Senate Set to Subpoena Lay

Irate members of Congress, upset with former Enron CEO Kenneth Lay's refusal to testify at a pair of hearings today, are vowing to bring him back to Capitol Hill.

Lay was to be the star witness at two congressional panels today, kicking off a series of Capitol Hill hearings this week examining the firm's collapse. But the former chief of the failed energy titan opted not to appear after what his lawyer says were inflammatory comments by members of Congress that served to pre-judge Lay.

As a result of the no-show, the Senate Commerce Committee — which cancelled a hearing today because of Lay's decision — is likely to vote Tuesday to compel him to appear in Congress. The House Financial Services Committee, which had similarly pencilled in Lay for testimony today, has also voted to authorize a subpoena mandating that Lay appear.

Even if handed subpoenas, the former head of Enron would still have the option to exercise his Fifth Amendment rights and not answer questions while appearing before the committees.

This evening, Lay announced he was resigning from Enron's board of directors. On Jan. 23, Lay had resigned as CEO, saying he did not want to be an unnecessary distraction for the now-bankrupt company.

Powers: Enron's Management 'Appalling'

The second committee at which Lay was slated to speak, House Financial Services, opted to proceed with its hearing anyway. It heard from William Powers, a member of Enron's board who directed an internal report, released this weekend, that blasted Lay and Enron's management for a lack of leadership and oversight.

"What we found was appalling," said Powers in his prepared testimony, adding: "We found a systematic and pervasive attempt by Enron's management to misrepresent the company's financial condition."

Powers pointed a finger directly at Lay, as well as former Enron President and CEO Jeffrey Skilling, and cited "misconduct" by former Chief Financial Officer Andrew Fastow and "other senior employees" who set up the company's undisclosed partnerships. Slightly less emphatically, he said the Enron board did not perform its watchdog role, noting, "The board of directors failed in its duty to provide leadership and oversight."

Sen. Byron Dorgan, D-N.D., told ABC's Good Morning America he thinks Lay's move was a reaction to the internal report.

"It's a devastating indictment of what went on inside the corporation," said Dorgan, a member of the Commerce Committee, "with the construction of secret partnership deals, overstatement of income and profits by a substantial amount, adding additional debt to the corporation and not reporting it by use of these partnerships."

In another development, Senate Commerce Committee chairman Fritz Hollings, D-S.C., became the most prominent congressman yet to call for a special prosecutor to investigate Enron's connection to the Bush administration. Hollings charged, "We've got an Enron government" at a news conference in Washington today.

What Did Lay Know … And When?

While Enron's collapse — the biggest bankruptcy in U.S. history — has brought attention to a sprawling set of issues, the heart of the matter remains what Lay and other Enron leaders knew about the precarious financial position of the company. Based on the revenues it claimed, it ranked seventh in the Fortune 500 as recently as last year.

The other issues being examined this week by seven congressional committees investigating the company's collapse, include matters of corporate responsibility, accounting standards, 401(k) plan reform, and the Bush administration's many connections to the Houston-based company.

On Tuesday, the House committee expects to hear from Joseph Berardino, CEO of Enron's now-fired accounting firm, Arthur Andersen. Enron fired Andersen soon after the accounting firm's Jan. 10 admission that it had shredded documents pertaining to Enron last fall. Since then, Enron employees have stepped forward to claim the company did its own shredding of important papers as well.

Berardino announced on Sunday that former Federal Reserve Chairman Paul Volcker would head an oversight board intended to review the firm's accounting practices. Additionally, Andersen will stop providing some consulting services to companies whose finances it also audits.

Silent Since the Fall

Lay has not given interviews and has kept out of the spotlight since his company's astonishing fall from financial grace became public knowledge.

On Oct. 16, with Enron's stock price already tumbling amid doubts about the company's health, Enron announced it had lost $618 million in the third quarter of 2001 and was worth $1.2 billion less than it had previously reported in its publicly-filed financial statements. The company said much of that was due to debts and losses which it had attributed to murky, off-the-books investment partnerships.

The company was forced to declare bankruptcy on Dec. 2, a few days after a proposed takeover by rival Dynegy, Inc. fell through.

Additionally, it is clear that Lay — who sold $101 million in Enron stock between 1998 and 2001 — had been told of troubles at the company. An August memo from an Enron vice president, Sherron Watkins, warned Lay of widespread high-level questions about the firm's accounting tactics. In response, Lay ordered a restricted investigation of Enron by the law firm Vinson & Elkins. And a few days later, Lay told employees he thought he would turn the company around.

Despite the firm's continuing losses, Lay continued to tell investors and company employees privately that Enron's prospects were bright — even after he had unloaded millions of dollars of Enron shares.

"One of my highest priorities is to restore investor confidence in Enron," Lay told workers in an August e-mail. "This should result in a significantly higher stock price." But the stock never recovered, and thousands of Enron employees lost huge chunks of their savings, in the form of retirement plans loaded up with Enron stock.

ABCNEWS' Linda Douglass and Ariane DeVogue contributed to this report.