Enron CEO touted company's stock in Sept. chat

HOUSTON, Texas (CNN) -- Weeks before his company filed for the largest bankruptcy in U.S. history, Enron's top executive touted the energy giant's stock as an "incredible bargain" in a Web chat with his employees.

A transcript of the in-house chat session, which took place on September 26, Enron CEO and chairman Kenneth Lay also defended Arthur Andersen, the accounting firm recently accused of destroying key documents and covering up sizable financial losses.

"My personal belief is that Enron stock is an incredible bargain at current prices, and we will look back a couple of years from now and see the great opportunity that we currently have," Lay said in the September chat.

Eli Gottesdiener, a lawyer representing former Enron workers who are suing the company, released the Web chat transcript to CNN.

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More than a month earlier, Enron Vice President Sherron Watkins had warned Lay and Andersen executives of looming financial problems, saying she was "incredibly nervous that we will implode in a wave of accounting scandals."

"It sure looks to the layman on the street that we are hiding losses," Watkins wrote in a memo.

Last fall, Enron saw its fate and stock price plummet when the firm, with $62.8 billion in assets, acknowledged several hundred million dollars of previously undisclosed liabilities. Thousands lost their pensions and life savings in Enron's swift collapse, which culminated December 2, 2001, when it filed for Chapter 11 bankruptcy protection.

Lay and other top Enron executives have been accused of selling large quantities of their stock in the company, while encouraging others to keep or buy more Enron stock.

In the September 26 chat, Lay said, "The company is fundamentally sound. The balance sheet is strong. Our financial liquidity has never been stronger. And we again have record operating and financial results."

The Enron CEO also defended Andersen's accounting methods in the chat, saying they had been carried out with "an abundance of safeguards that what is done is totally appropriate and acceptable."

When asked about upcoming financial statistics, Lay said, "The third quarter is looking great. We will hit our numbers. We are continuing to have strong growth in our business and, at this time I think we're well positioned for a very strong fourth quarter."

Three weeks later, the company posted third-quarter losses of $618 million.

The Department of Justice, the Securities and Exchange Commission and a handful of congressional committees are investigating Enron's downfall.