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American Morning

Kenneth Lay Decides Against Appearing Before a Senate Commerce Committee Hearing

Aired February 04, 2002 - 07:14   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.
JACK CAFFERTY, CNN CORRESPONDENT: Paula, he was supposed to testify before Congress today, but at the eleventh hour he decided against it. Upset with what he considered inflammatory statements made by some of the members of Congress on the talk shows yesterday, the former CEO and chairman of Enron, Kenneth Lay, has decided against appearing before a Senate Commerce Committee hearing, which has now been canceled. It was set for this morning.

CNN congressional correspondent Jonathan Karl joins us from Capitol Hill with more on what I suppose, Jonathan, is really no surprise, is it?

JONATHAN KARL, CNN CORRESPONDENT: Well, in some ways it really is a surprise because Ken Lay had said as early as yesterday morning that he fully intended to go through with his promise to testify voluntarily before that committee. In fact, he was huddled with his lawyers yesterday preparing for that testimony when the Sunday talk shows started. And you saw basically a parade of congressmen and senators coming out before the cameras on the talk shows and making some very harsh comments about Enron and about Ken Lay.

Typical of those harsh comments that caught Lay's lawyers off guard was one by Billy Tauzin, the Republican chairman of the House Commerce Committee.

(BEGIN VIDEO CLIP)

REP. BILLY TAUZIN (R), ENERGY & COMMERCE CHAIRMAN: That not only were there corrupt practices, not only was there a hiding of the fact that debt was being put off the balance sheets and profits were reported that didn't exist, but we found more than that. I think we're finding what may clearly end up being security fraud.

(END VIDEO CLIP)

KARL: Citing that comment and several others just like it, Ken Lay's lawyer said in a letter to Congress, "These inflammatory statements show that judgments have been reached and the tenor of the hearing will be prosecutorial. As a consequence, I have instructed Mr. Lay to withdraw his prior acceptance of your invitation. He does so with the greatest reluctance and regret. He cannot be expected to participate in a proceeding in which conclusions have been reached before Mr. Lay has been given an opportunity to be heard." That letter was signed by Earl Silver, Ken Lay's attorney.

Now, staffers for the Senate Commerce Committee, where he was supposed to appear today, were working throughout the weekend. They didn't actually get that letter, Jack, until late yesterday afternoon. They had been working throughout the weekend, getting ready for what was to be the blockbuster hearing of the year so far up here in the Senate. And the star witness is clearly a no show -- Jack.

CAFFERTY: All right, Jonathan, thanks very much.

Congressional correspondent Jonathan Karl joining us from Washington.

Ken Lay could now be subpoenaed. His scheduled appearance today was going to be voluntary, but he could be subpoenaed. They can force him to show up but they can't make him talk.

Joining us now to talk about some of the legal issues surrounding Kenneth Lay and Enron and what they're all likely to do next, former federal prosecutor Nathaniel Speights, who's also a partner in the law firm of Speights & Mitchell, and criminal trial lawyer Linda Kenney.

A welcome to you both.

Mr. Speights, let me begin with you. How do you read the cancellation? I said it was really no surprise. I'm reading the newspapers this morning and there seems to be a consensus that his lawyers were just looking for a reason for him not to show up, that the idea that he was going to go there voluntarily without immunity and not take the fifth Amendment was simply bad legal strategy.

NATHANIEL SPEIGHTS, DEFENSE ATTORNEY: Well, I think that you're right. It is no surprise. Earl Silver is a very excellent lawyer. He used to be the U.S. attorney in his district. I was shocked, quite frankly, that he was allowing Ken Lay to testify in the first place. But I think now you'll see more work behind-the-scenes with the lawyers for the committee. He will eventually testify under some, under a subpoena and under some guidelines.

The question as to whether or not he's going to exercise his constitutional rights will depend on how well the committee is able to get these other people to testify about what Ken Lay knew and when he knew it.

CAFFERTY: Ms. Kenney, do you expect that eventually he's going to be granted some form of immunity before we hear anything but "I refuse to answer" out of Kenneth Lay?

LINDA KENNEY, CRIMINAL TRIAL ATTORNEY: Well, I think it's going to be very, very careful, because, you know, we had that situation once before with Oliver North, if you recall. And one of the things that federal prosecutors -- and Nathaniel can attest to this -- hate is if Congress gives immunity or accidental immunity. So I think that that's going to be a real, real issue. And I really don't think you're going to see it necessarily from Congress at this stage, not at the beginning of this investigation.

CAFFERTY: You know, there was a lot of head scratching last week about the kind of legal advice that Kenneth Lay was getting when it seemed to be that he was going to simply march in there voluntarily and sit down in the chair and tell the world what he knows. Suddenly his lawyers say well, there was a prosecutorial tone to some of the appearances on the Sunday talk show. I mean was he under the assumption he was going there to get the Medal of Freedom? I mean they're conducting a potential criminal investigation here.

KENNEY: Yes, you know, that's a little disingenuous. They certainly, as you said, they weren't going to give him a birthday party here.

CAFFERTY: No.

KENNEY: This is about trying to decide what happened and we now have a report on Saturday that was issued that pretty much touched upon the fact that boy, if there wasn't fraud, it was pretty close to fraud. So, you know, for, I think there was a lot of spin control going on here and, you know, Kenneth Lay may be wanting to protect himself, his family, his friends and then somebody else. We don't know yet.

CAFFERTY: Mr. Speights, speaking of Kenneth Lay's family, these things often are won or lost in the court of public opinion, at least to a degree, you find -- practitioners of the law aside. And a week or 10 days ago, Kenneth Lay's wife appeared on the "Today Show." I'm told we can't run the clip, but I can paraphrase basically what she said, which is, you know, we've got a lot of financial problems here. We have no liquidity. We're out of money. Things are really tough here at the Lay household.

And then it turns out that he's got $10 million in stock besides Enron's stock. They own, I don't know, $10 million, $15 million, $20 million worth of real estate in Houston, Texas, Aspen, Colorado. Was that a mistake to have her go on the air, in light of what happened to all of the employees at Enron, and say gee, we've really got it tough here, we're down to our last 50 million bucks or so?

SPEIGHTS: Yes, it's a huge mistake. I think that Ken Lay's problem was both legally and from the standpoint of public relations are the fact that he and his family are trying to run this thing themselves rather than relying on professionals.

If they, Ken Lay's best shot here is to get a professional P.R. person to work with him and really to be Harry Truman, to say look, mistakes were made at Enron, people working for me made mistakes. I'm the boss. The buck stops here.

From a legal standpoint, the same thing. I'm not, you know, you don't go up to Congress and testify without immunity on the biggest criminal investigation in 20 years.

CAFFERTY: No.

SPEIGHTS: The biggest bankruptcy ever. It just doesn't happen.

CAFFERTY: All right, I appreciate...

KENNEY: Jack, but the problem...

CAFFERTY: Go ahead.

KENNEY: The problem he does have, though, is that everyone is now going to be pointing the finger at him. His board of directors is pointing the finger, Arthur Andersen is pointing the finger.

CAFFERTY: Sure.

KENNEY: And so it's everyone, including the person on the street who owned Enron's stock. It's going to be very difficult for him to win a public relations campaign.

CAFFERTY: Right. But he was the top guy. He was the chairman and CEO. I suppose eventually, as Mr. Speights suggests, the buck, that's where the buck stops.

I've got to run along. I thank you both for visiting with us on AMERICAN MORNING.

Nathaniel Speights, former federal prosecutor, and Lynn Kennedy, Kenney. I'm sorry, Linda. Linda Kenney, a criminal trial lawyer, joining us on the 180 degree turnaround on Ken Lay going to the Hill today.

KENNEY: Thanks, Jack.

CAFFERTY: Thank you, both. Have a good Monday.

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