Creditors Sue Former Chairman of Enron

Enron Corp.’s creditors have filed a lawsuit against former Chairman Kenneth L. Lay and his wife to recover more than $84 million in loans the company made to the couple that for the most part were repaid with now-worthless stock.

The creditors say the company failed to receive fair value for loans made to Lay and his wife, Linda, before the former energy trader collapsed in 2001. From May 1999 through November 2001, the Lays used Enron shares to repay the Houston-based company while knowing that the value of the shares was inflated, the suit alleges.

“Despite his knowledge of Enron’s deteriorating financial condition, Lay continued to use the revolving loan facility to take out enormous cash loans from Enron while purportedly ‘repaying’ such loans by conveying large amounts of Enron’s overvalued stock,” the creditors allege in the suit, which was filed Friday in New York. The creditors asked that the transfers be declared invalid.

Enron owes creditors $50 billion to $100 billion, company executives have said. The company’s downfall erased more than $68 billion in market value and about $800 million in employee pension investments. Lay, who also had been chief executive, resigned in January 2002.

The suit is the second filed by the Enron creditors’ committee seeking to recover some of the losses. A suit filed in Texas state court in October named nine former Enron executives, including Lay.

A spokeswoman for the Lay family declined to comment.

In January 2002, Linda Lay said in an interview on NBC’s “Today” show that she and her husband were almost broke and everything was for sale except their home.