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Angry lawmakers to subpoena Lay

WASHINGTON (CNN) -- As lawmakers planned new moves Tuesday to force former Enron Chairman Kenneth Lay to appear before committees probing the collapse of the troubled energy giant, Lay stepped down from the board of the company he led for 16 years.

Lay, Enron's chairman and chief executive officer since 1986 until he resigned last month, had been due to testify before a congressional subcommittee probing the company's collapse Monday.

He canceled the appearance Sunday night saying, through his lawyer, that "inflammatory statements" made on Sunday talk shows indicated some members of Congress already had made up their minds and that the hearings would have a "prosecutorial" tone.

Saying his presence was a distraction, Lay stepped down from the Enron board Monday evening, severing his final link with the company except that of stockholder.

"Due to the multiple inquiries and investigations, some of which are focused on me personally, I believe that my involvement has become a distraction. ... My concern is for current and former Enron employees and other stakeholders, and I feel it is in their best interest for me to step down from the board," Lay said in a statement.

U.S. Sen. Ernest "Fritz" Hollings, D-South Carolina, chairman of the Senate Commerce, Science and Transportation Committee, said he would convene the committee Tuesday to "get authority" to subpoena Lay. A House panel that was also snubbed by Lay has already authorized its chairman to subpoena Lay.

If Lay is subpoenaed, he would have to appear but could still refuse to testify by citing the Fifth Amendment's protection from self-incrimination.

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At a news conference announcing Lay's decision and the cancellation of the Senate hearing, Hollings blasted the Bush administration and cited a host of Bush administration officials he said had contacts with Enron.

"There's a culture of government corruption," Hollings said, offering some of the harshest comments yet directed at the Bush administration. "I've never seen a better example of cash-and-carry government than this Bush administration and Enron."

He also called for as special counsel to investigate Enron, calling Attorney General John Ashcroft "Enron's man." Ashcroft, citing past campaign donations, has already recused himself from the Enron probe.

The Justice Department issued a statement rejecting Hollings' call for a special counsel, saying "no conflict of interest exists."

President Bush has maintained Enron never received any favorable treatment from his administration. The White House on Monday dismissed Hollings' accusations.

"It's disappointing some are more interested in reading off partisan, Democrat attack memos and repeating unfounded and unsubstantiated allegations than working with the president to prevent something like this from happening in the future," the statement said.

Lay's decision not to appear came after the weekend release of what is called the Powers Report, named for William Powers Jr., who conducted the internal investigation into Enron.

Powers is a member of Enron's board of directors and the dean of the University of Texas Law School. He was assisted in the investigation by former SEC investigators.

The report claimed Enron executives reaped millions of dollars from off-the-books partnerships while the energy giant violated basic rules of accounting and ethics.

Powers, testifying Monday before a subcommittee of the House Committee on Financial Services, said the investigation "found a systematic and pervasive attempt by Enron's Management to misrepresent the Company's financial condition."

He said Enron used its partnerships to inflate its earnings by more than $1 billion in a 15-month period between the third quarter of 2000 and the third quarter of 2001.

Earlier, Securities and Exchange Commission Chairman Harvey Pitts told the subcommittee "a better system of corporate disclosure and financial reporting" is needed, as well as new rules to ensure the independence of auditors.

Hollings: "There's a culture of government corruption."

Enron, which filed for Chapter 11 bankruptcy protection in December, is under numerous investigations -- including one by the SEC and a criminal probe by the Justice Department -- amid accusations that top executives misled investors, engaged in shady accounting practices and hid losses.

Arthur Andersen, which has since been fired as Enron's auditing firm, is also under the gun. Critics say the firm allowed its consulting role to interfere with its obligation to properly oversee Enron's financial books.

"Those who perform audits must be truly independent," Pitt told the lawmakers.

Arthur Andersen CEO Joseph Berardino was scheduled to make his second appearance before the subcommittee Tuesday.

-- Congressional Correspondent Jonathan Karl and White House Correspondent Major Garrett contributed to this report.