“The ship has taken a hit in the bow and water is gushing in,” Useem says, recalling Watkins’ remarks. “The captain knows something is wrong, but he makes sure the band is still playing and the cocktail glasses are still full while his ship is going down.”
Such was the tale that federal prosecutors also told – albeit in less colorful, more legalistic language – in an indictment that was made public on July 8 in Houston . The government alleged that Lay and other former Enron officials, including Jeffrey Skilling, who succeeded Lay as CEO, and Richard Causey, former chief accounting officer, conspired to deceive shareholders, regulators and the public.
Useem and other Wharton faculty members say that the arrest of Lay, who was handcuffed when taken into court, was much anticipated. But they disagree as to whether it took investigators an inordinately long time – more than two years – before filing charges. They also say that Lay is walking a public relations tightrope in his extraordinary decision to defend himself publicly by such actions as holding a lengthy news conference and appearing on CNN’s Larry King Live. The Wharton experts stress that Lay must be presumed innocent until proven guilty of the criminal charges. But they agree that even if he is acquitted, his leadership of Enron was nonetheless abysmal in the months preceding the company’s collapse at the end of 2001.
“There were no signs [investigators] were dragging their feet in any way; it was just a tough case to crack,” says Useem, director of Wharton’s [continue]
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