Andrew Racz
Director of Research
300 East 54 Street, Suite 26C
New York, NY 10022
Phone: (212) 319-6949
Fax: (212) 753-1944

A Matter of Reasonable Doubt Ken Lay - Enron

I recommend this story to
my grandson, Daniel Racz (age 4)
and indeed his generation.

We want to tell the truth
so that your children and my children,
your grandchildren and my grandchildren
will never doubt our Government,
our elected representatives
and indeed
the written words in our newspapers.


The tragedy of Enron, a tragedy when a $65 billion market value disappears in a single year, when $2 billion in pension funds is wiped out, when 4,500 people lose their jobs, is a tragedy and a mystery.

The world and in particular the American people, accepted the collapse of Enron as a matter of business failure and as some of the attorneys for Ken Lay and Mr. Skilling stated, "Business failure is not a crime."

The question is, is the disappearance not the collapse of Enron a tragedy or also a mystery? Undoubtedly, before the trial of the two top executives of Enron in the year 2006, and the filing for bankruptcy in 2001, there were Senate hearings. Senator Boxer and Senator Levine dominated the hearing and the key item which appeared that the two executives, Skilling and Ken Lay, were selling while others were told to buy.

There was no post investigation of the largest corporate history to ascertain whether it was, in fact, a business failure or a mystery. There was no Warren Commission. The Warren Commission refused to discuss the mystery of President Kennedy's death on November 2, 1963, and in the same way the mystery of Enron during the Senate hearings and the trial did not, in fact, surface.

In fact, on July 13, 2003, Martin Siegel, a chief litigating partner of Brown & Rudnick, did say the Lays had done nothing wrong. There was no District Attorney Garrison for New Orleans, and there was no Oliver Stone who would have penetrated the Enron case of 1997-98-99 and 2000. All we know is that in the year 2001, the $65 billion market value gradually disappeared and meanwhile Mr. Skilling and Mr. Lay were selling stocks.

There is, however, a glimpse that opens up the mystery of what happened in Enron. Ken Lay, chairman of the board, founder of Enron, began to transfer freely tradeable shares of Enron for loans which were maximized at any one time to $4 million, sometime in late 2004. This item came out prior and during the trial, and Mr. Lay's attorney claimed that this was a legitimate transaction. The shares were freely tradeable and the average observer of the proceedings assumed that those shares were sold on the open market. After all, cash was issued for marketable securities. There was what's called the Enron power, which has failed to sell the securities, and therefore the $4 million worth of marketable securities were accumulated somewhere on somebody's desk at Enron without liquidating for cash.

Mr. Lay's attorneys argued that the Enron Estate became its own victim because they could have resold their Enron stock and eliminated any loss, but failed to do so. Accordingly, no claim for damages can be brought against Mr. Lay as the failure to resell the Enron stock, which he tendered to Enron according to the loan agreement, did not apply to the retention of those shares.

Here is the window of opportunity. Disregarding the fact that Enron counted in billions, a hundred million dollars is a lot of money. This is what Mr. Lay drew from Enron in cash, and this is the stock with Mr. Lay tendered to Enron for cash.

Somebody had to make a decision to keep these hundred million shares from hitting the market. That somebody had to be in a highly responsible position, as a public company cannot have over $100 million in tradable securities accumulated on anybody's desk in the year 2001 when the stock price was gradually falling to zero.

Somebody high up penetrated Enron. This decision had to be reached way before January 1, 2001, and the question is, who stood at the pinnacle of power to have influence over such a number of Enron shares? Furthermore, any securities analyst who is sufficiently experienced in corporate matters would probably agree with me that the Enron corporate problems, the structure of problems, the deficits, the strange financing, the subsidiaries, lack of profitability of various divisions, was known at the Enron headquarters not only in 2001 but in the year 1999, 1998 and probably 1997.

Who knew the secrets? The only thing we know is that Enron was a large company, a complex company, and millions of transactions between geographic boundaries and within the company were flying as a matter of daily business.

If the top echelons of Enron knew about the lack of profitability, the corporate problems, they have effectively covered up those issues. However, the money was freely floating from one pocket to another, from one bank to another, from one country to another. It is not totally unfair to assume that the people who knew about these problems, who saw the money floating back and forth, also had knowledge of the $100 million worth of securities that Mr. Ken Lay tendered back to the company. After all, what is called the ATM-type loan agreement is fairly unique in corporate history.

All we know is that in the years prior to 2001, Enron heavily concentrated on the stock and engaged in transactions which were easily covered up, a few hundred million dollars floating out of the regular Enron banks to banks about which we know very little. This is the mystery of Enron. Enron was an empire when divisions were set up, where money was floating, when the employees' money and pension fund was technically suggested to stay stationary but the numbers in total amounted to billions.

Unfortunately, the trial concentrated on the personal tragedies of the top executives. It concentrated on the cover-up in the year 2001. The trial, of course, did not have the budget of Oliver Stone to penetrate Enron and discover when the first dollar left Enron illegally and particularly who knew about it.

My contention is that the problems of Enron were known a long time before the year 2001 and the flow of money back and forth from one bank to another began way before the year 2001. It was covered up by the price of the stock, which was manipulated through the negligence of my professions, securities analysts, with certain exemptions, and by the media that fell from the performance unlike in the corporate history of the United States.

A $65 billion sure thing to unwind you need a budget which was even beyond the budget of the Senate hearings, but was paid for dearly by Arthur Andersen. However, the collapse of Andersen did not bring light to the situation, and we know very little about the life inside Enron.

Who knew the secrets? In American history I found only one example where one man knew more than was ever disclosed. Lee Harvey Oswald was eliminated in an alley by the Dallas Police building, a mysterious death. Ken Lay, who knew all the secrets, died mysteriously in March, 2006. Both people, had they been found guilty by the highest courts, probably would have spent the rest of their lives in prison. They both died with their secrets in their heads.

I wonder what would have happened if justice for a short while had been handed over to Oliver Stone in 1963 and in the year 2006. Let us assume that in the Dallas police station, as Lee Harvey Oswald was stepping into the dark alley, history would have stopped for a few minutes and Lee Harvey Oswald would have entered the room where he would have confronted Senator Baker and his protégé, the young Thompson who later became Senator Thompson, and Senator Baker could have asked Lee Harvey Oswald, "What did you know and when did you know it?"

Let us jump now 43 years in history, and let us imagine that the night before Ken Lay went to bed, never to return to this world. He, too, would have confronted Senator Baker with the same question. "Ken, what did you know and when did you know it?"

American history would have changed. If we had an honest answer from Lee Harvey Oswald and Ken Lay, we would have learned some very dark secrets. Something which on both occasions was covered up because people at higher ranks said it is not worth it for the daily life of the American public.

In many respects, there is some truth in it. However, for the interests of history, for the interests of the American public, we conduct these two deaths our daily life. I still wish that Senator Baker would have had the opportunity to inject the compulsive serum to Lee Harvey Oswald and Ken Lay, and get out the truth.

"Mr. Oswald, Mr. Lay, what do you know and when did you know it?"


Information contained herein is based on data obtained from recognized statistical services, issuers reports or communications or other sources believed to be reliable. However, such information has not been verified by us and we do not make any representation to its accuracy or completeness. Any statement non-factual in nature constitutes only current opinions which are subject to change. BERAL INC. or their officers, directors, analysts or employees may have positions in the securities or commodities referred to herein, and may as principal or agent buy and sell such securities or commodities. An employee, analyst, officer or a director of BERAL INC. may serve as a director for companies mentioned in this report. Neither the information nor any comment expressed shall constitute an offer to sell or a solicitation of an offer to buy any securities or commodities mentioned herein. There may be instances when fundamental, technical and competitive opinions may not be in concert. This firm may from time to time perform investment banking or other services for or which investment banking or other businesses from any company mentioned in this report.



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Andrew Racz. 300 East 54 Street, Suite 26C, New York, NY 10022
Phone: (212) 319-6949 Fax: (212) 753-1944. E-mail:

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