which he left his unit and how he got through Syria and into Lebanon, where again he is now in the custody of the U.S. military.
So a lot of questions for him. But at this point Pentagon officials and military officials are being careful not to jump to any conclusions until they have had a chance to hear his side of the story -- Kyra.
PHILLIPS: Jamie, we'll follow the investigation. Thanks.
Well, the Hassoun story has taken more turns and a mystery novel it seems. That had his family on an emotional roller coaster.
Miguel Marquez is at the family home in West Jordan, Utah. What are they saying, Miguel?
MIGUEL MARQUEZ, CNN CORRESPONDENT: Well, it's been 19 days of twists and turns for this family here in West Jordan and the large extended family in Tripoli.
I spoke to a family member a short time ago by phone. And the reaction wasn't quite what I expected. They had talked all week long about their hope that he be released and their desire to see him released and back in U.S. Hands.
But the relative I spoke with on the phone today expressed none of that. He expressed caution and concern about the information that I was giving him. There was no elation in the voice, either. He didn't even seem to believe the information was true.
Maybe that's understandable, given what they've been through the past 19 days. It's been one thing after another.
The one thing we have not seen, which we've seen in the past in these situations, typically, are pictures -- pictures or video of the corporal. And that's one thing we have not seen from them.
I did ask them about the statement, whether or not the family would make a statement. They had said in the past that once they knew he was in U.S. hands they would make a statement. At this point he said there's no statement for now, and possibly no statement today -- Kyra.
PHILLIPS: Miguel Marquez, live from the family home there in West Jordan, Utah. Thank you -- Miles.
O'BRIEN: Well, Ken Lay apparently is at the podium now. He just pleaded not guilty to a raft of federal charges stemming from the collapse of Enron, the company he founded and was the CEO of.
Let's listen to him as he addresses reporters in Houston.
KENNETY LAY, FORMER CEO OF ENRON: Very interesting day. Indeed it has been a tragic day for me and my family. We also know that an indictment came down that should not have occurred.
As CEO of the company, I accept responsibility for Enron's collapse, as I've said before. However, that does not mean I knew everything that happened at Enron. And I firmly reject any notion that I engaged in any wrongful or criminal activity. Enron's filing for bankruptcy protection on December 2, 2001, was clearly one of the saddest, if not the saddest day of my life, both personally and professionally, and caused enormous and irreversible hardship for thousands of good Enron employees and retirees, as well as many others.
As most of you know, on February 2001, after 15 years on the job, I stepped down as chief executive officer of Enron. By mid-2001, I had also agreed to accept another position outside of the company at year-end and was making plans to leave Enron entirely at that time.
Despite these plans, when Jeff Skilling unexpectedly resigned in August, the board asked me to step back in as CEO, just three and a half months before Enron's collapse. I agreed to do so because of my love for the company and my love and respect and admiration for the employees of the company.
I took major steps to improve investor and employee confidence. Implementing my management style of over 30 years, I solicited recommendations from employees. I wanted to get everyone's best ideas in order to make the company even stronger.
That being said, I believed and still believe that the fundamentals of our core business, our wholesale business, our retail business, and our pipeline business were very strong.
There is continuing misunderstanding about my Enron stock transactions. I believed in the company so much that rather than sell more of my sock over the years, I increased my ownership of Enron stock and borrowed against the stock to Make other non-Enron investments in order to diversify my investments, as my advisors were instructing me to do. I believed that Enron stock would only increase in value over time.
I disposed of some of my Enron stock in 2001 because, as the stock price declined, I received cash and margin calls by bankers and had to use the Enron stock to meet these calls. Even then, I sold as little of my stock as possible to satisfy the calls, because I was convinced that it was undervalued and would increase in value.
In September 2001, I even used a $10 million cash bonus I received from the company to pay down debt, rather than use Enron stock.
The Enron collapse was enormous tragedy. I continue to grieve, as does my family, over the loss of the company, my failure to be able to save it, and the tremendous hardship it caused so many employees, retirees and others. But failure does not equate to a crime.
Although my lawyers and I believe I should not have been indicted, now that I have been, I have instructed my legal team that I want a speedy trial. And I hope it will begin by early September this year. Not only are we ready to go to trial, but we are anxious to prove my innocence.
I also believe, as chairman and CEO of Enron, when it collapsed, it is my duty and obligation to go to trial as soon as possible.
As you know, the indictment entered in the court earlier today is long and complex. And many of the specific allegations and issues in the indictment cannot be addressed until we've had time to fully evaluate them.
But with that caveat, I and the legal team -- do have Mike Ramsey with me and Bruce Collins with me. I and my legal team are now ready to take a few questions. So questions, please.
UNIDENTIFIED MALE: Sir, are you still...
LAY: One at a time here.
UNIDENTIFIED MALE: (UNINTELLIGIBLE) Can you explain what you mean by taking responsibility? What do you think that you did wrong? And do you take any responsibility for the broader problems with investor confidence that resulted from Enron's collapse?
LAY: Scott Padre (ph), I say responsibility. I was chairman and CEO of the company throughout much of the period in question. In that role, ultimately, I have to accept responsibility for anything good and anything bad that went on in the company. And indeed I do that.
But we need to keep in mind, also, that this is a company that had over 30,000 employees in over 30 different countries. Add over 500 vice presidents and above, reporting to a management committee of about 24 or 25 senior executives that ultimately reported to the office of (ph) chairman, made up of myself and one or two other people.
And clearly the company that size and that diverse and growing rapidly, you have a lot of senior officers that have a lot of authority in which you place enormous trust.
And in the process of doing that in over 30 some years I found that, for the most part, those that I put in those positions and I entrusted to those positions have, in fact, justified that trust.
Clearly, in this case there was at least one, Andy Fastow, that betrayed that trust, and betrayed it very, very badly. And that caused an enormous amount of damage at Enron and ultimately caused Enron's collapse.
To the extent that I did not know what he was doing, that he obviously didn't share with me what he was doing, then indeed, I cannot take responsibility for what he did. But I can take responsibility as chairman and CEO for what happened to Enron, because I did in fact have some role in him being in that position.
UNIDENTIFIED MALE: (UNINTELLIGIBLE) The broader issue, confidence in corporate America as a result of Enron, do you take responsibility for that at all?
LAY: Do I take responsibility for that? Well, I mean, there are a lot of companies that had difficulties shortly after if not before Enron's collapse. Some of which, of course, were even bigger bankruptcies than Enron; WorldCom being the notable one.
But a number of very large ones and, of course, a lot of other companies that had some troubles with their accounting and the, again, other things that were related to those companies.
There's been a lot of hearings on this. There's been some legislation passed. We have new laws in place. And I think probably school is still out on how much that has improved the overall situation versus the old laws.
But I think, in fact, this is not a matter so much of needing new laws, just making sure all the existing laws are enforced. And, indeed, for the most part corporate America is very honest and hardworking.
And I think, as I said before at Enron, I think the vast majority, I mean, 99 plus percent of our employees were honest, hardworking people and doing exactly what, in fact, you'd expect those people to do.
But it is amazing the amount of damage that can be done by very few people that are doing things that, in fact, tend to self-enrich them but also create chaos in a company the size of Enron.
UNIDENTIFIED MALE: What were your -- you mentioned Fastow specifically (UNINTELLIGIBLE)
LAY: To my knowledge there were, but somewhat contrary to popular approach today, I think everybody should be innocent until proven guilty. And it seems that we've kind of lost that in many of the Enron cases, in particular, where with the frenzy -- the media frenzy and the political frenzy that went on around Enron, particularly shortly after its bankruptcy.
There were broad assumptions as to guilt of a lot of officers, a lot of individuals at Enron, on the front end of the investigation that -- rather than waiting until the investigation proves out that there is a crime somewhere and that somebody committed that crime.
UNIDENTIFIED MALE: What were your plans in the fall of 2001 and were those plans being driven by accounting concerns about (UNINTELLIGIBLE)?
LAY: It is interesting that that -- the whole issue of goodwill, of course, has become a very big issue in this indictment.
It may not surprise you or some of the other reporters here. I didn't spend a lot of time worrying about goodwill. I mean, we have a lot of things going on at Enron.
Now, I did have some meetings on goodwill, and obviously, there was an issue as to how the new accounting rules that were going in place in early 2002 might impact goodwill and particularly whether there would have to be write offs. And there were -- There was a lot of analysis going on inside the company. I mean, I was aware of some of the analysis going on inside the company and by Arthur Andersen on that very issue.
And I even had a report made to me in the first -- about the end of the first week in October by our chief accounting officer and by the partner in charge of the Enron account at Arthur Andersen.
And it was at that time that it was reported to me that in fact the new accounting rules would have very little impact on goodwill -- on the goodwill we had on the books.
But it was not -- as I said, that was not necessarily front and center, a big issue of the company at the time. Obviously a lot else was going on that we were trying to deal with.
UNIDENTIFIED MALE: Was the decision on whether or not you were going to continue investing in (UNINTELLIGIBLE)?
LAY: You guys want to stop me here in the back I'll be happy to. Well, I'll tell you right here -- right here is our leading expert on that, Bruce Collins. And he's already learned more about goodwill, I think, than most people will.
BRUCE COLLINS, KEN LAY'S ATTORNEY: Maybe a little bit of an expert just in the last few weeks as this issue has come up.
But we've had a chance to look at the work papers of Arthur Andersen. And looking at what they looked at and how they did their analysis, they did not base their determination at all on any growth prospects for Wessex.
So we don't understand the basis for this allegation.
O'BRIEN: All right. As Ken Lay cedes to his -- one of his attorneys -- Do you want to listen to one more question for him? Let's go back to one more time and we'll step back in.
Here's Ken Lay again.
UNIDENTIFIED MALE: (UNINTELLIGIBLE)
LAY: Well, I understand that. And again, I think some of that does come out, a lot of -- a lot of the publicity and so forth, the good media publicity that occurred on Enron early on which did lock in a lot of views about both the culture, the business model, a lot of other things about Enron that I believe were just dead wrong. And of course, we've seen some of that even popularized in TV movies and so forth.
But the same token I come back to the earlier comment and, of course, particularly having now had a chance or had an opportunity, chance, whatever, to go back and look at a lot of the various board minutes and other things related to the transactions that really did cause the collapse of Enron.
And indeed some very bright people were looking at those very same documents, getting those very same reports, very knowledgeable, sophisticated people, my board members, of course other officers, and indeed none of us detected what was going on.
And, of course, as I -- if you go back and look at probably what in the total volume of stuff we were reviewing during that three-year period or so, and approving or disapproving and making decisions on, it represented a very small percent of what we were focusing on for our various decisions.
And again, if you've got a chief financial officer that has reason to be trying to hide things, and certainly not disclose things to the board or me, it is very difficult to pick that up. I'm sorry to say, but it's very difficult to pick that up.
UNIDENTIFIED MALE: (UNINTELLIGIBLE) Watkins?
LAY: Well, and you well know when I got the letter from Miss Watkins and shortly after going back in as CEO, I immediately went and met with my general council counsel, which I typically would do with something that looked of some importance, and asked him. I'd already asked him, based on the anonymous letter to kick off an investigation.
And of course, based upon the more detailed information she gave me in a personal meeting, I took it to my chief -- my general counsel and asked him to -- to share that with our outside law firm and get them to get in there and do an investigation.
And of course talk -- follow the road map she had given. Talk to the people she said supported her position in the company. And determine whether, in fact, it was a problem that needed an even more in depth investigation, maybe by a third party law firm or a third party accounting firm.
And of course that report came back that everything seemed to be OK.
O'BRIEN: We have been listening for Ken Lay. He's going to continue on. We're going to keep monitoring it.
But now let's bring in our senior legal analyst, Jeff Toobin, who has been listening to all this.
Jeff, he's pleaded not guilty to 11 counts. It seems what he's doing is pleading guilty to felonious incompetence, as in his job.
JEFF TOOBIN, CNN LEGAL ANALYST: Well, you know, he's doing the traditional politician move of taking responsibility, which is a meaningless, broad term, but saying, in essence, that he did nothing wrong.
That, however, was an unusually substantive statement for someone who is under criminal indictment. And he did say some things that actually I think will be significant as this story unfolds.
I mean, he really did layout his defense. His defense is: "I was a victim of Andrew Fastow. I didn't know what he was doing. He was stealing from the company. He was leading the company to ruin. And even though I was chairman, and briefly CEO," again he didn't know what was -- what he was doing.
That is -- that is a valid defense if it's true. Prosecutors now have a very clear target to shoot at.
O'BRIEN: All right. A couple things here. Let's remind folks, first of all, about Andrew Fastow, chief financial officer at one time. Pleaded guilty. Ten-year prison sentence. So he's already gone down, so to speak, and is aiding, obviously, in this prosecution.
The big question, I guess, on a juror's mind will be, this is so big, how could it be limited to just one person?
TOOBIN: Very good question. Very, very tough question to answer for Ken Lay.
But it is worth remembering, some of the things he said early in his press conference. He was, by and large, a buyer of Enron stock. You know, he voted with his pocketbook. He accumulated more and more stock and only sold it when he had to for margin calls.
That is significant for someone who's accused of defrauding Enron shareholders, because he was probably the biggest single individual shareholder himself.
You know, as for Andrew Fastow, he was enriching himself through these secrete partnerships. He -- One of the big issues in the trial will be did Ken Lay and Jeff Skilling, the chief executive, did they know what Fastow was doing? Or was Fastow pulling the wool over their eyes in order to enrich himself with these partnerships?
That's going to be a critical factual issue in the trial. And I just, at this point, certainly don't know how it's going to turn out.
O'BRIEN: Jeff, is it possible for Ken Lay to find a jury that is open-minded in Houston, given all that has gone on there, and the number -- I'm sure most everybody in Houston knows somebody who lost a lot of money as a result of all this.
TOOBIN: Very tough. Very tough question. And it intersects that question with another very interesting thing Ken Lay said in his -- in that press conference.
He says he wants a trial by September. He wants a new -- he wants an almost immediate trial. And for a case of this complexity, that is close to an immediate trial.
But will he forego? Will he give up the motions he could file in court that would delay a trial?
For example, will he decide not to move for a change of venue? He probably has a pretty darn good motion for a change of venue, given all the publicity this has in Houston. Maybe they really should move it to El Paso, which is, you know, a relatively remote part of Texas.
But if he makes those motions, he's not going to get a trial in September. It will certainly delay things. Those are some of the legal issues to be sorted out.
O'BRIEN: Why would he be in a rush at this point? Why not exercise every possible motion you can?
TOOBIN: Well, as a former prosecutor, I know that sometimes when you bring a case, you're looking forward to a little time to be able to prepare, to -- to use the time to prepare, gather the evidence.
Sometimes you're not ready as a prosecutor to say, "Hey, let's go right to trial." That's something that can be an advantage for the defense, but they have to give up some advantages if they really want to force the prosecutor to go to trial right away.
O'BRIEN: Interesting. You would think the prosecution would be ready by now. But you're right. It's all this cat and mouse game.
All right. Jeff Toobin, thanks very much. Always appreciate your insights.
TOOBIN: OK, Miles. See you.
O'BRIEN: We're taking your e-mail on the other big story of the day: Tom Ridge's homeland security announcement. Helpful? Frustrating? Motivations behind it? Whatever is on your mind on that. Does it make you scared? Are you over that? E-mail us at LiveFrom dot -- at CNN.com. And we'll do our best to read some of your e-mail later this hour.
Stay with us.
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