Kenneth L. Lay, who as founder of the Enron Corporation rose to peaks of influence in business and politics, only to fall into disgrace amid scandal, died early yesterday morning in Aspen, Colo., while awaiting a judge's sentencing this fall that could have sent him to prison for decades.
Mr. Lay, who was 64 years old, died of coronary artery disease, according to Scott Thompson, the chief deputy coroner for Pitkin County, Colo. The finding was based on an autopsy completed late yesterday.
The death of Mr. Lay was a final, unexpected chapter in a complex personal and corporate drama that played out in public view in the years since Enron's collapse into bankruptcy in late 2001. It came at a time of enormous stress for Mr. Lay, who was awaiting sentencing after his conviction on May 25 on multiple counts of fraud and conspiracy stemming from his actions in the weeks before Enron's demise.
As recently as Friday, federal prosecutors filed a motion in federal court in Houston seeking forfeiture of Mr. Lay's remaining assets, including his home in Houston, though his death means that the government may not be able to proceed with that motion. [Page C1.]
While sorrowful and disbelieving about his conviction, according to people who have been in contact with him in recent days, Mr. Lay had been speaking of his probable prison sentence in almost a resigned manner.
"He seemed healthy, peaceful, with a good and positive perspective on his life and his future," Dr. Stephen P. Wende, Mr. Lay's pastor at the First United Methodist Church in Houston, said of a meeting he had with the former Enron chairman on Thursday. "He certainly didn't want to go to prison, but if that is where he went, he felt God could use him there."
Mr. Lay had been in Old Snowmass, Colo., staying with friends at the Pabst Ranch for the week with his wife, Linda. A call for emergency assistance came from the home at 1:41 a.m. yesterday, according to a statement from Joe DiSalvo, the director of investigations for the Pitkin County Sheriff's Office. Mr. Lay was taken to the Aspen Valley Hospital, where he was pronounced dead at 3:11 a.m.
With Mr. Lay's death, his successor at Enron, Jeffrey K. Skilling — the man widely viewed as the brains behind Enron's rise, and who was convicted alongside Mr. Lay of fraud in their joint trial — will stand alone before the court to be sentenced for his role in what has proved to be the greatest corporate scandal in American history.
Before the scandal, Mr. Lay was a rags-to-riches story, a onetime Missouri farm boy ensconced among the elite of American business. He walked among presidents and political heavyweights, who turned to him for advice and campaign cash. He was a regular visitor to the White House under President Bush, who famously bestowed upon Mr. Lay the endearing nickname "Kenny Boy."
But it all came unstuck as Enron spiraled toward bankruptcy, setting off a scandal that shook its hometown, Houston, and transformed the once-revered Mr. Lay into a reviled figure nationwide.
A corporation that had been thought to represent the best of business was revealed instead to be the worst, infused with both criminality and incompetence. What had seemed to be unstoppable financial power was exposed as the product of accounting manipulations and deceit. And Mr. Lay himself was transformed from a man worth hundreds of millions of dollars to someone near financial ruin.
While his criminal acts did not occur until the final months before Enron's downfall, Mr. Lay became the symbol of the scandal, condemned as a liar and a cheat. Through it all, and to his dying day, Mr. Lay maintained his innocence, portraying himself as an honest, hard-working man who had been railroaded by prosecutors and deceived by a dishonest chief financial officer at Enron, Andrew S. Fastow, whom he blamed for the company's demise.
The country house where local residents said Mr. Lay was staying is about 15 miles and a universe away from the glitz of Aspen. Dominated by a horse pasture and a corral in front, the relatively modest wooden house, on a rural winding road, had rusting farm implements in the pasture and faded gray outbuildings off the gravel driveway.
A county sheriff's deputy barred visitors from entering the yard. But a woman who said her name was I. V. Pabst came out to speak with a reporter, and to praise Mr. Lay. "Ken Lay was a wonderful, kind-hearted generous man," she said. "We are all suffering from a broken heart." She declined to say more. Ms. Pabst owns the Pabst Ranch and is the great-granddaughter of the founder of the Pabst Brewing Company.Ms. Kimberly, the family spokeswoman, confirmed in a statement that Mr. Lay had died. "The Lays have a very large family with whom they need to communicate, and out of respect for the family we will release further details at a later time," Ms. Kimberly said in the statement. There had been no known warnings of heart problems, Ms. Kimberly said, and Mr. Lay had continued exercising every day, a habit he developed years ago. While Mr. Lay showed signs of physical and emotional exhaustion during the trial in the spring, in recent weeks, friends said, he was looking healthier than they had seen him in years.
It is not unprecedented, however, for the stress of trial to contribute to the death of white-collar defendants. In 1988, for example, David W. C. Clark, a New York lawyer convicted in an insider trading case, died from chronic alcoholism just days before he was scheduled to be sentenced.
Mr. Lay was a short, soft-spoken man with courtly manners who could also show flashes of anger and impatience — a combative side that emerged while he testified in his own defense, damaging his case. He said he planned to appeal his conviction. He was awaiting his sentencing for 10 felonies, including six charges relating directly to his work at Enron and four counts of bank fraud involving his personal finances. Now, his case has instead come to an unexpected end that has left some of his former colleagues stunned.
"I think it's tragic," said Mark Palmer, Enron's former spokesman, who said he had not spoken to Mr. Lay since 2002. "But Ken was a spiritual guy and he believed the Lord has a plan for him. If this is it, I hope he's at peace."
Mr. Lay was born in 1942, the middle child of a deeply religious but struggling Missouri family. The first turning point in Mr. Lay's life came in his sophomore year at theUniversity of Missouri, when he signed up for a course in introductory economics. He was fascinated by theories of free markets, and abandoned his plans to attend law school in favor of pursuing a career in business.
In the late 1960's, he began a career in the energy business that was interrupted by a stint in the Navy and one at the Federal Power Commission, a federal agency in Washington.
In the 1980's, while back in the energy business, Mr. Lay established a reputation as an intellectual dynamo in an industry not known for its cutting-edge thinking, which led to a job at age 42 running a company that would become Enron when Mr. Lay helped engineer the merger of two pipeline companies, Houston Natural Gas and Internorth, an Omaha energy company.
Under Mr. Lay's direction, Enron embarked on an ambitious expansion that secured him a place at the front table among America's top businessmen.
But, it would later become obvious, Enron's finances were not anywhere as strong as the company's reported financials made them appear.
Throughout the 1990's, Enron slowly became addicted to accounting machinations allowed under a technique known as structured finance. This legitimate mechanism is used by most large companies to help diversify risk, bringing in outside investors and shifting assets and debt to off-books entities.
By 1998, Enron had voluminous off-books partnerships set up by Mr. Fastow, its chief financial officer. But Mr. Fastow had begun using the vehicles years before to direct corporate cash to himself and a few trusted allies — without the knowledge of Mr. Lay, according to Mr. Fastow's testimony.
Mr. Lay was aware of many of the off-books entities, if not their full purpose. And in 1999, he along with the Enron board approved of the creation of a special fund called LJM, which was headed by Mr. Fastow and was expected to be used for structured finance deals.
Instead, LJM and its successor, LJM2, became vehicles of crime, used to disguise the financial rot underpinning Enron's veneer of success.
In early 2001, Mr. Lay turned the chief executive reins of the company over to Mr. Skilling, although he retained the title of chairman. But in August of that year, Mr. Skilling resigned unexpectedly from the company and Mr. Lay returned to his old job.
The resignation of Mr. Skilling set off suspicions that something was deeply wrong within Enron, but Mr. Lay set himself up in his long-familiar role of corporate cheerleader, assuring employees and investors that everything was fine. In making those statements, the jury found at his criminal trial, Mr. Lay lied to the public, not revealing internal concerns he was hearing about the company's shaky financial condition and questionable accounting.
In his statements to investors, Mr. Lay assured employees that he was purchasing Enron stock — a claim that was true only in the most limited sense. While he had purchased some shares in the open market, for months Mr. Lay had been selling far more stock back to the company and using most of the proceeds to pay down bank loans. The complex transactions resulted in about $100 million being transferred from Enron to Mr. Lay, and ultimately to his lenders.
The questions about Enron's financial underpinnings left the company reeling, and the company filed for bankruptcy in December 2001. In addition to Mr. Lay and Mr. Skilling, 22 others have either pleaded guilty or been convicted of charges related to the company's failure.
The collapse, which cost investors billions and thousands of employees their jobs and retirements, devastated Mr. Lay, according to people who knew him. "He felt very keenly the pain of those who had lost livelihoods, life savings and lifelong jobs at Enron," said Dr. Wende, Mr. Lay's pastor. "The man I saw carried that with him at a deep emotional level."