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Thursday, July 06, 2006

Lessons From A Beaten Man

Ken Lay died last night a man thoroughly beaten by the rigors of the American justice system, and it showed. It was impossible to escape the devastation visible on his face after he was convicted.

And that's the real legacy Lay will leave behind--that face.

Of course there will be talk of everything else, again, and what corporate America has learned. Lay left behind a once-in-a-generation playbook on how not to run a company. There will be another rehashing of Enron's collapse and Lay's and Jeffrey Skilling's subsequent and multiple trials, climaxing with their convictions. But the employees won't get their jobs back. Shareholder money won't suddenly reappear in their brokerage accounts. The millions spent on legal fees to prosecute and defend them has been spent. As for the reforms, like Sarbanes-Oxley, born of the Enron implosion, they're already under fire. The rest of the country has moved on.

Lay's dead, and what's left is his conviction. That's all that's left of Lay.

It must feel thin to those hurt by Enron. But the players in the final trial--the Enron Task Force, Judge Sim Lake, defense attorneys Dan Petrocelli and Mike Ramsey, and the two defendants--were not in Houston to provide closure for Enron shareholders and employees, or the final chapter of the corporate accounting scandals of the 1990s. On the contrary, those directly involved were fighting to determine whether two men, who less than ten years before were lauded for their business acumen and philanthropy, would spend the rest of their productive lives in a federal penitentiary.

The prosecution succeeded, and Lay was crushed. When you're facing what is essentially life in prison, the gravity of the situation, of course, takes a tremendous physical and mental toll on a defendant. The roller-coaster ride that Lay and Skilling specifically went through was bound to manifest itself somehow.

Lay certainly must have felt as if there was a cloud forever hanging over his head, which caused continued strategic missteps and even rendered his lawyer too ill to represent him. He was indeed a beaten and broken man after the conviction; you could see it in that Houston courtroom. Perhaps the best thing we can say about Skilling is that he has remained publicly calm, even dignified, as he faces sentencing and prepares his appeal.

But the facts are the facts. Lay is forever the consummate corrupt CEO, and he, as well as his family, paid dearly for his callous actions. Lay's estate may even continue to file for an appeal posthumously, but his passing should not have any effect on either appeal's outcome. Skilling's chances of winning an appeal are slim to none.

As for Lay, the past six years of the man's life had been hellish. I would imagine the example left by Lay might serve as a stark deterrent to an executive considering a similar path. But the details of side deals and partnerships and corrupt accounting will all end up forgotten someday. It will probably happen again elsewhere.

But anyone who remembers the image of Ken Lay in handcuffs--now being replayed over and over again on CNBC--that stricken look he had as he faced spending the rest of his life in prison, will think twice before hatching similar schemes. No one wants to be that guy. That face is tough to shake.

As a legacy, it will have to do.

Jacob H. Zamansky, a principal in the firm Zamansky & Associates, one of the leading plaintiff's securities arbitration firms in the country. He is a routine contributor to


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