With the Theater or PACs, Texans Saw Kenneth Lay as ‘On Top of the World’

For all his clout in Washington, Kenneth L. Lay’s greatest influence was back home in Texas where the mirror-sheathed Enron headquarters building glimmers above the Houston skyline.

Operating here in his home base, Lay--who resigned Wednesday night as chairman of the once high-flying energy trading company he founded--was a kingmaker who could create or crush political careers, spearhead professional sports stadium drives, finance youth clubs and endow theater troupes.

“This was a man on top of the world. It was well known that if you needed something done you went to Ken Lay,” recalled Felix Fraga, a former Houston city councilman who has known Lay more than 30 years. “He could have run for mayor, governor, or done anything he wanted.”

As part of President Bush’s celebrated “pioneers” club, Lay and his wife, Linda, donated more than $145,000 to the national Republican Party and the Bush campaign. The Lays also contributed $100,000 to the Bush inaugural gala and $10,000 to the election recount fund.

But in Texas, where his money was less diluted, state Ethics Commission records show Lay gave $55,000 to one state Senate campaign alone. Other large contributions graced the coffers of Gov. Rick Perry, Atty. Gen. John Cornyn and Houston Mayor Lee P. Brown, for whom Lay sponsored a $50,000 fund-raiser Oct. 8.

However, in a sign that Enron fortunes were already on a slide, Brown campaign finance director Sue Walden said Lay failed to show up for the fund-raiser and never sent a check.

Always the Go-To Guy

Over the years, Texas officeholders ranging from Houston City Council members to state railroad commissioners benefited from Lay’s political largess.

“Ken Lay was a guy with swagger and loot who bought his way into whatever needed buying,” said Texas populist politician and commentator Jim Hightower. “He had this aura of being bulletproof, a corporate superstar who was real connected to the Bushes.”

After Lay’s spectacular fall from power and grace, the extent of Lay’s and Enron’s insertion into Texas government only now is surfacing.

The first casualty was Texas Public Utilities Commission chairman Max Yzaguirre, a former Enron executive Lay helped get appointed as the state’s chief utility regulator. Yzaguirre, tainted by his Enron connections, resigned his post Jan. 17.

Others caught in the backwash of the Enron collapse are Perry, who received a $25,000 contribution from Lay the day after he appointed Yzaguirre to direct the PUC; Cornyn, a U.S. Senate candidate who reversed an earlier position and recused himself from the state Enron investigation because of donations he received from Lay and Enron; and Texas elected Supreme Court Justice Priscilla Owens, whose appointment by Bush to the U.S. 5th Circuit Court of Appeals now is in jeopardy because of Enron contributions she received beginning in 1995 and decisions she made favoring the company.

According to Rice University political scientist Bob Stein, Lay displayed a particular genius for picking out politicians on the rise.

“These were investments about where these guys were going, not necessarily where they were at the time,” Stein said. “Ken Lay was a big supporter of Bush probably before Bush himself knew he was running for president.”

According to the Austin-based watchdog group Texans for Public Justice, the Lays personally donated $122,000 to Bush’s two gubernatorial campaigns. Similarly, Lay was an early backer of Cornyn, even before the Republican attorney general announced his candidacy for the seat to be vacated by Republican Sen. Phil Gramm, who is retiring after this year’s elections.

Payroll Deductions to the Company PAC

Gramm, whose economist wife served as a paid member of the Enron board of directors, is caught up in the vortex because of the tens of thousands of dollars he received in contributions from Enron and Lay.

Enron’s system for political contributions operated on two fronts. Employees were encouraged to give money to candidates believed to be supportive of company issues, particularly those involving market deregulation central to the energy trading business.

Additionally, top executives were tapped for what amounted to a tithe to the Enron Political Action Committee, one of the country’s biggest corporate political PACs. A percentage of each executive’s paycheck was withheld from every biweekly pay period. For example, Joe Allen, Enron vice president for state government affairs, gave $83.34 every two weeks to the Enron PAC, for an annual total of $2,166. Other executives gave much more.

The money primarily was used to fund campaigns of candidates for Congress, particularly those with key energy-related positions. According to documents on file with the Texas Ethics Commission, the Enron PAC collected $336,000 from executives in 2001.

But not all of Lay’s and Enron’s munificence was reserved for major political offices, nor was it limited to politics.

Spreading Wealth Among Nonprofits

One of the largest political contributions Lay made in 2001 was for a state Senate race in the Piney Woods of rural East Texas. In that race, one of the most expensive legislative races ever undertaken in Texas, Democratic trial lawyer David Marsh was pitted against Republican businessman/rancher Todd Staples.

The race became a key contest for the Houston-based Texans for Lawsuit Reform, a conservative movement Lay supports that seeks to limit lawsuits. Staples won, backed by $55,000 in contributions from Lay.

Even in the grandest Texas tradition of alms giving and support for the arts, few have surpassed Lay and his company.

The Lays and Enron were prominent givers to virtually every important Houston charity ranging from a new cancer ward at the city’s famous M.D. Anderson Hospital to support for the Houston Ballet.

Lay encouraged giving by offering matching funds for as much as $15,000 for each employee. The results often were spectacular. Enron’s 7,500 employees alone, led by Lay with a $100,000 pledge, accounted for $5.5 million of the $75 million raised by the Houston United Way campaign.

“Enron was a visible leader in the charity world,” said Houston Ballet managing director Cecil C. Conner, whose troupe received a $10,000 gift from the Lays. “It helped make this city a vibrant, important city, not just an oil town. We have lost a leading voice.”

Occasionally, Lay’s influence went beyond money.

When former City Councilman Fraga, 72, a longtime social worker and prominent leader in the Latino community, found himself snared in a 1997 FBI bribery sting operation that sent another councilman to jail, Lay was one of the prominent Houstonians who wrote a letter in Fraga’s support.

After returning the $2,000 offered by two undercover agents, Fraga never was charged.

But Lay may be missed most as a civic leader. He served a term as president of the Greater Houston Partnership, the city’s influential super-chamber of commerce. Before that he served as head of the Board of Regents at the University of Houston, where he received his graduate education.

According to political scientist Stein, Lay was instrumental in the revival of Houston’s historically moribund downtown, including the successful referendums to build stadiums for baseball and basketball/hockey, the building of a light rail line connecting Houston’s renowned medical center complex to downtown and development of the theater district.

“Ken Lay was a great promoter of the city,” Stein said. “His business was based on attracting productive capital and labor, and when it worked, it worked to make the city a more attractive place to live.”

Scrambling for a New Look

But even this legacy already is fading, as Lay’s and Enron’s woes continue to deepen. On a recent afternoon in Houston’s gritty 2nd Ward District, the Enron Boys and Girls Club, renovated with $500,000 in Enron donations, was busy changing its name. The Enron logo on the center of the newly resurfaced basketball court was being sanded off and replaced with the new sponsor’s name: Holt House.

“We’ve already got us a new sponsor,” said club director Glen Sherrod, showing a reporter a roomful of new computers donated by Enron.

In a statement issued Thursday, Mayor Brown made no mention of Lay’s role in rebuilding the city.

“My fervent hope,” Brown said, “is that Enron is able to hire a CEO who can put the company back in a position to rehire its employees and remain a viable part of the business community.”