Statement by SEC Staff:
Statement at Press Conference Announcing Actions Against Kenneth Lay
Linda Chatman Thomsen
Deputy Director, Division of Enforcement
U.S. Securities and Exchange Commission
July 8, 2004
Let me begin by congratulating the Department of Justice, the Federal Bureau of Investigation, the Internal Revenue Service, and especially the Enron Task Force, on today's criminal action against Ken Lay.
Also today, the Securities and Exchange Commission initiated civil fraud charges against Mr. Lay, seeking among other things the return of over $90 million in unlawful proceeds. Today's action seeks the permission of the U.S. District Court in Houston to add Mr. Lay as a defendant in the Commission's previously-filed action against Jeffrey Skilling, Enron's former Chief Executive Officer, and Richard Causey, Enron's former Chief Accounting Officer. By our actions the Commission's civil action and the Department of Justice's criminal action we again demonstrate our collective commitment to use every tool available under law to pursue those who violated the law in connection with Enron's collapse.
The Commission's proposed Second Amended Complaint charges Mr. Lay with fraudulently violating the federal securities laws, and seeks from him the full array of civil remedies. In particular, the Commission has asked the Court to permanently enjoin Mr. Lay from violating the federal securities laws in the future, to permanently bar him from acting as an officer or director of a public company, to order him to disgorge over $90 million in unlawful proceeds, and to order him to pay a substantial monetary penalty. The Commission's action alleges that beginning in early 2001, Mr. Lay engaged in a wide-ranging scheme to deceive the investing public with statements that misrepresented Enron's financial performance. At the same time Mr. Lay was falsely touting Enron's financial condition, he was quietly selling millions of dollars of his own Enron stock. Of course, when what Mr. Lay knew became known to the rest of the investing public, Enron was in a freefall into bankruptcy and the stock certificates of Enron's shareholders many of whom were Enron employees and retirees were now worthless pieces of paper.
This is not simply a case about someone sitting at the top of a corrupt and fraudulent organization. Mr. Lay is being charged, not for where he sat, but for what he did. Mr. Lay is today a defendant not because he was a disengaged figurehead, but rather because he was an all-too-engaged participant in the fraud that was Enron. The defendants charged in Enron-related actions now number in the dozens. This list on the one hand is a testament to the tenacity and perseverance of the United States law enforcement community, of which all the people here, and those many others who have worked on this investigation, are proud members.
On the other hand, the list of defendants is also a sad commentary on the pervasive culture of corruption that permeated Enron. The list now includes Enron's former Chairman, its former President and Chief Executive Officer, its former Chief Accounting Officer, its former Chief Financial Officer, its former Treasurer, as well as 10 other former executives of various Enron operating divisions. It includes some of the world's largest financial institutions. And as the U.S. Court of Appeals for the Fifth Circuit recently affirmed it includes Enron's former independent auditor, Arthur Andersen.
Just the mention of the name Enron evokes images of duplicity and greed. However, we hope that Enron will also someday evoke another image: That the Enron investigation is emblematic of vigorous and careful and thoughtful prosecution of corporate fraud. It is our sincere hope that others who might someday be tempted to dissemble to the investing public -- and improperly place their personal interests ahead of those of their shareholders -- will be deterred by the specter of a determined and multi-faceted prosecution.
I would like to thank the entire SEC team that has worked on this investigation, particularly Phil Gross, Rick Kutchey, and Cindy Haspel. Also Charles Clark, Doug Paul, Alex Lipman, Kurt Gresenz, and John Loesch.
And finally lest there be any doubt I will repeat what we've said before: Our investigation is continuing.