HOUSTON (Reuters) - Former Enron Corp. (ENRQ.PK: Quote, Profile, Research) Chairman and Chief Executive Kenneth Lay, who ran the company as it grew into an energy trading giant then fell into ruins as a symbol of corporate greed, was indicted on Wednesday for his role in the company's collapse, sources said.
Sources said a federal grand jury charged Lay in a sealed indictment with undisclosed criminal charges for alleged misdeeds before the company fell into bankruptcy in December 2001.
Federal officials said Lay was expected to turn himself in on Thursday to the FBI, then go before a federal judge. Neither he nor his lawyers were available for comment.
Houston-based Enron was the nation's seventh largest publicly owned firm when it unraveled in the final months of 2001 amid disclosures that it had used off-the-books deals to hide billions of dollars in debt and inflate profits.
Lay, 62, has steadfastly denied any wrongdoing.
Separately, the U.S. Securities and Exchange Commission plans to file civil fraud charges against Lay in Houston on Thursday morning, a source familiar with the matter said.
Lay, once a leading U.S. industrialist and close friend of President Bush -- who called him "Kenny Boy" -- now faces felony charges stemming from the Enron debacle.
Bush, at an appearance in Waterford, Michigan, was asked by reporters about the indictment but walked away without answering.
The charges come 2-1/2 years after the U.S. Justice Department began an investigation which has slowly climbed the corporate ladder to bring criminal charges against 22 former Enron employees, including former Chief Financial Officer Andy Fastow, former chief accountant Rick Causey and, most recently, former Chief Executive Jeff Skilling.
Skilling and Causey have been charged with multiple counts off insider trading, fraud and lying on Enron financial statements. News reports have speculated that Lay could face similar charges.
The fall of Enron touched off investigations that uncovered widespread financial fraud in corporate America and was followed by scandals that brought down giants such as accountancy Arthur Andersen, telecoms giants WorldCom Corp., now MCI (MICAV.PK: Quote, Profile, Research) , and GlobalCrossing (GLBCE.O: Quote, Profile, Research) and HealthSouth Corp. (HLSH.PK: Quote, Profile, Research) .
Those bankruptcies and charges of criminal behavior in the boardroom eroded consumer confidence and helped send world stock markets into a year-long tailspin. In the wake of the scandals, strict new federal laws on corporate governance were enacted.
In a recent interview with the New York Times, Lay accepted responsibility for Enron's demise, but said he had committed no crimes.
He said Fastow, the architect of Enron's financial house of cards, was largely to blame for the company's troubles.
"At our core, regrettably, we had a chief financial officer and a few other people who, in fact, mismanaged the company's balance sheet and finances and enriched themselves in a way that once we got into a stressful environment in the marketplace, the company collapsed," Lay told the Times.
Fastow, who is accused of enriching himself by siphoning off millions from the off-the-books partnerships, has pleaded guilty to fraud and is cooperating with prosecutors in exchange for a 10-year prison sentence that is yet to begin.
His wife Lea, a former assistant treasurer at Enron, has pleaded guilty to filing a false tax return and is slated to start a one-year jail sentence next week.
Skilling and Causey have pleaded not guilty and currently are free on bail.
Lay, as head of then Houston Natural Gas, led a 1985 merger that formed the modern Enron.
He became an aggressive political player who lobbied lawmakers such as Bush and his father, former President George H.W. Bush, to deregulate natural gas markets.
Generous campaign donations -- at one time he was the current President Bush's top contributor -- helped gain access to the halls of power.
Enron used deregulation to become a dominant force in electricity trading in the 1990s and served as a role model for dozens of other firms that mimicked its no-holds-barred trading practices.
But the burgeoning merchant power industry imploded after Enron's collapse and the California power crisis of 2000-2001.
Lay was Enron's chief executive for most of the company's history, but handed the post to Skilling in February 2001.
Skilling suddenly resigned in August 2001 Lay resumed as CEO until he quit in January 2002.
Lay told the Times his personal fortune once stood at $400 million, but had dropped below $20 million because most of his holdings were in now worthless Enron stock.