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  "Not guilty, your honor," Lay, speaking loudly and clearly, told U.S. Magistrate Judge Mary Milloy at a court hearing hours after he surrendered to the FBI and was hustled to the federal courthouse in handcuffs.

A federal indictment unsealed Thursday added Lay to charges already filed against his hand-picked protege, former CEO Jeffrey Skilling, and former top accountant Richard Causey, and accused Lay of participating in a conspiracy to manipulate Enron's quarterly financial results. It also accused him of making public statements about Enron's financial performance that were false and misleading and omitting facts necessary to make financial statements accurate and fair.

Milloy set his bond at $500,000. Prosecutors, saying he was a flight risk, had sought a $6 million bond.

Lay was allowed to keep his passport because he travels internationally on business, but Milloy said if he left the country he would have to seek permission from the court.

Lay entered the packed courtroom and smiled at his wife, Linda, who had driven him before dawn to the Houston FBI headquarters. She rose from her seat to pat him on the back, then was told by a marshal she could have no contact with her husband.

Lay was accompanied by attorney Michael Ramsey. When Milloy asked if Ramsey was his lawyer, Lay drew laughter from spectators by responding, "I think his billings will indicate that I have hired Mr. Ramsey."

53 Counts, 11 for Lay

The superseding indictment, now totalling 53 counts, accused Lay, Skilling and Causey of enriching themselves through salaries, bonuses, grants of stock and stock options.

It names Lay in 11 counts: one of conspiracy, two of wire fraud, four of securities fraud, one of bank fraud and three of making false statements to banks. If convicted on all counts, the Justice Department said Lay could receive up to 175 years in prison plus fines possibly totaling more than $5.7 million.

A grand jury returned a sealed indictment against Lay on Wednesday, 2 1/2 years into a methodical investigation that has produced charges against some of his once most highly trusted lieutenants.

"I have done nothing wrong, and the indictment is not justified," Lay, 62, said in a statement Wednesday.

Prosecutors from the Justice Department's Enron Task Force had presented the indictment to Milloy on Wednesday, and at their request she sealed the indictment and an arrest warrant.

"Ken was not in any conspiracy," Ramsey said Thursday before entering the courthouse.

Ramsey said he would push for Lay to go trial ahead of other executives. He maintains Lay did nothing wrong and cast blame on former chief financial officer Andrew Fastow, who pleaded guilty to two conspiracy counts in January.

Fastow admitted to orchestrating partnerships and financial schemes to hide Enron debt and inflate profits while pocketing millions of dollars for himself. Fastow is waiting to testify for the prosecution.

'A Liar and a Thief'

"Andy is obviously a liar and a thief," Ramsey said. "He admits that."

In a separate action, the Securities and Exchange Commission filed civil charges Thursday against Lay, accusing him of fraud and insider trading and seeking recovery of more than $90 million in what the agency said were illegal proceeds from stock sales.

Prosecutors have aggressively pursued the one-time celebrity CEO and friend and contributor to President Bush who led Enron's rise to No. 7 in the Fortune 500 and resigned within weeks of its stunning failure. Lay is the 30th and highest-profile individual charged.

The indictment particularly focuses on Lay's behavior after Skilling, in August 2001, abruptly resigned in the weeks leading up to Enron's collapse. Skilling had succeeded Lay as CEO six months earlier. He was indicted in February on nearly three dozen counts of fraud and other crimes.

Prosecutors allege Lay knew Enron was preparing to announce massive third-quarter losses and a $1.2 billion writedown in shareholder equity, yet in a Sept. 26, 2001 Internet chat told Enron employees he had strongly encouraged management to buy Enron stock.

"Some, including myself, have done so over the last couple of months and others will probably do so in the future," he said. "My personal belief is that Enron stock is an incredible bargain at current prices."

Then on Oct. 12, 2001, he told a credit rating agency that Enron and its auditors had "scrubbed" the company's books and that no additional writedowns would be forthcoming. Four days later, the company announced those big losses, but the shareholder equity writedown was not in Enron's press release.

The indictment alleges Lay also knew Enron was facing a $700 million writedown in its water business, Azurix, but didn't disclose detailed information. In addition, it alleges Lay knew Enron had reorganized its energy services unit to hide hundreds of millions of dollars in losses.

"We're not trying to conceal anything," Lay told analysts on Oct. 23, 2001, according to the indictment. "We are not trying to hide anything."

He also told employees that same day: "Our liquidity is fine; as a matter of fact, it is better than fine, it is strong."

But prosecutors allege Lay knew Enron had been forced to offer its pipelines as collateral to get a $1 billion bank loan to maintain liquidity.

Then on Nov. 12, 2001, in a call to analysts and in another effort to combat bad publicity, he said: "We don't have anything we are trying to hide. I am disclosing everything that we've found."

But prosecutors allege Lay knew that he and other senior Enron managers had not disclosed a litany of negative facts about Enron's finances.

The counts alleging bank fraud accuse Lay of improperly drawing from his lines of credit, and exposing banks to a higher risk of loss, to directly or indirectly buy and carry margin stock.

Enron's collapse led a series of corporate scandals that led to Congress' passage of sweeping reforms to securities laws with the Sarbanes-Oxley Act two years ago. Thousands of Enron's workers lost their jobs, and the stock fell from a high of $90 in August 2000 to just pennies, wiping out many workers' retirement savings.

The charges against Skilling and Causey, who was initially indicted a week after Fastow pleaded guilty, target actions over several years leading up to Enron's collapse.

Days after Skilling's resignation, Lay met privately with Sherron Watkins, then an executive on Fastow's staff, who had sent him a lengthy memo warning of impending doom from Fastow's myriad schemes to hide debt and inflate profits.

But Lay told The New York Times last month that he didn't believe the company had serious problems and trusted other senior managers, including Fastow and Causey, when they reassured him that all was fine.

Skilling and Causey are awaiting trial on charges of conspiracy, fraud and insider trading. Both pleaded innocent and are free on bond.

The indictment unsealed Thursday contained no new charges against Skilling, already named in 35 counts alleging fraud, conspiracy and insider trading. Causey was named in three additional counts: two conspiracy and one securities fraud.

Prosecutors also were trying to seize an undisclosed sum of money from Lay, plus his 33rd-floor Houston penthouse valued at more than $7 million.

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