Lay Painted as Enron Conspirator

"During 2001, with specific knowledge of rapidly deteriorating performances of Enron's business units, Lay made numerous false and misleading public statements about Enron's financial condition," the SEC complaint alleges.

Lay was alleged to have been aware of massive losses in a subsidiary he nevertheless touted as part of the company's Wall Street growth story, Enron Energy Services. He is also alleged to have known that those losses, which amounted to a business "failure," were being shifted into the company's more profitable wholesale energy unit to deceive the public.

"As Lay and others knew, Enron Wholesale had ample earnings to absorb the EES losses, while at the same time continuing to meet its own internal budget targets," the complaint states. "Lay made the false and misleading statements to persuade investors that Enron's profitability would continue to grow, to maintain credit ratings, to influence investment analysts, and to prop up the share price of Enron stock."

Philip Hilder, a former federal prosecutor and the attorney for would-be Enron whistleblower Sherron Watkins, says Lay probably will not succeed in getting his trial severed from that of Skilling and Causey. He says Lay would have a hard time showing that would be unduly prejudiced by being tried with the other defendants.

The indictment of Lay marks the final step in a march up the corporate ladder that began in August 2003 with a guilty plea from Michael Kopper to money-laundering and conspiracy charges. Kopper was the right-hand man to Andrew Fastow, the former Enron chief financial officer, who masterminded the off balance sheet accounting tricks used to inflate earnings and hide its assets.

The indictment is also a rebuke to critics who said prosecutors would never touch Lay, who refused to testify when called before Congress shortly after Enron filed for bankruptcy in December 2001. Lay asserted his Fifth Amendment right against self-incrimination and has said little since. He claims to be innocent of criminal wrongdoing in the storied collapse.

Lay's armor cracked earlier this year when prosecutors reached a plea agreement with Fastow. That led to the indictment of Richard Causey, Enron's former chief accounting officer. Soon after, Skilling was added as a defendant in a superseding indictment. Both Causey and Skilling have pleaded not guilty to the charges.