Publish date:

Kenneth Lay Subpoenaed in Enron Probe

The SEC wants to shake loose documents the ex-CEO says are protected by the Fifth Amendment.

Updated from 12:57 p.m. EDT

Federal authorities haven't forgotten about former


chairman Kenneth Lay after all.


Securities and Exchange Commission

on Monday said it filed an enforcement action asking a federal judge to force Lay to comply with a subpoena seeking documents he had tried to keep private under the Fifth Amendment.

In its subpoena, filed in a federal court in Washington, the SEC seeks corporate records that could show "whether Lay had knowledge of, or was involved in, fraudulent activities at Enron.''

The SEC action is the first sign in many months that authorities are still pursuing a possible action against Lay and possibly former Enron Chief Executive Jeffrey Skilling.

TheStreet Recommends

To date, former CFO Andrew Fastow is the highest-ranking Enron executive to be charged either criminally or civilly in one of the country' most infamous corporate scandals. Fastow, one of the alleged masterminds behind Enron's scheme to inflate its earnings, is scheduled to go on trial next April on raft of federal securities fraud charges.

For months, critics have wondered why securities regulators and federal prosecutors have taken so long to bring charges against Enron's other top executives. Most of the charges and guilty pleas in the Enron criminal case have involved lower level executives such as Michael Kopper, Fastow's right-hand man in running the infamous LJM2 partnership.

But in recent weeks, there have been signs that prosecutors and regulators, who are working in tandem in the Enron case, are getting more aggressive as they slowly try to work their way up the corporate ladder.

Two weeks ago, prosecutors charged three former Merrill Lynch investment bankers with helping Enron manufacture a profit in late 1999 through the bogus purchase of energy equipment. And just days before that, former Enron Treasurer Ben Glisan was sentenced to five years in prison after admitting his role in cooking the company's books.

Michael Ramsey, Lay's attorney, could not be reached for comment.

This is not the first time Lay, who resigned from Enron on Jan. 23, 2002, has invoked his Fifth Amendment right against self-incrimination. A month after he left Enron, Lay was called before a congressional panel to testify on the Enron mess. But during that appearance, Lay said little beyond exercising his Fifth Amendment right.

Prior to his resignation from Enron, Lay did in fact turn over thousands of pages of documents to SEC investigators. Included in those documents were his personal calendars and bank statements.

But Lay stopped cooperating with the SEC shortly after he resigned. On Feb. 13, 2002, two weeks before his congressional appearance, Lay asserted his Fifth Amendment right during a scheduled interview with SEC investigators.

The battle between Lay and the SEC over this latest document request heated up in recent weeks, according to court papers filed by the SEC. Earlier this month, Lay's attorneys offered to turn over the documents, as long the SEC agreed that federal authorities could not use them against Lay in a subsequent prosecution. But that condition was clearly unacceptable to the government's lawyers.

"Lay cannot have it both ways -- he cannot produce personal records that may be incriminating while preserving his Fifth Amendment rights, thereby limiting the use of such records by the government,'' said Luis Mejia, an SEC assistant chief litigation counsel in a Sept. 24 letter to one of Lay's attorneys.