1 2 3 UNITED STATES GRAND JURY 4 SOUTHERN DISTRICT OF TEXAS 5 HOUSTON DIVISION 6 7 8 9 RE: INVESTIGATION OF ENRON 10 11 BE IT REMEMBERED that on the 1st day of July, 12 2004, beginning at 11:56 a.m., in the Federal Building, 13 515 Rusk Avenue, Houston, Texas, the United States Grand 14 Jury convened, at which time the following proceedings 15 were had and testimony adduced as hereinafter set forth. 16 17 18 19 20 21 22 23 24 25 TESTIMONY OF SALLY K. BALLARD 1 2 3 4 5 6 I, IDA H. SALINAS, CSR, a Certified Court 7 Reporter and Notary Public in and for the State of Texas, 8 previously appeared before the Foreman of the Grand Jury, 9 at which time I was sworn in as the reporter for the 10 United States Grand Jury. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1 2 3 4 5 APPEARANCES 6 7 Special Assistant United States Attorney JOHN 8 HUESTON appearing for the United States of America. 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 1 EXHIBITS 2 3 EX. NO. DESCRIPTION PAGE 4 1 Dailies 16 5 2 Dailies 23 6 4 Wiring Instructions 45 7 5 Transmittal sheets 46 8 10 Memo 29 9 11 Pledge Agreements 42 10 13 Statement of Purpose 33 11 14 Reports 25 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 1 (Witness sworn.) 2 SALLY K. BALLARD, SWORN 3 EXAMINATION 4 BY MR. HUESTON: 5 Q Good morning, Ms. Ballard. It's still morning. 6 A Barely. 7 Q Could you state your name and spell it please for 8 the record? 9 A Yes. Sally Ballard, B-a-l-l-a-r-d. 10 Q All right, Ms. Ballard. You've appeared before 11 the Grand Jury before. 12 A Yes. 13 Q And I will once again remind you of your rights 14 and obligations as a Grand Jury witness. All right? 15 A Okay. 16 Q You understand that you are testifying here today 17 under oath and that a record is being made by a court 18 reporter. Correct? 19 A Yes. 20 Q And do you understand that you have an overriding 21 obligation to tell the truth and that if you lie about 22 anything material to the Grand Jury's investigation, you 23 could be prosecuted for the crimes of perjury and 24 obstruction of justice? 25 A Yes. 6 1 Q You also have a right, as anyone that is before 2 the Grand Jury, to be represented by an attorney in 3 connection with your appearance. Do you understand that? 4 A Yes,Ido. 5 Q And are you represented today? 6 A Yes, I am. 7 Q Can you state your attorney's name? 8 A George Murphy. 9 Q All right. And I notice -- I know you've done 10 this before -- and I'm a bit of a slow speaker -- but for 11 the clarity of the record, if you could wait till I finish 12 my question -- 13 A You bet. 14 Q -- before you give the answer -- 15 A Okay. 16 Q -- I'd appreciate it. 17 A Okay. 18 Q All right. Is Mr. Murphy in the courthouse here 19 with you today? 20 A Yes. 21 Q Do you understand that you can't have your lawyer 22 in the room here with you; but if you wish to excuse 23 yourself on a reasonable basis, we'll take a break so you 24 can consult with your attorney? Do you understand that? 25 A Yes, I do. 7 1 Q All right. You also understand that you have the 2 right to refuse to answer any question based on the 3 grounds of your Fifth Amendment privilege if you believe 4 in good faith that a truthful answer might tend to 5 incriminate you? 6 A Okay. 7 Q Do you understand that? 8 A Yes. 9 Q And that's a right and that was explained to you 10 in your last appearance. Correct? 11 A I'm not certain. I don't recall. But... 12 Q Do you understand that today? 13 A Yes, I do. 14 Q Do you need any time to consult with your 15 attorney about that? 16 A Not at all. 17 Q All right. And once again, if you have any 18 questions at all, feel free to take a break and talk to 19 your attorney. 20 Ms. Ballard, can you please describe how 21 you're currently employed? 22 A How I'm currently employed? 23 Q Are you currently employed? 24 A Yes. You mean by whom? 25 Q Yes. 8 1 A I am employed by LayLind Limited. 2 Q And what's your position with LayLind Limited? 3 A My title or what I do? 4 Q Well, let's start with your title. 5 A I do a little bit of everything. I suppose my 6 title would be -- I think it's financial coordinator. 7 Q Same title -- 8 A Executive assistant. 9 Yes. 10 Q All right. And you had the title financial 11 coordinator, I believe, while you were employed by Mr. Lay 12 while he was still with Enron. Right? 13 A Correct. 14 Q Okay. And you've testified before in the Grand 15 Jury, but are your duties and responsibilities with 16 LayLind essentially the same as they were in the last year 17 or two of your time while Mr. Lay was still employed with 18 Enron? 19 A I would say so. 20 Q Can you just very briefly describe your 21 educational background for the Grand Jury? 22 A I have a year of college. 23 Q All right. And you finished college in 1969, 24 1970 or so for the year? 25 A About that time. I -- 9 1 Q All right. 2 A That sounds fair. 3 Q And then after that, what kind of positions did 4 you hold? I don't need to give a -- you don't have to 5 give me a full employment history, but over the course of 6 the next 10, 15 years, what sorts of positions did you 7 have? 8 A Okay. While my children were still at home, I 9 worked in public schools as school secretary/teacher aide 10 so that I could have maximum time with my children. When 11 they got into high school or nearly graduating, then I 12 went into -- went out to work at a real business so I 13 could make more money and do -- secretarial work. 14 Q Okay. So, mostly secretarial work? 15 A Secretarial work. And then later I got into a 16 bit of payroll work and accounting. 17 Q Okay. When did you get into accounting work, 18 when you say "accounting"? 19 A It was light accounting, basically payroll and 20 light accounting -- I started probably -- I started with 21 Enron in 1985. So, probably about 1982. 22 Q All right. So, in 1985 you began working for 23 Enron. Right? 24 A Correct. 25 Q And what was your position there when you began 10 1 working in 1985? Were you working as a secretary or were 2 you working -- 3 A I was working as probably 4 secretary/administrative assistant. I worked in Mr. Lay's 5 office. 6 Q All right. So, you were one of three 7 secretaries/administrative assistants. Right? 8 A Correct. We did whatever needed to be done. 9 Q Okay. And that remained true all the way through 10 2001. Right? 11 A Yes. That is correct. 12 Q Now, you worked in his office; but you were paid 13 by Mr. Lay. Is that right? 14 A No. 15 Q You were paid by Enron? 16 A That's correct. 17 Q Okay. Did you handle some of Mr. Lay's personal 18 financial documents, information, in the late Nineties 19 before Sherrie Gibson arrived? 20 A Yes, I did. 21 Q Okay. Prior to the arrival of Sherrie Gibson, 22 what kind of work were you doing to assist Mr. Lay in the 23 handling of his accounts and finances? 24 A I handled all of his personal bill paying duties. 25 I handled -- coordinated his insurance for the insurance 11 1 companies and coverages and took care of troubleshooting 2 there and paid the premiums, gathered information to 3 forward on to his CPA. 4 Q And who was his CPA prior to the arrival of 5 Ms. Gibson? 6 A Well, Sherrie -- 7 Q Was there one? 8 A Sherrie was -- Sherrie -- I believe Sherrie' s 9 title was -- was -- I think she was controller. We had an 10 outside CPA firm. 11 Q Oh, Margolis? 12 A Well, before Margolis it was Bessemer Trust in 13 New York. 14 Q Okay. Was there a controller or somebody doing 15 Sherrie's job before Sherrie arrived? 16 A No. 17 Q All right. Once Sherrie Gibson arrived, did she 18 take over some of the responsibilities that you had been 19 handling? 20 A Absolutely. Yes. 21 Q Okay. So, let's focus now on that period of time 22 five years or so, let's say, before Ms. Gibson arrived. 23 A Before? Okay. 24 Q Yes. What -- to what extent were you involved in 25 Mr. Lay's personal investment activities? What role would 12 1 you have? Processing paperwork? What would you -- 2 A I think that would -- yes. That would have been 3 the most I would have done. 4 Q All right. So, let's say, for instance, that 5 Mr. Lay is opening an account -- an investment account for 6 $2 million. All right? Are you following me? 7 A (Witness nods head.) 8 Q And there's a need to fund the investment, to 9 find $2 million to move into that account. 10 A (Witness nods head.) 11 Q Who would provide those instructions to you? 12 Mr. Lay? 13 A Absolutely. 14 Q Okay. It would be Mr. Lay in every instance. 15 Correct? 16 A Yes. 17 Q All right. And then when Ms. Gibson arrived, 18 then she became the contact person with Mr. Lay with 19 respect to the movements of moneys? 20 A For the most part. 21 Q Were you still involved to some degree? 22 A My only involvement was when Mr. Lay would direct 23 me to either draw down money from one of his accounts or 24 to maybe pay down and -- 25 Q Pay down a line of credit? 13 1 A That's correct. And I would -- I would -- most 2 times I would pass that on to Sherrie. 3 Q Okay. 4 A Except the Enron line. 5 Q Now-- 6 A Is this mine? 7 Q Yes, it is. 8 A Good. Thank you. 9 Q And in those times that Mr. Lay was asking you to 10 move moneys, he was telling you where to move moneys from 11 what account to which account. Right? 12 A That's correct. 13 Q From A to B? 14 A That's correct. 15 Q You didn't make those decisions on your own? 16 A No, I did not. 17 Q And once Ms. Gibson arrived, you still didn't 18 make those decisions on your own. Right? 19 A That's correct. 20 Q What about for smaller amounts of money? If you, 21 say, had to move moneys to pay for a personal expense, did 22 you check in with Mr. Lay at those times to make sure you 23 were drawing from the right accounts? 24 A When you say "for personal expense," what do you 25 mean? 14 1 Q Well -- and I was keying off some of your earlier 2 Grand Jury testimony. Let me just -- let's clarify -- 3 A Okay. 4 Q -- and have you say it just in your own words. 5 Once Ms. Gibson arrived, she took over a lot of that prior 6 responsibility that you had moving moneys, correct, and 7 creating reports about where the moneys are coming and 8 going to. Is that right? 9 A Yes. 10 Q Okay. 11 A I -- you're saying -- you're asking me if -- if 12 that's what she did? 13 Q Yeah. 14 A If that's my understanding of it? I would think 15 so, but she still got her direction from Mr. Lay. 16 Q Okay. 17 A I don't -- she didn't make decisions on that -- 18 she didn't do those things without his direction. 19 Q And how do you know that? Because that's the 20 way -- 21 A That's probably conjecture on my part. 22 Q Is it partly because that's the way everything 23 had happened with you? 24 A That's correct. 25 Q And that's -- Mr. Lay had -- he -- he was a very 15 1 active manager of his accounts. Right? 2 A That's -- in my experience. 3 Q Okay. So, once Ms. Gibson arrived -- did you 4 still have any responsibilities once Ms. Gibson arrived 5 for moving moneys to pay certain expenses? 6 A Oh, gosh. I may have. I'm not -- you know, I 7 don't know that I did. I really can't recall that. I 8 don't know that I would have with Sherrie there. 9 Q Okay. So, if you did, it would have been on a 10 rare occasion. Right? 11 A That's right. It wasn't on a regular basis. 12 Q And if you did so, again, it would be moving 13 moneys at the direction of Mr. Lay? 14 A That's correct. 15 Q You wouldn't have been just doing it on your own. 16 Right? 17 A No, I wouldn't have. 18 Q Okay. Prior to the arrival of Sherrie Gibson, 19 did you create any sort of reports or daily sheets to keep 20 Mr. Lay up to speed on where moneys were coming and going? 21 A It wouldn't have been on a daily basis. 22 Q Well, when moneys were moved, would you actually 23 produce a document, a report, that would show when you had 24 moved moneys? 25 A Well, he would know about it, and I probably -- 16 1 oh, gosh. Q Well, let me just stop you right there. A Q A Q already A Q A Q front of A Q tab that A We're going back -- Let me just stop you there. Okay. You'd know about it because you would have talked to him about it? Right. But you're asking if I -- Created something afterwards. -- created reports. I think I probably did. Okay. And let's go -- now, I have a book in me and here are the rules of the book -- Okay. -- just to keep it real simple. Just turn to the I direct you to. Okay. Q And when you finish with it, just close it back 19 up. Okay? 20 A 21 Q 22 That's 23 A 24 Q 25 A Uh-huh. All right. Exhibit BL-1. Right. Do you recognize this? I do. Let's go to Tab 1 of the book. There are two pages in there. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 17 1 Q 2 A 3 This is 4 Q 5 A 6 Q 7 one on 8 A 9 Q 10 appears 11 A 12 Q 13 A 14 Q 15 A 16 Q 17 up-- 18 A 19 Q 20 A 21 Q 22 A 23 Q 24 A 25 she was What are these pages? Well, this is what I would have done for him. what I did for him. Okay. And a copy to Linda, as you can see here. All right. Well, let's -- I'm putting the first here. Uh-huh. First of all, at the bottom of the page, it to be dated December 29th, '95. Right? Yes. And then it's cc KLL, that's Mr. Lay. (Witness nods head.) Yes? That's correct. And I ask you that because the record has to pick Sure. -- your verbal response. Okay. Okay. And LPL, that's Mrs. Lay? That's correct. And who is TLH? TLH is Tern Hodges (phonetics) and at that point our -- she was a bookkeeper that we had coming in 18 1 and we paid her to -- to do things that I couldn't do. 2 I'm not a bookkeeper. So... 3 Q All right. 4 A That was just for her records so she could make 5 sure that everything was entered correctly in our 6 financial papers. 7 Q Well, let's take a look at this entry here on 8 December 29th. 9 A Uh-huh. 10 Q It says "Today I have borrowed $3,600,000 from 11 the Compass Bank line to pay off the Enron line and the 12 balance for expenses. 13 A Yes. 14 Q That's your entry. Right? 15 A That's correct. 16 Q Now, when it says "I borrowed," that was after 17 consulting with Mr. Lay? 18 A Absolutely. 19 Q And at his direction. 20 A Absolutely. That was just to confirm what I 21 had -- 22 Q It's another way to confirm and -- 23 A Yes. 24 Q -- let him know you did it. Right? 25 A That's correct. 19 1 Q All right. Did you create this form? 2 A I think I did. 3 Q Okay. And would you issue a new one of these 4 forms every time on a date there was a -- you did a 5 borrowing like this to keep it -- everybody confirmed and 6 up to speed? 7 A Well, it wouldn't be a new form, but it would -- 8 I would modify this form. Yes. 9 Q Okay. So, if, say, five days later Mr. Lay asked 10 you to move $2 million to some other investment or some 11 other account, you'd produce another version of this form 12 or you'd modify it? 13 A That's correct. I would update it. 14 Q With the date. Right? 15 A Yes. 16 Q And the entry down below? 17 A Yes, I believe so. 18 Q Okay. And how would you circulate that? How 19 would you get it to Mr. Lay or to Mrs. Lay and to this 20 other person? Would you put it in the mail? Would you 21 hand it to them or -- 22 A Oh, no. I would take it over and give it to 23 either -- I probably -- I probably -- to the best of my 24 recollection, I probably would have handed it to him or 25 put it facedown on his desk where only he could -- would 20 get it. Q Okay. Did he appreciate getting these documents? Did he say -- did he indicate, "Thanks for doing these. I do like to have these"? Did he indicate an interest in these? A Well, I think it was -- the reason I generated it was because he and Mrs. Lay wanted to -- wanted something like this. So, yes, that was -- Q So that they could both track what's going on with their moneys? A Absolutely. Q Okay. And Mrs. Lay wanted them, too, you stated. Right? A Yes. Q And to what extent do you recall her reviewing this or being involved? A I don't know how involved she was. that I supplied them to her -- Q Okay. A -- because she wanted it. Q And she wanted it. A And possibly Mr. Lay may have said, "Make sure that Linda gets a copy of this, too." That could have well been. Q I just know But your recollection is she was interested in 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 21 1 getting these? 2 A Yes. 3 Q And did review them? 4 A That's correct. And I would send hers home in a 5 confidential envelope via Mr. Lay so that it would get to 6 her in the confidential envelope. 7 Q Do you remember her calling you about these every 8 once in a while -- 9 A I don't recall. 10 Q -- with a question? 11 A I don't recall that. 12 Q Did Mr. Lay ever give you any feedback on these 13 other than -- 14 A He may have but -- 15 Q -- just "keep it up"? 16 A -- I don't recall. 17 Q Okay. Okay. And then on the next page, the 18 second page there, is this a similar list again? 19 A Yes. 20 Q And at the bottom another note. This one's May 21 of '96. You said: On May 2nd I borrowed 100,000 from 22 NationsBank, nonpurpose line for expenses, and today I 23 borrowed another 325,000 for the 5,000 shares Eli Lily, 24 292,604 in expenses. Right? 25 A That's correct. 22 1 Q Again, make sure that he knew where the money was 2 coming from and for what purpose. Right? 3 A That's right. 4 Q And that's something that you would have 5 confirmed with him anyway in a prior conversation before 6 you started moving money. Right? 7 A That's right. 8 Q And once Ms. Gibson arrived, did the same 9 practice happen, she would confirm with him where the 10 moneys were going and then -- 11 A I really don't know what she did. 12 Q Okay. But after she arrived, Ms. Gibson 13 arrived -- 14 A She took -- I think she took that over -- or 15 maybe I continued. I -- you know, I -- that's been nine 16 years ago. 17 Q All right. Well, let's -- let's take a look at 18 some examples and maybe that will help -- 19 A Okay. 20 Q -- refresh your recollection. 21 Let's turn to Tab 2. 22 A (Witness complies.) Okay. 23 Q And at Tab 2 you'll see there are a number of -- 24 a -- more of these documents. Right? 25 A Uh-huh. 23 Q Okay. So, on the first page, for instance, is this something -- the date down at the bottom appears to have been scratched out and you can see January 13th, '99? A Yes. Q Is that your handwriting there, Ms. Ballard? A Itis. Q Okay. So, were you, in fact, still modifying and updating these daily -- A Well, I must have been. Q Okay. They were still in use then as a way to get everybody up to speed as to where the money was going and coming. Right? A I don't recall -- did -- see, I'm not sure -- did -- recall. Q A have been Q and to A Q A Q A was Sherrie on board at that time? See, I don't She may have been. Look at the cc line. Oh, she had to have been. Yes. by then. Okay. So, a copy is now going to Sherrie -- And Sherrie rather than Tern. All right. So, you were still continuing -- Okay. -- to do these dailies -- Okay. I must have been. Yes, she had to Mr. Lay, to Mrs. Lay, 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 24 1 Q Okay. And why would you handwrite it like this? 2 Would you later have typed this out? 3 A Oh, I would have typed that out. I wouldn't have 4 handed that to him like that. These were just my notes. 5 Q All right. 6 A Yes. 7 Q And let me ask you why -- while I have this one 8 on the screen, actually: Why did you have these accounts 9 on here? Mr. Lay had other accounts. Why these accounts? 10 Why were these included, this one from Compass, the Enron 11 line, the NationsBank, which was at 37 1/2 million, an 12 unsecured here, a nonpurpose partnership line and -- 13 A These were -- excuse me. These were his -- his 14 lines that we normally -- you know, that I could -- that I 15 had availability -- that we had availability to draw from. 16 Q Okay. So, this was the pool of lines that were 17 available for -- 18 A Yes. 19 Q -- uses. Right? 20 A That's correct. 21 Q Including investment purposes? 22 A I think so. I'm -- 23 Q Okay. In any event, when money was moved you 24 would still produce one of these reports letting everybody 25 know where it came from and where it went to. Right? 25 1 A 2 Q 3 these, 4 Ordo 5 6 7 8 9 10 11 12 13 14 15 Yes. Yes. All right. If you could page through the rest of are these all your reports and your handwriting? you see anybody else's handwriting? A (Witness reviewing document.) Q monthly analysis A Q have open That's my handwriting. Okay. Once Ms. Gibson arrived, she created balance sheet comparisons and balance sheet Do you remember that? Vaguely. Okay. Well, let's -- just very quickly, let me you turn to exhibits -- to Exhibit 14. Why don't you the book to that. A (Witness complies.) Q Let me ask you if the documents contained at 16 Exhibit 17 A 18 that I 19 Q 20 A 21 or seen 22 Q 23 reports 24 A 25 Q 14 appear familiar. I'm not certain that I've seen this. haven't -- Okay. -- but it's on a regular All right. of some sort I don't recall. Okay. Prior to the time that she arrived, did I can't say not anything that I would have gotten basis. Do you remember getting monthly from Sherrie Gibson? 26 you try to create some sort of document other than the one 2 that we've been putting up on the screen? 3 A I don't think I would have. Now, I believe that 4 Tern would do a monthly balance sheet for him -- our -- 5 with the bookkeeper that we had, but I don't -- I don't 6 think I would have. I don't -- All right. I don't recall. Prior to Ms. Gibson's arrival -- Uh-huh. -- you have talked about how you would move at Mr. Lay's direction. Right? Right. Now, Tern was a part-time person. Right? That's correct. Was Tern involved in movements of moneys? Huh-uh. Huh-uh. No, sir. It was all with you until Ms. Gibson arrived? That's correct. Okay. Ms. Ballard, (Witness complies.) These are a list of Right? Yes. Okay. What does it mean when you put in under Q A Q A Q moneys A Q A Q A Q A Q A Q for use A Q let's go back to Tab 1 again. Okay. the loans that were available 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 27 1 NationsBank, for instance, nonpurpose? What does that 2 mean? 3 A That was just what -- what our banker -- that's 4 what they called it, a nonpurpose line. 5 Q They called it a nonpurpose line? 6 A And that's why I put -- I have no idea what that 7 means. 8 Q Okay. But the bankers called it that. That was 9 the type of loan it was referred -- 10 A Yes. 11 Q -- to as? 12 A It was called a nonpurpose line. 13 Q And so, that's how it was known in your office. 14 Right? So, you put it in there as the nonpurpose line. 15 That was the title -- 16 A Well, not in the office. The only person that 17 would have seen this would have been myself, Mr. Lay, and 18 these people. No one else in the office would have seen 19 that. 20 Q Right. But Mr. Lay and Mrs. Lay and this other 21 person? 22 A Correct. We understood that that's what that -- 23 right. 24 Q That that's what that referred to? 25 A That's correct. 28 1 Q That it was a nonpurpose loan? 2 A Yes. 3 Q But you don't -- you don't, sitting here, 4 remember if you knew what that meant? 5 A No. 6 Q Did you ever have a discussion with Mr. Lay about 7 the types of loans that he had? 8 A No, I didn't. 9 Q That was something that he dealt with? 10 A That's correct. 11 Q Okay. Did Mr. Lay ever tell you to change the 12 format of this at any time -- the format of these dailies 13 over the years? 14 A I don't believe he did, but -- I don't recall 15 that he did. 16 Q Did he ever have a question for you like, you 17 know, "Ms. Keepers, at a time, what are you" -- "what is 18 this? What does nonpurpose mean?" 19 A No. 20 Q Did he seem to have a pretty good understanding 21 about what these banking terms meant? 22 A Yes. I thought he did. In my estimation, I 23 thought he did. 24 Q Ms. Ballard, did you ever handle loan 25 documentation that was coming through the office that 29 1 required Mr. Lay's review and signature? 2 A Yes. 3 Q Okay. Well, first of all, let me have you turn 4 to Exhibit 10. 5 A (Witness complies.) Okay. 6 Q Is this a memo from you where your name is at the 7 bottom right-hand corner, Sally Keepers? Is this 8 something from your letterhead? 9 A From my little memo pad. 10 Q From your memo pad? 11 A Uh-huh. 12 Q Does it appear that you prepared this memo to Ken 13 on or about November of '95? 14 A Yes. 15 Q Okay. It says, "Ken, further to paying off the 16 Enron loan - Carol" -- St. Clair -- "advises that even 17 though Enron is not a lending institution, the issue here 18 is that you are technically bound by the Reg U law when it 19 comes to paying off with borrowed funds from lending 20 institutions." 21 Well, why did you write that note? 22 A Why did I write the note? 23 Q Well, first of all, let me ask you: Did you know 24 what Reg U law was? 25 A No. 30 1 Q Did you understand the issues that you were 2 referring to there? 3 A Very vaguely. 4 Q What was -- vaguely what do you remember? 5 A Well, I don't really actually even remember this. 6 Q Okay. Do you remember, roughly, talking to him 7 or writing memos about Regulation U? 8 A No. No, I don't. 9 Q But this is, in fact, something that you 10 prepared. Right? 11 A Oh, yes. Yes, it was. 12 Q Okay. And you may have been passing on 13 Ms. St. Clair's advisement? 14 A Absolutely. Yes, sir. 15 Q Sitting here today, do you have any recollection 16 about what Reg U was? 17 A No. 18 Q And what the bounds or the requirements of Reg U 19 are? 20 A No, sir. 21 Q Why don't you turn to the second page in the 22 exhibit? 23 A (Witness complies.) 24 Q Do you see that? It looks like the same 25 document. Right? 31 A The same document? Q It's not the same document. Now it's saying -- it's dated November 29th, '95 -- A Okay. Q -- from A Yes. Q It says A Uh-huh. Q Is this A Yes. Q And it appears that Mr. Lay underlined and your memo. Right? Sally Keepers there? another note that you prepared? 12 circled there. 13 14 15 16 17 18 19 20 21 22 23 24 25 Right? Does that look like his heavy sort of underlining, underscoring that he would do on documents? A Q estimate? A Q A Q A Q little A It could have been. I don't know. Does it seem like it, if -- using your best I -- I can't say. I -- This was a note from you to Mr. Lay. Right? Okay. Was it? Yes. Yes, it would have. Okay. At times would he return something with notes -- Yes. 1 2 3 4 5 6 7 8 9 10 11 32 Q A Q document A minor Q A Q "Reg U" A -- for you? That's correct. Okay. Would you have written on your own before handing it to Mr. Lay? If I needed to add something or correction, I probably would have. But you weren't doing that in this one? I didn't do that, if that's what you're -- no. So, it appears that Mr. Lay, in fact, circled and underlined "to pay off this purpose line." Well, someone did. correct -- make a Q Okay. And it says, "K, I've realized that we 13 were advised by James" 14 America? 15 A That would have been James Shelton. 16 Q -- "advised by James that according to Reg U, we 17 cannot use borrowed funds to pay off this purpose loan." 18 Let me stop right there. 19 A Okay. 20 Q Did you understand what you were writing, what 21 the purpose loan was? 22 A I don't recall. That's -- I might have at the 23 time, but I -- 24 Q Okay. 25 A Here today, I don't. -- is that James Shelton at Bank of 1 2 3 4 5 6 7 8 9 10 11 12 33 1 Q Do you remember Mr. Lay coming to you and saying, 2 "What are you talking about? I have no idea what you're 3 talking about, purpose, nonpurpose." Do you remember 4 anything like that? 5 A No, sir. No, sir. 6 Q Not at all? He understood what you were writing 7 about. Right? 8 A Well, if he didn't, he didn't come back to me. 9 Q Okay. And then here you're saying, "Legally we 10 can pay back another $155,292 from" -- "from income for 11 the October 1 to November 29th period but no more than 12 that. Please advise." 13 You were looking for his guidance. Correct? 14 A Correct. 15 Q You weren't going to make those decisions on your 16 own? 17 A Oh, absolutely not. 18 Q All right. Let me have you turn to Tab 13, 19 Exhibit B-13. 20 A (Witness complies.) Okay. 21 Q Do you see that? 22 A Yes. 23 Q This is a series of certifications that say 24 Statement of Purpose for an Extension of Credit Secured by 25 Margin Stock. 34 1 And you were employed in Mr. Lay's office in 2 1993. Right? 3 A Yes, I was. 4 Q All right. Here's one dated -- signed and dated 5 April, 1993. It's the first page of this exhibit. Do you 6 see that there? 7 A Ido. 8 Q Do you remember seeing these Federal Reserve Form 9 U-is coming in? 10 A I don't recall, but I must have -- 11 Q Okay. 12 A -- seen it at the time. 13 Q You don't have an independent recollection -- 14 A I don't. 15 Q -- today? 16 A No, I don't. 17 Q If bank forms came in, would you then bring them 18 to Mr. Lay for him to process and review and to sign or 19 would the bankers come separately or both? 20 A I would say both. 21 Q Okay. So, if it came into the office to you, you 22 would then bring this in to Mr. Lay. Right? 23 A That's right. 24 Q Now, on this form there are certain things that 25 need to be filled out. 35 A Q filling A I did. Q these ahead A Q A Q things, or carry answer is credit." their A Q to time A Q A Q Uh-huh. Do you remember ever assisting the Lays in out these forms? I probably did. I think probably over the years Okay. And if you assisted them in filling out forms, would you be thinking about these things of time and writing them up yourself? No, sir. It would be at the direction of Mr. Lay? That's correct. And do you, in fact, remember typing in these "Will any part of the credit be used to purchase margin stock?" Answer, typed "no." "If the no, describe the specific purpose of the "Personal investments." Do you remember preparing these forms for assistance? Yes. I feel sure I prepared that. Okay. So, you remember preparing these from time when these forms arrived? Yes. And it would be at their direction? Yes. And when I say "their direction," Mr. Lay or 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 36 1 would Mrs. Lay also tell you how to fill these out? 2 A I would say Mr. Lay. 3 Q Okay. That's who you remember having 4 conversations with. Right? 5 A Yes. 6 Q Okay. I'm going to have you page through these. 7 Sometimes these Form U-is, this is the second one, you 8 have it typed in here. Correct? 9 A Is that the next page or do I -- I could just -- 10 Q I think it's two pages later. 11 A It's the same one. 12 Q Unless I have it -- yes. It's the next Statement 13 of Purpose. Do you see it there? 14 A Okay. Yes. 15 Q So, sometimes it's just typed in "personal 16 investments." Right? 17 A That's what it looks like. 18 Q Okay. You would have recalled -- you recall that 19 you were typing these things in. Right? 20 A I'm sure I would have been. 21 Q Okay. 22 A If -- unless -- unless the banker -- well, it 23 depends on the banker. That's -- I don't know who -- how 24 I got that, but I'm sure I'm the one that typed that in. 25 Q All right. And again, that would be at Mr. Lay's 37 1 direction. Right? 2 A Yes. 3 Q Turning the page to the next one dated August of 4 '93, this one says, "If the answer is no, describe the 5 specific purpose of the credit." Now it says "personal 6 and investments." Right? 7 A Yes, it says that. Uh-huh. 8 Q And those wouldn't be -- that wouldn't be 9 something you made up. That would come at the direction 10 of Mr. Lay. Right? 11 A Yes. 12 Q Okay. Turning two pages on -- I'm going to move 13 into these documents a little bit further. Okay. If I 14 can have you turn a few pages, you'll see -- you'll come 15 to a September of 1997 document. The -- do you see it 16 there? 17 A Are these in -- are these in chronological order? 18 Q Yes, they are. They should be. And there are 19 several -- 20 A Oh, I'm going the wrong way then. I must be. 21 What is the date? 22 Q This one is -- the date of signature is September 23 30th, '97. 24 A Okay. 25 Q It's right after one that says August 7th, '95. 38 1 A Oh, okay. Well, I was -- 2 Q All right. You got it now? 3 A No, not yet. 4 Q All right. 5 A This is the 7th. There are a lot of August 7th. 6 Are -- you re saying this is -- 7 Q I'm sorry. Let -- let me -- I can help you. 8 A 9/30. Here we go, right here. Right here. 9 Q Right. Okay. We'll turn to this page that I 10 have displayed. 11 A Uh-huh. 12 Q This says, "Will any part of this credit be used 13 to purchase or carry margin stock?" It's typed ~ If 14 the answer is no, describe the specific purpose of the 15 credit." "Personal expenses not margin stock." 16 You would have typed that at the direction 17 of Mr. Lay? 18 A Correct. 19 Q All right. I'm going to bring you now -- let's 20 turn one, two, three -- four pages until you get to this 21 form here with some handwriting. This is for a 22 10-million-dollar line of credit -- 23 A Yes. 24 Q And it's dated December of 1997. 25 A Uh-huh. 39 1 Q Is this your handwriting here? 2 A No. 3 Q Okay. So, would this one have been entered by 4 somebody else? 5 A It would have had to have been. 6 Q Okay. Do you recall whose handwriting that is? 7 A I don't recall. I don't -- I don't recognize 8 that -- that's right. 9 Q Okay. So, at times somebody else appears to be 10 writing this in? 11 A Well, that's the first one I've seen like that, 12 but that -- 13 Q Okay. Paging through, I want to see if you 14 recognize your handwriting. The next page appears to be a 15 copy of the same one. Let's skip that. And that seems to 16 be another copy. I'm sorry. Let me take a moment here to 17 direct you -- the next one I want to draw you to is one -- 18 it says, "$5 million." It's about five or six pages. 19 There aren't dates down here at the bottom; but if you 20 turn to the next page, you'll see the date April of '98. 21 Do you see that? Are we on the right page? 22 A I see April 15th of '99. 23 Q Okay. I think you might have -- 24 A Oh, no. Maybe that's an 8. I'm sorry. That is 25 an 8. 40 Q Okay. A It looks like a 9. Q Okay. And then going back up to this there's a typewritten entry "personal expenses investments, not investments in margin stock." have been something that you had entered? GRAND JUROR: It was back one page. one page. A the entry here, and Would that Go back Oh, okay. Thank you. not page I'm on. Okay. I'm sorry. Your question again? Q (By Mr. Hueston) Here's the entry here this time, "personal expenses and investments, not investments in margin stock," would that have been something that you prepared? A Yes. Q Let's go two pages. There's another one with some handwriting. Is this your handwriting -- A No. Q -- or somebody else's? A Have to be someone else's. Q That one appears to be someone else -- A (Witness nods head.) Q -- and this one's dated November of '98? A Right. I was going to say, that's 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 41 1 Q Can you identify the handwriting? 2 A I can't. 3 Q Turning to the next page, there are more 4 typewritten entries. This one for June of '99, would you 5 have prepared this at his direction? 6 A I -- that looks like that's something that I did. 7 Q Okay. And how can you tell it looks like 8 something you'd do? You recognizing -- 9 A Well, I recognize -- that's the font that I 10 used -- 11 Q Okay. 12 A -- on my typewriter. 13 Q All right. 14 A So, I -- and I -- if that came into our office, I 15 would have logically been the only one to see his -- his 16 financial information and to do anything with it. 17 Q And do you remember from time to time helping 18 complete these bank forms? In general, that was part of 19 your duties and responsibilities? 20 A Well, I completed this. That's -- that's the 21 extent of it. 22 Q You did -- but you remember completing these? 23 A Yes. 24 Q Okay. And then turning to the last two pages 25 here, is this font also -- this is now in 2000. Both of 42 1 these are dated September of 2000. Is this from your 2 typewriter as well? 3 A You know, I'm not sure. That doesn't look -- 4 unless my -- unless the typewriter really was worn out by 5 then. It looks -- it could have been something -- it 6 could have been mine. 7 Q Okay. 8 A Maybe it was something that Sherrie was doing at 9 that time. I don't know. 10 Q All right. But in general, you recollect from 11 time to time filling these forms out at the direction of 12 Mr. Lay? 13 A Yes. 14 Q And putting in those reasons that he directed you 15 to put in. Right? 16 A Yes, sir. 17 Q I want to have you turn briefly to Exhibit 11. 18 These are Pledge Agreements. And I'll ask -- I'll turn 19 the lights on because it's hard to see. Do you recall 20 seeing these sorts of documents? 21 A Yes. 22 Q And how would you see these? Would you help 23 complete these as well? 24 A No. As I recall, the bank would have completed 25 those. 43 1 Q These Pledge Agreements? 2 A Yes. 3 Q But if you turn to the last -- I think about -- 4 A And then -- 5 Q -- four or five pages -- 6 A Okay. 7 Q -- they call for Mr. Lay's signature? 8 A Right. But I -- I think as far as this -- 9 Q Oh, yeah. That's a printed form. 10 A Yes. And they would send those to me 11 traditionally, to my attention. 12 Q Okay. 13 A And then I would secure the signatures. 14 Q And how would you do that? Explain how you get 15 the signatures. Would you walk it in to Mr. Lay? 16 A If he was available. 17 Q Okay. 18 A If not, I would put the little memo -- sticky 19 memo note on there and say, "Ken, if this" -- "Ken and 20 Linda, if this is your understanding of what you want, 21 please sign." And I would put a little sign thing here. 22 Q Okay. 23 A And he would sign it, traditionally. That was 24 usually the way we did it. And then when I got his 25 signature, then I would send it home in -- in a 44 1 confidential envelope for Linda to sign and get back to 2 me. 3 Q Okay. 4 A That was -- that was usually the procedure. 5 Q All right. And did you ever stick around and 6 watch him review the documents or observe his review of 7 the documents? 8 A Usually not. 9 Q Okay. 10 A And many times, like I say, I would just put a 11 note on there; and he would do it at his -- 12 Q Athis-- 13 A When he had a few moments -- 14 Q Right. 15 A -- and then get it back to me when it was signed. 16 Q And based on your training and experience there 17 at Mr. Lay's office, was he somebody who would try and 18 carefully review his financial paperwork, wanted to keep 19 on top of things and know what he was doing? 20 A I'm not sure what you mean by "carefully review" 21 or how careful you would -- you mean would he read the 22 entire document? I don't think so. 23 Q Do you know -- 24 A I mean -- 25 Q -- whether he did or not? 45 1 A Well, I'm saying I don't think so. I don't know. 2 No, I couldn't -- I couldn't make that -- 3 Q Or maybe -- 4 A -- observation. 5 Q -- he had read one of these Pledge Agreements, he 6 knew what it said -- 7 A Yes. 8 Q -- and then the next one would come in and he -- 9 he would be able to review it more briefly next time, 10 possibly. Right? 11 A You know, be conjecture on my part. 12 Q Either way, right, whether he was closely reading 13 it or not? 14 A Right. 15 Q All right. Okay. Take a look at Exhibits 4 and 16 5. Actually, let me have you take a look at Exhibit 4 17 first. 18 A Okay. 19 Q These are a series of wiring instructions. 20 A Uh-huh. 21 Q Do you recognize all these documents? Why don't 22 you take a moment to page through them. 23 A (Witness reviewing document.) 24 Yes. I recognize this. 25 Q Were these the wiring instructions that you 46 1 created to actually cause the moneys to be moved from 2 Account A to Account B or to Investment C? 3 A Yes. Most times I probably -- could possibly 4 have been all the time, but certainly that was what my 5 general practice was. 6 Q Okay. In each of these occasions, this would 7 reflect the movements of funds that you were directed to 8 do by Mr. Lay. Right? 9 A Yes. 10 Q Let's move to Tab 5. 11 A Okay. 12 Q This is a series of transmittal sheets after 13 Ms. Gibson arrived. 14 A Uh-huh. 15 Q Would you assist her in completing these sheets 16 after she arrived? Are you still doing some of these? 17 A I don't recall. 18 Q Okay. Would you tend to see these at all when 19 she did these fax wiring instructions? 20 A No. If she did them, I wouldn't have, no. 21 Q All right. All right. Ms. Ballard, that's all 22 the questions that I have for you at the moment. 23 A Uh-huh. 24 Q If you could just step outside for a minute, I'll 25 see if the Grand Jurors have any questions for you. 47 1 (Witness exists.) 2 (Witness enters.) 3 Q (By Mr. Hueston) Ms. Ballard, the forms that we 4 showed you at Tab 1, can you take a quick look at that? 5 A Sure. 6 Q These were the dailies. Right? 7 A Uh-huh. 8 Q When you created that form, did Mr. Lay approve 9 it? 10 A When you ask did he approve, what do you mean by 11 "approve"? 12 Q Well, did he indicate somehow -- 13 A I would say that if it -- I would say this: If 14 there was information that was not on here that he 15 would -- wanted to see on here or needed to see, he would 16 have asked me to -- you know, to put -- could I please -- 17 next time would I please add it. 18 Q Okay. 19 A So, in that sense I guess you could say he 20 approved it. But... 21 Q And likewise, if there was something in there he 22 didn't want, he would have told you, "You can take that 23 out." Right? "I don't need that"? 24 A Probably. Yes. 25 Q Okay. But in any event, he never told you to 48 1 change the format or do anything once you started -- once 2 you started creating those -- 3 A He may have over a period -- over the years. He 4 might -- we might have refined it some. 5 Q I've showed you some from, I think, '95. Right? 6 A Uh-huh. 7 Q And then you've seen some going all the way into 8 '99 and 2000, right, in the next tab? 9 A Let's see. Oh. In the next -- okay. Okay. 10 Q The format didn't change, did it? 11 A Okay. Then, obviously, it was okay with him. 12 But, I mean, I can't -- I don't have recall as to whether 13 it was revised or whether he... 14 Q But any changes would have come at his request. 15 Right? 16 A Yes. 17 Q Okay. Let me ask the Grand Jurors if they have 18 any other questions. 19 A Okay. 20 (Witness exits.) 21 (Proceedings concluded.) 22 23 24 25 49 1 2 3 I, IDA H. SALINAS, CSR, a Certified Court 4 Reporter and Notary Public in and for the State of Texas, 5 having been duly sworn in as the Grand Jury Reporter, 6 hereby certify that the foregoing pages constitute a true 7 and correct transcript of the proceedings had and 8 testimony adduced in said cause at the time and place as 9 hitherto set forth; that the interrogatories and answers 10 by the witness were taken down by me in shorthand and 11 thereafter reduced to typewriting. 12 AS WITNESS MY HAND AND SEAL OF OFFICE this 13 11th day of July, 2004. 14 15 16 17 IDA H. SALINAS, TEXAS CSR 4469 Expiration Date: 12/31/2004 18 19 20 21 22 23 24 25 (No text was detected on this page)