In June, a Houston jury found former Enron executives Kenneth Lay and Jeffrey Skilling guilty of multiple charges including conspiracy and fraud. Wendy Vaughan, who owns a roofing contracting business in Katy, Texas, was one of two business owners on the 12-member panel. She had also launched a second business, which runs a boot-camp-style fitness program, at about the same time that she received her jury summons. Vaughan shared her thoughts on the trial and the legacy of Enron with Inc. editor Mike Hofman.
INC.: When did you realize that you had been called for the Enron trial?
Vaughan: Right from the start. A lot of the questions on the jury questionnaire were Enron-specific. But I'm not a newsmonger. I get most of my news from talk-radio shows like Glenn Beck's. So I didn't know a lot about the case, and I had no clue how big or how long this trial was going to be until the judge spoke to the jurors and said he expected it to last from four to six months. That's when it hit me, and I thought to myself, I am going to go bankrupt.
Did the trial, which ended up lasting four months, hurt your businesses?
It was hard. I had to work a lot of evenings and weekends to keep both businesses going. My roofing company, Sparrow Construction, was doing really well before I was called for jury duty. We had a good fall. Hurricane Rita brought in a lot of work, so I was able to build a cushion before the trial. Sparrow grossed $250,000 in 2005.
The fitness company, Boot Camps for Life, was in the process of being launched when I got called for jury duty. I had to get up at three in the morning, teach a class at five, and then at six, I'd rush to the restroom to change so I could be at court on time. The trial slowed down a lot of the legwork that I wanted to do, like working on advertising, a key thing for this business. Today, Boot Camps is making a few thousand bucks every month and business is slowly increasing. That's fine with me. Growth puts so much pressure on a company.
Do you think that was part of the problem at Enron?
That's where the problems probably started, and I can relate to how easily that can happen. You have a couple of good years, you make way more than you thought you would ever make, you think anything can happen. But when it's good, you can't get careless or arrogant.
What was Ken Lay like in court?
His whole defense was that he ran a company with thousands of employees and lots of accounting people, and he couldn't possibly know everything that was happening.
Ultimately, you didn't believe that?
Look, they got to be the seventh-largest company in the nation in 2001 before things fell apart, so the company was not a circus. There should have been checks and balances put in place by that point. People reported to other people and, from time to time, serious issues about the company's finances would make it to the CEO level. When things looked slightly suspicious, as CEO, you'd think you'd ask questions. That was Lay's responsibility when he served as CEO, and he can't deny that. Yet we never saw him own up to that fact.
What evidence was the most compelling?
We learned a lot about Lay from videos of employee meetings that we were shown. At some points in the trial, we were so video'd out from hours and hours of those videos! But they showed him to be very dynamic, to be a very concerned individual. And the employees would ask him tough questions in those meetings, and he was welcoming of that scenario. I don't think you can develop that kind of relationship with employees and not be involved in the day-to-day activities in the office. You can't have it both ways.
Another thing that bothered me happened after the whistleblower Sherron Watkins was sounding the alarm, and some other people were sending letters to supervisors with concerns. Lay finally made the decision to supposedly investigate these concerns--I'll put investigate in quotation marks--and he had the same accountants who were responsible for the screwups go back and investigate themselves. That does not make any sense to me at all. Why wouldn't you bring in somebody who's never been in there? And Watkins even brought that up to Lay in a letter she wrote to him--that he shouldn't use the same accountants.
And how did he respond when asked about that?
He was always going back to the excuse that "we didn't see the need to follow up." Well, I thought to myself, if you're such a wonderful leader, at what point do you feel the need to follow up on people's concerns? Because shortly after that your company went down the toilet.
"Something's not right here." --Enron juror Wendy Vaughan
You know, it's not rocket science when you break it down. Take my roofing company. Let's say I have a crew that does excellent work. Every time they complete a job, the homeowner says, "The roof looks great. The crew was clean. They worked quickly, but they seemed to be working carefully. They were courteous. I'm glad we called you guys." Other times, you may have a crew that, after they do a job, the homeowner always complains. Well, it's my responsibility, now that there are questions about how this is being handled, to go further than I would with the first crew. I need to check on them when they're working. I need to be sure that they clean up properly. I need to get up on the roof and pull up the shingles to make sure that there's the right number of nails on every shingle. That's my job. To me, Lay's employees were just like my customers. They were saying, Something's not right here. It was his job to get up there and look under the shingles.
In your view, was the bigger crime that he betrayed those employees or that he betrayed shareholders?
Let me start by saying, believe me, I tried full force to try to find that benefit of a doubt. But toward the very end when Mr. Lay, I felt, knew what was going on, he was--in my eyes--dumping his stock. And, on top of that, he went in front of the employees and not only pretended that there was nothing wrong, but he told them to go buy more stock for themselves. That seemed so insidious. Like the employees weren't already going to lose enough as it was.
Having had this experience, what role do you think the government should play when it comes to making sure that businesses stay in line?
As a tax-paying business owner, I hate the government! That said, it's nice to see what the government does well, what it does for the good of society. Does the U.S. government need work? Heck yeah, it needs a lot of work. But you need the government in place to get businesses to play by the rules.
So what are the lessons here for other business owners?
There are a lot of lessons. In business, you're supposed to be aggressive and to push the limits. But you've got to respect the people who work for you--you've got to listen to them and take care of their needs. If they are not happy with how the business is going, you have got to listen to them. You can't have an "I'm the boss" mentality. You can't treat problems as if they don't exist. Ultimately, I'd say that the biggest lesson for me is that, if you're not going to run your business with ethics as a priority and as the center of your business, you shouldn't be running it at all.