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Former Enron Chairman Could Still Refuse to Speak Despite Subpoena - 2002-02-05

Two congressional committees are to subpoena former Enron chairman Kenneth Lay to compel him to testify about the collapse of the energy trader after he refused to appear before a Senate panel Monday. Mr. Lay has also resigned from the energy giant's board.

Senate Commerce Committee Chairman Fritz Hollings, a Democrat from South Carolina, said a subpoena would be issued Tuesday to force Mr. Lay's appearance before the panel next week.

The House Financial Services Committee also voted to authorize a subpoena for Mr. Lay.

But lawmakers acknowledge the former Enron executive could still refuse to testify by invoking his constitutionally-protected right to remain silent to avoid incriminating himself.

Lawmakers want to know why Enron, which went bankrupt in December, failed to report hundreds of millions of dollars in losses to stockholders and employees. Many investors lost their life savings.

Lawmakers also are probing whether political contributions to President Bush's election campaign by Enron influenced energy policy. Senator Hollings suggested the links are deep.

"There is a culture of government corruption, and I have never seen a better example of cash-and-carry government than this Bush administration and Enron," he said.

Mr. Hollings suggested an independent prosecutor is needed because he believes the U.S. Justice Department would not be objective in its probe of the matter. The department quickly responded, saying it saw no reason to appoint a special prosecutor. Mr. Lay declined to testify voluntarily Monday after some lawmakers suggested on Sunday television talk shows that he and other company executives engaged in criminal acts. Mr. Lay's attorney said he believed his client would not get an impartial hearing.

But committee member Senator Byron Dorgan, a Democrat from North Dakota, says he believes the reason for Mr. Lay's refusal to appear was the release of a report Saturday on what led to the company's collapse. The Enron-authorized review details how top company executives used business partnerships to conceal mounting debt.

"Mr. Lay is concerned that people were using language that described problems in that corporation in a very serious way. Yes, but his own vice president did that, his own accounting firm did that, his own board of directors did that," he said.

The review was prepared by a panel led by University of Texas Law School Dean William Powers, who testified at a House subcommittee hearing Monday.

"We found a systematic and pervasive attempt by Enron's management to misrepresent the company's financial condition," he said.

Meanwhile, the Chairman of the Securities and Exchange Commission, Harvey Pitt, told the subcommittee he would be outraged if the conclusions in the report turn out to be true. He said the Enron case highlights the need for tougher corporate disclosure requirements.