- HOUSTON (Reuters) - The FBI's
investigation into former Enron Chairman Ken Lay is focusing on allegations
he illegally sold stock after learning his company's finances were unraveling,
sources close to the case said on Friday.
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- The close examination of Lay's stock dealings is part
of an overall federal investigation into Enron's former management team
for possible misconduct and fraud, the sources said.
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- But in Lay's case, the stock dealings are seen as the
most promising avenue for investigators looking for potential crimes, they
said.
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- A Justice Department spokesman and a lead prosecutor
in the Lay inquiry declined to comment.
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- The sources said special Justice Department prosecutors
and representatives from the U.S. Securities and Exchange Commission are
helping conduct the probe and were expected to be in Houston next week
talking to potential targets and witnesses.
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- Enron, once the nation's largest energy trader, filed
for bankruptcy in December in a financial scandal centered on off-the-balance
sheet partnerships that hid billions of dollars in debt and inflated profits.
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- According to civil lawsuits filed since the company's
collapse, Lay sold $100 million worth of Enron stock between February 1999
and July 2001.
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- He has also been accused of dumping stock after an August
2001 meeting with Enron Vice President Sherron Watkins in which she warned
him that off-the-balance sheet partnerships threatened to engulf the energy
trading giant in a wave of scandals.
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- Lay spokeswoman Kelly Kimberly could not confirm that
Lay was being investigated for insider trading, but said he "firmly
denied" any allegations of wrongdoing.
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- His stock transactions after the Watkins meeting were
simply to raise cash to repay personal loans from Enron, not an expression
of bad faith in the company, she said.
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- "He was allowed to borrow money under his contract
and repay in stock. That is not an insider trading," Kimberly said.
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- On Monday, attorneys for the University of California
board of regents are expected to filed an amended version of their key
civil lawsuit in which they allegedly will describe much more extensive
insider trading by Enron executives than was previously known. A source
close to the case said the amount of Lay's stock sales may actually be
closer to $184 million.
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- A special federal grand jury was impaneled in Houston
last week to spearhead the investigation.
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- Others accused of controversial insider trading include
former Enron Chief Executive Jeff Skilling, former Chief Financial Officer
Andrew Fastow and former Vice Chairman Cliff Baxter, who committed suicide
in January.
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- Skilling has denied any wrongdoing in two appearances
before Congress. Fastow, through lawyers, has also denied wrongdoing.
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