Senator anticipates testimony from Enron's Lay

Lawmakers expand investigation into Wall Street banks

EDMUND SANDERS AND RICHARD SIMON, LOS ANGELES TIMES

The chairman of a Senate committee investigating Enron's collapse said Friday that he expects Kenneth L. Lay to testify next week, although a Lay spokeswoman said the ousted Enron Corp. chairman was still weighing a decision.

Separately, lawmakers said they are expanding their investigation to include the role played by at least two Wall Street banks in Enron's collapse. The banks invested in some of Enron's off-the-books partnerships, apparently in the hopes that Enron would return the favor by sending other business their way.

Lay was scheduled to speak voluntarily to the Senate Commerce Committee this week, but canceled his appearance because of what his lawyers called the "prosecutorial" comments of lawmakers on the eve of his appearance.

Sen. Byron Dorgan, D-N.D., chair of the Senate Commerce subcommittee on consumer affairs, said he expects Lay to testify because his attorneys have not notified the committee of any plan to assert Lay's Fifth Amendment right against self-incrimination. The full Commerce Committee subpoenaed Lay to appear Tuesday after he canceled his voluntary appearance.

"Normally they would have done that by now," Dorgan said. "We told Lay's attorney Friday that we are preparing for a hearing in which Lay will answer questions and they said, 'We can't disagree.' "

Lay undecided

But spokeswoman Kelly Kimberly said Lay had not made up his mind.

"This is an important decision," Kimberly said. "He's weighing it very carefully."

If he testifies, Lay faces a political and legal quagmire, experts say. Many criminal attorneys agree that it's in Lay's best interest to refuse to testify until it is known whether he is a target of the criminal investigation.

On the other hand, refusing to testify could be a lightning rod for criticism -- particularly after his right-hand man, former Chief Executive Jeffrey K. Skilling, appeared before committee members Thursday and denied any responsibility for the company's collapse.

That could put pressure on Lay to testify to salvage his reputation.

"It's very difficult to control high-profile clients like this," said Joseph diGenova, a former prosecutor and partner at diGenova & Toensing in Washington, D.C. "They think they can talk their way out of everything. They overestimate their powers of persuasion and underestimate their Darth Vader qualities."

He and other Washington attorneys said it was likely that Lay's attorney, Earl Silbert, was recommending that his client take the Fifth.

Lay will be joined Tuesday by another witness, William C. Powers, who led a special internal investigating team that accused Lay of failing to fulfill his oversight duties at the company.

Financial institutions

Another congressional committee said Friday that it plans to expand its investigation to include Merrill Lynch, Wachovia Bank and other financial institutions that invested in some of the controversial Enron partnerships despite being warned about potential conflicts. Officials at Merrill and Wachovia invested in LJM-2, one of the partnerships controlled by fired Enron Chief Financial Officer Andrew S. Fastow.

Both companies said they were told that they would receive a bigger piece of Enron's bond business if they invested in the partnerships, congressional investi- gators said.

"We want to know if they were aware that they were engaging in transactions that were off the books, and therefore deceitful," said Rep. James Greenwood, R-Pa., chair of the House Energy and Commerce subcommittee on oversight and investigation.

For more business stories go to the Business section.

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