Energetic rise before the fall of Ken Lay

HOUSTON - Kenneth Lay was a preacher's son who rose from humble origins to earn wealth and acclaim as head of Enron, then died in disgrace after he was convicted of fraud in the energy company's collapse.

Lay, 64, and his successor as chief executive, Jeffrey Skilling, were convicted of fraud and conspiracy charges that could have resulted in Lay spending the rest of his life in prison.

Lay died of a heart attack yesterday near Aspen, Colorado, where his family has a vacation home.

Before his dramatic fall, Lay was a prominent civic leader in Houston, Enron's headquarters city, a multimillionaire who was active in numerous charities and political campaigns.

When Enron imploded in 2001, the Houston Chronicle reported, the former CEO's corporate "creation ultimately ruined reputations, destroyed families, evaporated retirement nest eggs and shamed the city it calls home". At his trial, Lay testified that, far from millions, he had a negative net worth of US$250,000. He said he had been forced to sell millions of dollars in stock because of a run on Enron's shares and to finance his legal defence.

It was a remarkable reversal for a man Business Week magazine once described as one of the top-paid executives in the country, though he wasn't someone who flaunted his wealth.

"He is not only friends with the nation's first family, the Bushes, but is among the biggest supporters of their charities and political campaigns," the Chronicle said last year. "One year he contributed US$28,900 to the Barbara Bush Foundation for Family Literacy." In the year 2000, when Lay and his wife, Linda, listed US$52 million in assets, their charitable foundation made about US$3.6 million in contributions to churches, museums, hospitals and other charities.

Although many Enron workers were embittered when their pensions were wiped out by its collapse, some saw Lay's role as one of tragic circumstances. "Ken Lay was a good man, and it is a shame people won't remember the good things he did for this city," said Kathleen Magruder, a former Enron regulatory affairs lawyer who lost US$1.3 million in savings and investments in Enron's collapse.

"Just this past weekend, I got a note back from him" in response to one she sent Lay during the trial, she said. "He said he was going to continue to walk with his head high and fight this until it was done. It was classic Ken Lay."

"Ken Lay is an example of how you can be a very good person, and make some mistakes, and circumstances can make the consequences of those mistakes tragic," said former Houston Mayor Bob Lanier, who testified as a character witness for Lay at his trial.

Lay was the man who picked Skilling to become Enron's CEO in 2000.

Kenneth Lee Lay was born on April 15, 1942, in Tyrone, Missouri, in a religious family, according to the book, Conspiracy of Fools by Kurt Eichenwald. His father, Omer, was a Baptist minister who worked at a general store, sold farm equipment and held other jobs to earn money.

As a youth, Lay delivered newspapers, mowed grass, baled hay and daydreamed of becoming rich. "I was enamoured with business and industry," he recalled. "It was so different from the world in which I was living."

He was in high school when the family moved to Columbia so Ken could live at home while attending the University of Missouri, from which he graduated in 1964 and made connections that helped speed his career.

Pinkney Walker, a former Missouri professor of economics, said Lay's brilliance and understanding of market forces made him a class standout.

After earning a master's degree at Missouri in 1965, Lay became a senior economist at Humble Oil and Refining - later to be known as Exxon - and grew close to the company's president, who asked him to write his speeches.

Expecting to be drafted during the Vietnam War, Lay joined the US Navy in 1967 and in time was assigned to the Pentagon, where he led a group that studied the effects of defence spending on various parts of the economy.

Back in the private sector in 1973, he took a position at Florida Gas, a pipeline company in Winter Park, Florida. In 1981 he became second in command at another pipeline company, Transco Energy, in Houston.

In 1984, Lay became chairman and CEO of rival Houston Natural Gas. The next year InterNorth of Omaha, Nebraska, bought Houston Natural Gas for US$2.4 billion, creating the biggest US natural gas-pipeline system. The new company was renamed Enron and Lay was named head.

In 1966 he married his college sweetheart, Judith Ayers. They divorced and Lay married his Florida Gas secretary, Linda Phillips Herrold.

Enron, once the world's largest energy trading firm, had US$68 billion in market value before its December 2001 bankruptcy wiped out thousands of jobs and at least US$1 billion in retirement funds.

- BLOOMBERG