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NEW YORK Records show Enron's ex-chief had faith in stock



Published: Wed, February 12, 2003 @ 12:00 a.m.



Reports indicate Enron chief wanted to hold onto company stock.

NEW YORK (AP) -- Former Enron Corp. chairman and chief Kenneth Lay had nearly absolute faith in the company's stock, even as it plunged, with many of his share sales made only to cover margin calls, according to a published report.

Lay's personal finances were structured similarly to those at Enron -- a firm belief that the company's stock would never tumble, The New York Times reported Sunday after reviewing some of Lay's financial records, provided by people sympathetic to him.

The records appear to cast doubt on the widely held notion that Lay urged employees to buy Enron stock while he was secretly unloading his own shares in 2001, the newspaper said.

The records present evidence of reckless financial planning and hubris, potentially complicating prosecutors' efforts to build a criminal insider-trading case against Lay, the paper said. Prosecutors are nearing a decision on whether to charge Lay, the paper said.

Lay has maintained that his sales were only to cover calls on money he borrowed to fund stock buys and other investments, and not the result of his knowledge of Enron's deep flaws.

"There was no concern, no worries that Enron was going to collapse," one of Lay's former advisers told the newspaper. "Every step along the way, we felt like today is the bottom and tomorrow is going to be better."

Doubts remain

Still, prosecutors might conclude that Lay structured his selling to hide his actions from the market or was aware of nonpublic information that should have led him to stop trading, the newspaper said.

As calls to pay his debt mounted, Lay sold nearly $100 million of Enron stock in 2001, but the records show that he went to great lengths to hold onto the shares, the Times said.

Collateral reduced

When falling share prices reduced his collateral -- Enron stock -- Lay sold other investments and persuaded a bank to accept an illiquid asset before he sold Enron shares.

In July 2001, Lay stopped his daily share sale begun a year earlier because he felt Enron's stock price was too low.

And in September 2001, Lay used a $10 million incentive payment to pay down debt -- relinquishing cash instead of selling Enron shares. That same month, Lay began selling private equity investments that required additional cash, even though further sales of Enron shares would have provided that money.

Lay insisted that Enron shares be sold only to cover margin calls, advisers said.

That left him with 1.2 million shares as Enron's stock price spiraled toward zero.

"He was always a bull on the stock, right up to the day that the company filed for bankruptcy," one adviser said.




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