HOUSTON, Jan. 24 — Kenneth Lay resigned as chairman and CEO of beleaguered Enron Corp. late Wednesday. He remains a member of the board of directors.
Lay was asked to step aside by the creditors’ committee , which considered Lay’s involvement in dozens of lawsuits and congressional investigations a distraction from the bankruptcy reorganization of the Houston energy company.
“This was a decision the board and I reached in cooperation with our creditors’ committee,” said Lay in a statement. “I want to see Enron survive and for that to happen we need someone at the helm who can focus 100% of his efforts on reorganizing the company.”
The creditors’ committee has begun the search for a ‘restructuring specialist’ to assist Enron’s efforts to reorganize.
Lay had been with Enron since 1985 and presided over its rise as the nation’s largest energy trading company. Enron and Lay’s efforts to influence energy policy in the US were legendary. One year ago, Lay’s name was thought to be in the running for a cabinet post in the new administration of President George W. Bush.
Lay is named in scores of lawsuits alleging securities fraud and malfeasance as well as being in the center of at least 10 congressional investigations into the causes of Enron’s collapse.
Enron filed for protection against creditors in federal bankruptcy court Dec. 2, 2001. The company’s stock had been as high as $90/share in early 2001 but plummeted to single digits after a series of write downs and losses and restated earnings in October 2001.
The stock delisted from the New York Stock Exchange this week. The company collapsed amidst mountains of debt that had been kept from investors and shareholders by complex off balance sheet ‘special purpose’ entities that came to light in October. Full payment of the notes was triggered by credit downgrades and a severe liquidity crisis.
With the company embroiled in one scandal after another, including allegations employees shredded documents pertinent to several investigations, some observers questioned the ability of the company to reorganize. Others said the bankruptcy court has to go through the motions because of its duty to creditors.
“The focus should be on the reorganization of the company not on Lay,” said Louis Gagliardi, analyst with John S. Herold Inc., Stamford, Conn. “It’s in everyone’s [creditors] best interest to reorganize it.”