Crimes Against Reality - Page 2

[ Page 1 ]    [ Page 2 ]    [ Page 3 ]    [ Page4 ]    [ Page5 ]

How can a man so seemingly intelligent, well-educated and experienced, religious, moral and law-abiding, kind, civic and philanthropic with long training as a top corporate manager preside over the greatest business fraud and debacle in corporate history. 

At this point I need to inject a little or a lot of humility.  First, Iím giving opinions-hypothesis without rebuttal from Ken Lay himself.  Iíve had a number of interviews with Ken for the period prior to his Enron career and I hope to resume with him after the trial is over.   And the things I have today could be wrong in part or in whole but I can promise is that my book will try to reach the right decisions.  That is my calling.  The people - the Foundations and individuals who are supporting me - who are non-conflicted in this want the right story. 

Second on the theme of humility, for the next half-hour I urge you not to think only - or even primarily of Ken Lay, Jeff Skilling and Enron, but I urge you to think about patterns of behavior - behavior that we have all fallen into but on a much smaller scale and with less damaging consequences.  Only out of introspection can the Enron story truly be intelligible for it involves slippery slopes and path dependence and plain old bad habits that many of us fight all the time.


Let me begin with the Ken Lay that I knew.  The Ken Lay I knew was never blatantly dishonest.  Iíd say that anyone who knows Ken well would say that too.  Over the seven-year period where I had a hand in putting together over a 100 speeches, comments, Ken Lay never asked me to use a bad number.  There was never a moment where he winked and said ďI think you know this is not a good number but we have to have it in there given where the corporation isĒ.   That didnít mean that all the numbers were good.  I used what Enron departments gave me.  But in the realms of numbers I knew something about and the subjects and themes I knew something about, there was no attempt at falsity on his part.  I feared bad numbers precisely because he did.  I also remember how deathly afraid Ken Lay was about Enron employees violating the Foreign Corrupt Practices Act and how at a management meeting, he made it very clear that if anyone violated it, they would be fired, no ifs, ands, and buts.  So I had no doubt that the same applied to any hard, fast, transparent government rule on legality and illegality - at least in normal times.  Of course we all know that in desperate times, desperate people will do desperate things.   That is another question and to the extent it applies to Ken Lay, others will decide.    

Second, Ken Lay was a very kind, generous and fair person even to a fault.  He said YES way too much - failed to say ĎNoí way too much to friends, family and outsiders.  As a result, he spread himself thinner and thinner with the passage of years and his focus on core issues became less and less intense.  I remember some of us working with Kenís wonderful assistant, Rosalee Fleming to try to come up with a screening process where we could get more Noís.  It was certainly an action item in the corporate staff meetings.  But this was a weakness and some of it was personal and innate.  But some of it was part of his business model - a Charm Offensive that Iíll describe in a minute.   

Looking at Ken Layís pre-Enron life and careers is very important for trying to interpret the present situation.  

From the first time he got on a tractor in rural Missouri, until well into his Enron career, there is little to suggest deviant behavior or even mischievousness.  There were no examples that Iíve found or any of the many investigative journalists have found of Ken Lay putting gum in someone elseís trombone or sugar in the tractor or anything like that.  The evidence suggests that he worked hard to contain his temper and impatience and to project a fatherly figure particularly as the years went on.  But at the same time when you look at a half-century of Ken Layís life, there was no life influencing failure.  It was success after success.   Certainly there were family failures and some of that could be very important when judging Ken Layís ambition or over ambition - even blind ambition.  But as far as setbacks personally, it was one success after another with all the jobs he held as a small child - top student, top leadership positions, distinguished doctoral dissertation, great work at the Pentagon, the Federal Power Commission Dept of the Interior, a fast track business career beginning in 1974 at the Florida Gas Company   and becoming a Chief Operating Officer (COO) at Transco at age 39. 

Slide from Transco -  

He says something very interesting hereÖ The best people are those who understand the situation thoroughly and take action.  The most dangerous are those who donít take the time to understand but take action anyway.  I make it a point to understand the system, learn the results from past experience and consider the opinions of others.  And Ken Lay certainly had some good bosses.   Selby Sullivan at Florida Gas and Jack Bowen at Transco and Ken even told Jack after Ken left Transco for Enron: ďItís easier to be Chairman than it is to work for the ChairmanĒ which was something I thought was always very interesting.  But by 1984, Ken Lay was certainly one of the great men of the industry.  This is a clip from the New York Times from late 1984 where Ken is portrayed as transforming a whole industry.  And Ken Lay went on to be Mr. Houston in the 1990ís.  And all this is to suggest that it was one success after another.  There were no failures.  And he had a high and growing confidence. 


Now, the other thing to keep in the back of your mind is that none of his prior career necessarily implies that Ken Lay was a truly great, nuts and bolts, number-oriented businessman - someone who you would necessarily want to run a business throughout a business cycle. For Ken Lay, economist Ken Lay, the dreamer Ken Lay was most interested in the big picture in Washington DC.   When Ken Lay became boss of Florida Gas Company, Selby Sullivan, his predecessor had to choose between three people. He chose Ken Lay over the two others but he said that Ken Lay was not necessarily the best businessman of the three. Ken was chosen because the major asset of the company was a federally regulated pipeline.    Ken had great skills in Washington and in making a public utility regulated asset the best it could be.  Ken was a great people person.  He seemed to hire great people and as far as Selby Sullivan could tell he was a very good delegater. Ken could also tell a great story to Wall Street.  But again, Ken was not chosen because he was the best numbers person who could lead a company through bad times and good.

There is a third trait I think thatís very important about Ken Lay and it became more pronounced as his career went on.  It was captured best in a statement made to me by Ken Layís friend and business advisor Irwin Stelzer who once said, and this was during the Enron boom    ďKen was the only person he had every met who was always in spin modeĒ.  Now for a salesman or corporate booster or an advertising man, that is certainly not a bad quality, but as head of a company, if an individual begins to prefer his visions to reality, it is the beginning of philosophical fraud.  And in retrospect, Ken Lay was apparently addicted to ideas of where he wanted the company to be in some ways that might not have been healthy.   


Itís very important to understand the unique qualities of Ken Lay - great intelligence, extraordinary energy, superb people skills and an open door policy.  Sharon Watkins should not have been afraid to meet him - and that she was tells me that she didnít know him at all.  It was easy to talk to Ken about problems.  And Ken had extra extraordinary ambition.


  [ Page 1 ]    [ Page 2 ]    [ Page 3 ]    [ Page4 ]    [ Page5 ]