Lay and Skilling guilty in Enron fraud trial
Former Enron executives Kenneth Lay and Jeffrey Skilling were found guilty today of hiding corruption and losses at the onetime energy giant, with a federal jury in Houston concluding that the two men at the top must bear responsibility for one of the most devastating corporate scandals in history.
The jurors rejected the former executives' defense that no crimes were committed at Enron and that the company's collapse in 2001, resulting in as much as $60 billion in losses to investors, was caused by a "run on the bank" mentality when unfavorable news reports touched off a loss of confidence in the company. On all counts central to the case, the jury sided with prosecutors who argued that the spectacular rise and fall of Enron–at one time the seventh-largest company in the United States–was a story marked by accounting trickery and outright lies.
Skilling was acquitted of 10 counts of insider trading on Enron stock, which many analysts point out is one of the most difficult cases to prove in securities law. But both former executives face what essentially will be life in prison, with Skilling convicted on 19 counts of securities fraud, false statements, and conspiracy charges, and Lay convicted on eight counts of conspiracy and mail- and wire-fraud charges.
The two took a gamble by taking the witness stand in their own defense. But that plan went awry, especially for Lay, who argued even with his own attorney in open court. That discord appeared to continue into the moments before the verdict was announced at noon Eastern time, when microphones picked up his attorney chiding Lay for his attempt to have his wife stand beside him as the verdict was read.
"It's as much her life as it is mine," CNBC quoted Lay as saying.
Some experts believe the defendants were done in by their own tactic of insisting that no laws were broken at Enron.
"I think that was a very hard sell for any juror, because the collapse of the company was so complete and so widely publicized, and could only have happened because some people were doing some very bad things," said Alan Bromberg, securities law expert at Dedman School of Law at Southern Methodist University in Dallas. "So I think any reasonable juror must have said it just doesn't wash."
Lynn Turner, the former chief accountant at the Securities and Exchange Commission, praised the verdict as one that will reverberate throughout the corporate world.
"This trial sends a very clear message to executives who deceive investors, that they will be held accountable and pay a high price for doing so," he said.