In a compelling victory for the government, Enron Corp. founder Kenneth Lay and his former right-hand man, Jeffrey Skilling, who had at various times been COO, president and CEO of Enron, were found guilty of fraud and conspiracy on Thursday. Sentencing is set for Sept. 11, and both men could spend the rest of their lives in prison.
U.S. District Judge Sim Lake ordered Lay to immediately surrender his passport. He also asked Lay for a $5 million bond co-signed by his children. Skilling had already surrendered his passport and filed a $5 million bond. Lake allowed both men to remain free pending their sentencing.
Lay was found guilty of one count of conspiracy, three counts of securities fraud and two counts of wire fraud. Lake also found Lay guilty of three counts of making false statements to banks and one count of bank fraud. Skilling was found guilty of one count of conspiracy (a joint count with Lay), 12 counts of securities fraud, one count of insider trading and five counts of making false statements to auditors and Enron shareholders. Skilling was acquitted on nine counts of insider trading.
The verdict was announced about 11 a.m. Thursday morning, following only six days of deliberation. Skilling, whose verdict was announced first, appeared composed with his arms crossed, and he barely showed any emotion. Lay's wife, who was allowed to sit with her husband in the front row of the spectator section of the courtroom, kept her arm around her husband and began crying when the verdict was read. Lay's daughter also began crying when her father's verdict was read.
Appearing outside of the courthouse shortly after the verdict, Skilling and his lawyer Daniel Petrocelli spoke with reporters.
"I'd like to thank Dan, and I'd like to thank my family," Skilling said, naming his wife and children among those who had continued to support him. "We fought the good fight. Some things work and some things don't...Obviously I'm disappointed...that's the way the system works."
Petrocelli said he and his legal team would "sit down and look at everything hard. We litigated hard, and we lost on some of the issues." He said it was "too early" to comment on what will happen next but added, "We will have a full and vigorous appeal."
Following the verdicts, members of the jury agreed to talk with the media about their deliberations, which lasted only six days following a 16-week trial.
"We went over all of the evidence, and we went through all of the possibilities," said jury forewoman Deborah Smith. "We didn't know what the verdict would be until this morning." Smith, who said she worked in human resources for a "large oil services company," said "we didn't think we had a target of reaching a verdict today. We were prepared to stay here as long as it took. We wanted to have the right verdict... We wanted it to be one that all of the jurors unanimously agreed about."
Smith said there was "no particular piece of evidence" that swayed the panel. "We listened and considered every witness," said Smith. "Everybody's name came up at least once. Some we gave more credibility to, some we didn't give any. But we considered every one."
Juror Freddy Delgado, an elementary school teacher, said Ben Glisan's testimony was some of the "best." Glisan, Enron's former treasurer, declined to make a deal with the government, and he was sentenced to five years in prison for fraud. Glisan testified that Skilling was aware of some of the deception at Enron, and he said Skilling had approved Enron's notorious special purpose entities.
"When we were in doubt, we always went to those boxes of evidence...and looked at the defense exhibits and the prosecution's. It was there in black and white and it doesn't lie."
Asked about a defense argument that Enron actually collapsed because of short sellers and "inaccurate" articles in The Wall Street Journal, juror Don Martin said, "I think The Wall Street Journal thing was not that critical in anything." He acknowledged it could have played a role in the company's bankruptcy, but "as far as we were concerned with this case...it didn't have that much bearing."
In a statement following the verdicts, U.S. Deputy Attorney General Paul McNulty said the "verdict encourages us to continue to combat corruption wherever we find it."
So far, the government has charged about 30 people with Enron-related crimes. More than 12 Enron executives have pleaded guilty, including Chief Accounting Officer Richard Causey. Several other former executives who pleaded guilty testified against Lay and Skilling, including ex-CFO Andrew Fastow, Glisan, former chief of investor relations Mark Koenig, former corporate secretary Paula Rieker, former Enron Broadband Services CEO Kenneth Rice and former Enron Energy Services CEO David Delainey.
According to legal experts, there are at least four possible appeal issues for Lay and Skilling. Over an objection by the defense, Lake included a "deliberate indifference" instruction, which allowed the jury to find either Lay or Skilling guilty for ignoring possible criminal conduct that otherwise would have been obvious. The defense argued that the instruction was not relevant to the theory of the case.
Another appeal issue could be the venue. Before the trial began, Lake denied a request by the defense to move the trial out of Houston, where Enron had been headquartered. The defense had argued that Enron's bankruptcy had hurt the defendants' ability to have a fair trial. Lake also denied a request by Lay to try his case separately, which could cause Lay's attorneys to argue on appeal that jurors were prejudiced against him by the joint trial.
Finally, the government declined to grant immunity to several former Enron executives who might otherwise have testified for the defense, and Lake supported the move. The absence of these potential witnesses may have deprived Lay and Skilling of having testimony in their favor.
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