[This Is A Rush Transcript. This Copy May Not Be In Its Final Form And May Be Updated. Paula Zahn, Cnn Anchor:] The question this morning: What scared off Ken Lay? The remarks by congressional members that Kenneth Lay found inflammatory yesterday were in response to an internal report just released by the company over the weekend. The 200-page report was highly critical of Enron management, and said the company's founder, Kenneth Lay, bears significant responsibility as the captain of the ship. For more on what the report revealed, we go to senior correspondent Brooks Jackson, who joins us now from Washington Brooks, good morning.
[Brooks Jackson, Cnn Senior Correspondent:] Good morning, Paula.
[Zahn:] Does the fact that Lay refused to testify suggests he is afraid of potential criminal charges?
[Jackson:] Well, the Powers report that you just mentioned really doesn't give much of a basis for that. It does say that Ken Lay was failing to supervise his own employees, that he was acting more like a director of the company than an actual manager, raising the question about why there were paying him $7 million a year. But that's a far cry from criminal charges or facts that would lay the basis for criminal charges. It's much more critical of some of Lay's underlings. What Lay's attorney, Earl Silbert, says he is afraid of, and seems to be afraid of, is a hostile atmosphere in Congress. As you heard earlier, he says there were inflammatory statements made over the weekend by some congressional investigators, and he is right. Just listen to this.
[Rep. Billy Tauzin , Energy And Commerce Chairman:] Were there really wrongdoing, and maybe somebody ought to go to the pokey for this. And I think we're going to find out, yes, to that answer.
[Jackson:] So when you have members of Congress senior members of Congress talking about sending people to the pokey, it's only prudent to tell your client that perhaps he doesn't want to go up there and testify. What he is really afraid of is making statements before a congressional committee that though they might not necessarily be under oath, still could be used later during criminal investigations of the company to pick apart his story. Say, well, you told us one thing here, and you said something else over there. His attorney just doesn't want to put Mr. Lay in that posture Paula.
[Zahn:] What's interesting now, Brooks, is that you have Arthur Andersen coming out and saying this Powers report, as brutal as it was, particularly when it came to Ken Lay, is actually a whitewash that Enron's board is trying to blame others for its own problems. What about that take on this report?
[Jackson:] Well, I have to say I had to smile when I heard that, because the report is just brutal as to Enron's own management. This is a report that was commissioned by the board of directors, when they found out that the company was going down the tubes. And they brought in Mr. Powers, who is dean of the University of Texas Law School to conduct as independent an investigation as a company can conduct of itself. They brought in an outside law firm, brought in outside audit firm to look at this. It said the board of directors should have been more vigilant. That they bear responsibility. It said some of Lay's underlings laid out facts that experts are now saying could well provide the basis for fraud charges against some of these Enron executives. It says that Enron's law firm, Vinson & Elkins, should have spoken up and urged fuller disclosure. It also says and here is what really gets Arthur Andersen upset that Arthur Andersen quote "failed in its professional responsibilities." That they made accounting mistakes that were simple and not so simple accounting mistakes. And that's just devastating criticism of Arthur Andersen, but they certainly don't stint on their criticism of the company itself.
[Zahn:] Brooks, before we let you go, OK, so Ken Lay is refusing to testify. But aren't there some other key Enron officials that will be testifying later this week?
[Jackson:] Well, that's, of course, we thought Lay was going to testify up until late yesterday. So it remains to be seen. I think there is going to be plenty that you overhear. There are lots of subpoenas out there, boxes and boxes of documents that the committees already have, and of course, they are saying they don't have nearly enough. They are clamoring for more, and they are going to get them. And plenty of lower-level witnesses potential witnesses, who have no fear of criminal prosecution, no reason not to testify. I think you're going to be hearing plenty about Enron for the foreseeable future.
[Zahn:] All right. Brooks Jackson, thanks so much for that update. And we move on on this story. Up front this morning, why Mr. Lay isn't going to Washington. Well, Sen. Byron Dorgan is heading one major investigation of Enron. It was his Commerce Committee that canceled its hearings today in the wake of Kenneth Lay's refusal to show up. And the Democrat from North Dakota joins us now from Washington good to have you with us, sir. Thank you very much for joining us on
[A.m. Sen. Byron Dorgan , Commerce Committee:] Hi, Paula.
[Zahn:] So let me put up on the screen what Kenneth Lay's attorney is saying about why Mr. Lay pulled out at the last minute quote "He cannot be expected to participate in a proceeding in which conclusions have been reached before Mr. Lay has been given an opportunity to be heard." What's your reaction to Mr. Silbert's comments?
[Dorgan:] Well, the conclusions are talking about the conclusions that his own vice president reached last August, his accounting firm reached in a report to him a couple of months ago, and especially conclusions in the Powers report, which was released Saturday late evening. Now, that report came from inside the company, the board of directors. It was a devastating indictment of what had happened inside that corporation. So you know, those are the conclusions. The restatement of the obvious ought not to have been difficult for him. It was never, in my judgment, something that would be a walk in the park for him to come before our congressional committee. There are a lot of tough questions to be asked and to be answered.
[Zahn:] But as you know, Mr. Lay's attorneys are also suggesting, in spite of what you have just said, that you and other congressional investigators had made up your mind about his guilt. Let's quickly replay some of what you and your colleagues had to say yesterday on the Sunday talk shows let's listen.
[Dorgan:] This is almost a culture of corporate corruption here. Clearly, some things have happened here that are going to put some people in real jeopardy and trouble.
[Tauzin:] Maybe somebody ought to go to the pokey for this. And I think we're going to find out, yes, to that answer.
[Zahn:] And once again, there was another quote that says, "Mr. Lay will face a panel eager to pulverize him." That was in "The New York Times." How... Yes, exactly. How would Mr. Lay have had any chance before this committee?
[Dorgan:] Well, look, what we said is what his accountants have already said a month ago that there were possible illegal acts here, what his vice president said in a memo to him last August. But the point is this: The people at the top in this corporation, including Mr. Lay, made tens of millions of dollars. The people at the bottom lost their life savings, and in many cases investors lost their shirts. There is a lot to answer for, and especially to answer the Powers report, which is an internally-generated report that talks about $1 billion in profit that was overstated, a debt that was incurred by the company that was never disclosed. There's a lot that went wrong here, and I think the public would be served by hearing Mr. Lay's description of what happened and how it happened and who was responsible.
[Zahn:] Given that you said a lot of this information was available as, you know, as recently as late August, do you think it was a mistake then to talk about this Powers report in advance of questioning Mr. Lay?
[Dorgan:] Well, the Powers report was released...
[Zahn:] That of course came out over this weekend.
[Dorgan:] That was released publicly on Saturday evening. Of course, it's going to be discussed. But look, Mr. Lay, in my judgment, was looking for a door to get out of this testimony, because of the Powers report. And I understand that. I am disappointed by it. But to suggest that somehow he is going to come before a committee that is not going to ask him tough questions, given what has happened in this rather spectacular bankruptcy, the biggest corporate bankruptcy in history, and given the fact that there are now documented reports, and in addition memos from his own employees inside the company talking about accounting hoaxes and so on and so forth. This would not have been an easy testimony by Mr. Lay. But he ought not blame his nonappearance on others. What he ought to understand, he and his attorneys, is he didn't want to show up because of the Powers report generated by his own company. It talks about substantial problems inside that company that deceived investors.
[Zahn:] Do you think you will ever get him to talk on the record before a congressional committee?
[Dorgan:] I don't have the answer to that. We can compel Mr. Lay to come, but we cannot compel him to speak. He can certainly assert his Fifth Amendment rights. But we'll have a meeting later today to talk about that. I mean, there is subpoena power here. This is you know, the issue of criminal liability is something the Justice Department will evaluate, not us. And we are interested in the public policy questions. Where were the regulators? Brain dead? Asleep? Without power or the authority? Where were the accounting firms? You know, what about Arthur Andersen's role? And especially, who in the company, Mr. Lay, Mr. Fastow, Mr. Skilling and others, who did what in order to allow all of this to happen? I am talking about all of this that's described in the Powers report, which I think is a devastating indictment of what happened in that company.
[Zahn:] Sen. Dorgan, I know you said you were going to hold a meeting later today to figure out whether you will subpoena Mr. Lay. What are the chances that you will do just that to compel him to come testify before your committee?
[Dorgan:] Well, let us have the meeting and evaluate. I mean, we had expected until yesterday for Mr. Lay to be appearing this morning. He is not, so we canceled the hearing, because he was our only witness. But let's hold this meeting, and then we will talk about it.
[Zahn:] We'd love to have you come back...
[Dorgan:] Thank you very much, Paula.
[Zahn:] We'd love to have you come back, when you make a decision one way or the other Sen. Dorgan, thank you for joining us this morning.
[Dorgan:] Thank you, Paula.
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