The Death of a Salesman

Ken Lay, the disgraced former CEO and chairman of Enron, died early this morning in Aspen, Colo., at age 64. A spokesman stated that he died from "natural causes."

We here at the Fool, of course, were not fans of Ken Lay, Jeff Skilling, or the other participants in one of the largest frauds ever perpetrated on American investors. Lay rose from abject poverty to the height of success, only to have uncontrolled avarice and thirst for power bring him back to the lowest of the low.

News of Lay's death has been met largely with catcalls and mockery, which may suggest that he's ultimately getting what he deserved. If there is a fate worse than dying and having no one care, it must be dying and having millions of people be pretty happy about it. Such, we must believe, is the fate of Kenneth Lay. He had all of the hustings of greatness, but he threw them away in the quest for more, destroying the livelihoods of thousands in the process. It's not so much tragic as pathetic.

Thus the conflict that we -- and perhaps most people -- feel today. A man is dead. But he's a man who hurt a lot of people, and whom most despised.

Ken Lay's story is pretty interesting, though. He was born in the midst of World War II in rural Missouri, to parents who owned a feed store. When it went out of business, he lived with relatives and grew up working their fields. Lay went on to major in economics at the University of Missouri, where he also received a master's degree. He later completed a Ph.D. in economics at the University of Houston in 1970.

Following graduation, Lay enjoyed a meteoric rise, lecturing at George Washington University, skip-stepping his way to the executive offices of various energy companies, and settling into the CEO's chair at Omaha-based InterNorth in 1984. In 1985, InterNorth acquired Houston Natural Gas, and the combined entity was renamed "Enron." Ken Lay, then age 43, ran the whole thing.

Under Lay's guidance, Enron grew into one of the world's largest energy companies, owning assets in natural gas pipelines, electric utilities, telecommunications, water, and energy trading. At its height, Enron employed 21,000 people.

Meanwhile, though, the company had set up scores of offshore entities to hide losses in various business subsidiaries. This practice made the company seem more profitable than it was. As Enron unraveled in 2001, Lay, who had retired earlier in the year, returned to the company and assured the public that all was well with the business, and that the stock, which had dropped precipitously, would rebound. Meanwhile, Lay sold more than $90 million in Enron stock. Enron collapsed in November 2001, entering bankruptcy protection in one of the largest Chapter 11 reorganization cases in US history.

The end of Ken Lay's Enron saga came fewer than two months ago, when he was convicted on six counts of securities and wire fraud and faced up to 45 years in prison.

The interesting thing to me about Ken Lay and Enron is that though there were even bigger frauds such as WorldCom; though other companies tagged with accounting irregularities cost shareholders much more money, including Nortel (NYSE: NT  ) and Lucent (NYSE: LU  ) ; it was Enron, and Ken Lay, who became the most hated, the most identifiable with the excesses and fraud that accompanied our last bull market. True, Dennis Kozlowski from Tyco (NYSE: TYC  ) had his vodka-peeing ice sculpture, Dick Scrushy his destruction of HealthSouth, and lower down the food chain of corporate evil, there were plenty more. Michael Saylor of Microstrategy (Nasdaq: MSTR  ) has since become notorious for losing more money in one day than any other man in history (except Bill Gates) following the revelation of shaky accounting practices at his company, an event that coincided with the pricking of the Nasdaq bubble in 2000. Yet none of these extremely costly events generates the same level of anger and hatred among the public, even today, as the collapse of Enron does.

Maybe that's Ken Lay's enduring legacy. Here was a man so smart, so good, so convincing at his job of selling Enron to the masses, that he made us all believe that he could walk on water. He had government officials, Wall Street, and Main Street all eating out of the palm of his hand. We all believed in Ken Lay and his vision for Enron.

Though the saying goes that Hell hath no fury like a woman scorned, I think that maxim perhaps undervalues the level of anger that a mob of former true believers can muster. Perhaps now, Mr. Lay can solve the riddle for us.

Bill Mannowns none of the companies mentioned in this article. In 2001, Billtestifiedbefore the Senate Commerce Subcommittee on Consumer Affairs regarding the collapse of Enron. He is the co-advisor of theMotley Fool Hidden Gemssmall-cap investing service. Tyco is aMotley Fool Inside Valuepick.


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