Enron Examiner Says Lay Is Liable

Former Enron Corp. Chairman and Chief Executive Kenneth L. Lay, its lawyers and accountants should be held liable for claims against the energy giant, a Bankruptcy Court examiner said in a report filed Monday.

Lay could be liable for $94 million related to a loan from the company he paid back illegally with Enron shares, Neal Batson, the examiner, said.

The report, the fourth and final by Batson, was submitted to the Bankruptcy Court hearing claims against Enron.

Lay and Jeffrey K. Skilling, Enron’s former president and chief operating officer, both breached their legal duty to properly supervise several “special purpose entities,” according to the report.

Enron used dozens of such entities to hide billions of dollars in debt while fraudulently boosting its income.

Lay and Skilling “failed to respond appropriately to the existence of ‘red flags’ indicating that certain senior officers were misusing [special entity] transactions to disseminate materially misleading financial information,” the report said.

Skilling also could be liable for a $2-million loan he paid off with Enron stock, it said.

Arthur Andersen, the now-defunct accounting firm brought down because of its role in advising Enron in manipulating its books, committed “professional negligence,” Batson said.

A spokesman for Andersen said the allegations were “categorically untrue” and the blame for any fraud at Enron should be directed at the company’s executives.

The report said Enron executives concealed information from its auditor many times, but that Andersen was to blame for overlooking obvious risks.

Enron’s in-house and outside attorneys committed legal malpractice related to the company’s special purpose entities, Batson said.

No criminal charges have been filed against Lay or Skilling, and both have denied any wrongdoing in Enron’s collapse.