From: dan.dorland@enron.com
To: dave.ellis@enron.com, paul.devries@enron.com, jeff.borg@enron.com, paul.goddard@enron.com, garrett.tripp@enron.com, steven.burnham@enron.com, chris.dorland@enron.com, chris.gaffney@enron.com
Date: 2002-01-14 13:32:15+00:00
Subject: Lay touted Enron stock to employees

January 14, 2002
Lay touted Enron stock to employees 
Growth 'has never been more certain,' former chairman of failed energy trader said in e-mails: Messages released
The Associated Press 
WASHINGTON - In a pair of e-mails to his employees in August, the chairman of now-bankrupt Enron Corp. touted the company's stock and declared that the energy trader giant's growth "has never been more certain."
"Our performance has never been stronger; our business model has never been more robust. ... We have the finest organization in American business today," Ken Lay said in an Aug. 14 e-mail just two months before Enron's long-hidden financial problems surfaced.
In an Aug. 27 e-mail, Mr. Lay announced the details of an employee stock option program that spoke of "a significantly higher price" for Enron stock in the future. Selling for US$37 a share in August, Enron stock now sells at US68?. The stock was at US$83 a year ago.
"It appears that you misled your employees into believing that Enron was prospering and that its stock price would rise," Rep. Henry Waxman, the ranking Democrat on the House Government Reform Committee, said in a letter Saturday to Mr. Lay.
Mr. Waxman released the e-mails along with the letter to Mr. Lay, whose political donations along with those of other Enron executives have made the company U.S. President George W. Bush's biggest financial supporter through two governor's races and the presidential election.
Mark Palmer, an Enron spokesman, said the picture for the company was solid in August and that financial problems didn't become clear until later.
"Ken Lay was telling the truth" in August, said Mr. Palmer. "We had had 21 consecutive quarters of earnings growth, the same number of consecutive quarters of volume growth. Our core business at Enron had never been in better shape."
On Oct. 16, the company acknowledged hundreds of millions of dollars in third-quarter losses and a billion-dollar writedown of its equity, a belated admission that touched off a crisis in investor confidence and sent the company careening toward bankruptcy. The company for several years had kept huge amounts of debt off the company's books in partnerships that had been set up by Enron executives, who collected millions of dollars from the partnerships.
Declaring that Mr. Lay sold US$40-million of Enron stock between January and August last year, Mr. Waxman demanded to know whether Mr. Lay was aware of the company's financial vulnerabilities.
"If you were not aware of this, please explain whether this was because Jeffrey Skilling or other executives withheld that information from you," Mr. Waxman wrote. Mr. Skilling had abruptly left the company in August after just six months as president and CEO.
In one of the August e-mails to employees, Mr. Lay said he regretted Mr. Skilling's "resignation. ... Jeff is resigning for personal reasons and his decision is voluntary."
Mr. Palmer said "all of those partnerships had been through review processes and approval processes that were set up with and in many cases worked out with Arthur Andersen as our outside auditors, plus outside legal counsel."
The Enron spokesman said problems with the partnerships were brought to light "as the result of our investigation. We found there were accounting problems with one of those partnerships and we fixed that by restating those earnings and that was not knowledge we had in August."