Lay the Kingmaker

HOUSTON -- For all his clout in Washington, Kenneth Lay's greatest influence was back home in Texas where the mirror-sheathed Enron headquarters glimmers above the Houston skyline.

Operating here in his home base, Lay -- who resigned Wednesday as chairman of the once high-flying energy trading company he founded -- was a kingmaker who could create or crush political careers, spearhead professional sports stadium drives, finance youth clubs and endow theater troupes.

"This was a man on top of the world. It was well known that if you needed something done you went to Ken Lay," recalled Felix Fraga, a former Houston city councilman who has known Lay for more than 30 years. "He could have run for mayor, governor or done anything he wanted."

As part of President Bush's celebrated "pioneers" club, Lay and his wife, Linda, donated more than $145,000 to the national Republican Party and Bush campaign. The Lays also contributed $100,000 to the Bush inaugural gala and $10,000 to the election recount fund.

But in Texas, where his money was less diluted, state Ethics Commission records show Lay gave $55,000 to one state senate campaign alone. Other large contributions graced the coffers of Gov. Rick Perry, Attorney General John Cornyn and Houston Mayor Lee P. Brown, for whom Lay sponsored a $50,000 fund-raiser on Oct. 8.

However, in a sign that Enron fortunes were already on a slide, Brown campaign finance director Sue Walden said Lay failed to show up for the fund-raiser and never sent a check.

Over the years, Texas officeholders ranging from Houston city council members to state railroad commissioners benefited from Lay's political largess.

"Ken Lay was a guy with swagger and loot who bought his way into whatever needed buying," said Texas populist politician and commentator Jim Hightower. "He had this aura of being bulletproof, a corporate superstar who was real connected to the Bushes."

After Lay's spectacular fall from power and grace, the extent of Lay and Enron's insertion into Texas government is only now surfacing.

The first casualty was Texas Public Utilities Commission Chairman Max Yzaguirre, a former Enron executive whom Lay helped get appointed as the state's chief utility regulator. Yzaguirre, tainted by his Enron connections, resigned from his post on Jan. 17.

Others caught in the backwash of the Enron collapse are Perry, who received a $25,000 contribution from Lay the day after he appointed Yzaguirre to direct the Texas PUC; Cornyn, a U.S. Senate candidate who reversed an earlier position and recused himself from the state Enron investigation because of donations he received from Lay and Enron; and Texas elected Supreme Court Justice Priscilla Owens, whose appointment by President Bush to the 5th U.S. Circuit Court of Appeals is now in jeopardy because of Enron contributions she received beginning in 1995 and decisions she made favoring the company.

According to Rice University political scientist Bob Stein, Lay displayed a particular genius for picking out politicians on the rise.

"These were investments about where these guys were going, not necessarily where they were at the time," Stein said. "Ken Lay was a big supporter of Bush probably before Bush himself knew he was running for president."

According to the Austin-based watchdog group Texans for Public Justice, Lay and his wife personally donated $122,000 to the two Bush gubernatorial campaigns. Similarly, Lay was an early backer of Cornyn, even before the Republican attorney general announced his candidacy for the seat to be vacated by Republican Sen. Phil Gramm, who is retiring from elected office.

Gramm, whose economist wife served as a paid member of the Enron board of directors, is caught up in the vortex because of the tens of thousands of dollars he received in Enron/Lay contributions.

But not all of Lay's and Enron's munificence was reserved for major political offices, nor was it limited to politics.

One of the largest political contributions Lay made in 2001 was for a state senate race in the piney woods of rural east Texas. In that race, one of the most expensive legislative campaigns ever undertaken in Texas, Democratic trial lawyer David Marsh was pitted against Republican businessman/rancher Todd Staples.

The race became a key contest for the Houston-based Texans for Lawsuit Reform, a conservative movement that Lay supports that seeks to limit lawsuits. Staples won backed by $55,000 in contributions from Lay.

According to political scientist Stein, Lay was instrumental in the revival of Houston's historically moribund downtown, including the successful referendums to build stadiums for baseball and basketball/hockey, the building of a light rail line connecting Houston's renowned medical center complex to downtown and development of the theater district.

"Ken Lay was a great promoter of the city," said Stein. "His business was based on attracting productive capital and labor and when it worked, it worked to make the city a more attractive place to live."

But even this legacy is already fading, as Lay and Enron's woes continue to deepen. On a recent afternoon in Houston's gritty 2nd Ward District, the Enron Boys and Girls Club, renovated with $500,000 in Enron donations, was busy changing its name. The Enron logo on the center of the newly resurfaced basketball court was being sanded off and replaced with the new sponsor's name: Holt House.

"We've already got us a new sponsor," said club director Glen Sherrod, showing a reporter a roomful of new computers donated by Enron.

In a statement issued Thursday, Brown made no mention of Lay's role in rebuilding Houston.

"My fervent hope," the mayor said, "is that Enron is able to hire a CEO who can put the company back in a position to rehire its employees and remain a viable part of the business community."