Long ride ends with bump for Enron boss

Kenneth Lay has had a Jekyll-and-Hyde reputation since well before Enron, the energy trader he heads, began its tumultuous decline.

Earlier this year, he was both lauded as a pioneer of energy trading and vilified as a profiteer by Californian politicians for exploiting the energy crisis. In the past month, he has been humbled by the financial markets, sued by shareholders and employees - and yet applauded for his desperate attempts to save Enron from disaster.

When a $9.4 billion (€10.5 billion) rescue bid from Dynegy, Enron's smaller rival, began to fall apart last week, the 59-year-old Mr Lay flew to New York for exhausting talks in a suburban hotel. Those talks culminated in failure last Wednesday as Dynegy pulled out, credit ratings agencies downgraded Enron's debt and the bankruptcy advisers moved in. But, as one banker put it: "Ken Lay was there all night, every night" until hope evaporated.

"As long as this is still playing, he will be right in the middle of it, with his nose to the grindstone," says Jim Kollaer, who has known Mr Lay for 10 years and serves as president and chief executive of the Greater Houston Partnership, which speaks for the city's business community.

It is this perseverance that enabled Mr Lay to transform Enron during 15 years as chief executive, from a natural gas pipeline company into the biggest name in energy trading. Enron rose to become a company with $100 billion in annual revenues and a number seven ranking in the Fortune 500. As chairman, he was heavily involved in the management of the company even after stepping down as chief executive this year. He returned to the top job when his successor quit in August after six months.

In a premature valedictory comment on November 9th, the day Dynegy launched its takeover bid, Mr Lay said: "It's been a good ride, for the most part." He might revise that judgment as Enron and its creditors struggle to salvage something from the ruins of the company. The irony of his heavy involvement is that Mr Lay is the most prominent target for those seeking an answer to the question: who killed Enron?

"Certainly he shares the blame," says Mr Andre Meade of Commerzbank Securities. "He was CEO of this company for a mighty long time, and he never fully left the scene."

That is the problem for those in Houston who have known Mr Lay since the mid-1980s, when he began his rise to the top. Mr Lay led the civic development of corporate Houston. He presided over countless charity events, drawing on the generosity of Enron's staff and the corporate community to help the city's less fortunate.

"He was a true leader in this community - very active and very concerned," says Mr Mario Gomez of the United Way charity, which funds health and human services.

It was Mr Lay who pushed forward the revitalisation of downtown Houston. He pressed for a new professional baseball park and then financed what is now Enron Field, a catalyst for further regeneration.

But the "go-to" man for corporate Houston has been forced to pull back from the community to preserve what he can of Enron. He has not attended since October the meetings of the Greater Houston Partnership, where he serves on the executive committee. "There is a contradiction that is really very difficult to fathom," says Mr Bob Eury, president of Central Houston, a business league to foster development of downtown Houston. "This is a guy that people really liked. There is a sense he does care. . . The problem it all leads back to is it was on his watch and he was the CEO."

Mr Lay's friends in Washington are, at least in public, less supportive. Mr Lay was particularly close to the Bushes, father and son, but, like most canny businessmen, he gave equally to both political parties. According to the Center for Responsive Politics, he and other Enron officials spent $2.1 million lobbying Congress and the White House last year. The investment in Washington paid off. In the early 1990s, Congress opened the electricity market to sales by marketers. Enron was one of the first companies to receive approval to sell at market rates. It also successfully killed a plan a few years later, backed by the independent gas producers, which would have helped stabilise prices, and influenced President Bush's appointments to the Federal Energy Regulatory Commission, the industry watchdog.

To opponents, this determination to fight for anything he believes in looks like arrogance. During the Californian energy crisis this year, politicians in the Golden State transformed Mr Lay and Enron into public enemy number one for allegedly exploiting the woes of the state's utilities. Now Enron has joined them under the umbrella of protection from its creditors.

At home, however, Mr Lay's belief in himself is seen as a virtue. His enduring faith has its foundations in his early years as son of a Baptist minister. Born in Missouri, Mr Lay graduated in economics from the University of Missouri, where he also earned a masters in economics. He went on to win a PhD in economics from the University of Houston. He found his calling in the energy business when he joined Houston Natural Gas in 1984 as chairman and chief executive, and presided over its merger with InterNorth the following year to form Enron.

Since mid-October, when the group's surprise disclosure of a $1.2 billion balance sheet adjustment met questions about Enron's transparency, Mr Lay has found himself under attack for not knowing enough about what was going on.

But even in the teeth of financial catastrophe, he continues to receive accolades. Mr Chuck Watson, head of Dynegy - who are now being sued by Enron - credited Mr Lay for not once mentioning his severance package when negotiating their merger agreement. When news of his $60 million contractual package emerged and upset his staff, Mr Lay said he would not accept it. Despite the occasional jab at an analyst or the media, he has dealt with the crisis as the "aristocrat" Mr Watson says he is.

However, signs are now that relations have soured. Last Sunday, Enron sought protection under US bankruptcy laws and launched a $10 billion suit against Dynegy.

The Chapter 11 bankruptcy filing aims to give Enron time to reorganise its debts while it presses its lawsuit against Dynegy and tries to get new loans from its banks. Mr Watson called Enron's lawsuit "frivolous and disingenuous".