Federal prosecutors rested their case Tuesday in the fraud and conspiracy trial of Enron Corp. founder Kenneth Lay and ex-CEO Jeffrey Skilling after filing a motion to drop three charges against Skilling and one against Lay. The defense, which was denied motions for acquittal, will open its case Monday.

“By authority granted to me I declare spring break,” presiding U.S. District Judge Sim Lake told jurors, who were dismissed for an extra-long court break.

Before court adjourned, Lake granted a motion by the government to dismiss three criminal counts against Skilling and one criminal count against Lay. The counts against Skilling (15, 21 and 30) and Lay (30) concern securities fraud charges for a quarterly income report filed on May 15, 2000, an April 12, 2000 conference call with financial analysts, and a Nov. 12, 2001 conference call. (To view the government’s charges against them, click here.)

Prosecutor Sean Berkowitz told the court the charges were dropped “out of economy and some other reasons.” He did not elaborate. The prosecution will produce a new version of the indictment.

Skilling’s and Lay’s lawyers filed motions for acquittal, but they were immediately denied.

In the nine-week-old trial, the government presented 22 witnesses, including eight former executives who have pleaded guilty to wrongdoing and are awaiting sentencing, one serving time in prison with an immunity deal, and one who settled allegations with the Securities and Exchange Commission (SEC). The defense has a witness list of about 100, although less than half of those named are expected to actually testify.

In the closing hours of testimony Tuesday, former Enron employee Joanne Cortez, who oversaw a line of credit Enron provided to Lay, told the jury about Lay’s transactions in 2000 and 2001.

Other Enron executives also were given credit lines, but Lay was the only one who could repay his cash withdrawals using his Enron stock, Cortez said. She said that Lay typically would pay back the credit line with stock and a new cash advance would be given shortly after that.

However, in August 2001, after Skilling had resigned, Cortez said she became concerned about Lay’s transactions.

“Why was there a concern?” prosecutor John Hueston asked.

“Mr. Skilling had already left the company, and there were lots of question about the company,” she said. “It made me wonder, or question, why it was being used as somewhat of a tool to sell shares.”

In late October 2001, Enron’s board increased Lay’s credit line from $4 million to $7.5 million. Cortez said the increase upset her.

“I walked down the stairwell to blow off steam,” she recalled. “I was upset. I cried. I was very upset that his line of credit increased to $7.5 million when the company was in so much trouble.” Afterward, she decided to write up a one-page spread sheet with all of the details of Lay’s credit transactions.

“Why did you think it was important?” Hueston asked.

“I felt that it wasn’t public knowledge, that shares were being sold back to the company to repay his line of credit,” Cortez replied.

By the end of 2001, Lay borrowed $77 million from the lines of credit but only paid back $70 million, Cortez told jurors.

Cortez said she reviewed Enron’s proxy statement later in 2001 to see if Lay’s credit line was mentioned. “I wanted to know if it was publicized anywhere,” she said. It was not included in the proxy statement, and she complained to her supervisor. “I thought it was improper. I thought the public ought to know.” Cortez then contacted a lawyer, who took her notes about the financial withdrawals on the credit line to the FBI.

In related news, a former Enron accountant and a former company lawyer settled civil charges brought by the Securities and Exchange Commission (SEC), which accused the two men of manipulating the company’s earnings in 2000. David Leboe, 38, of Houston, and Dale Rasmussen, 46, of Portland, OR, admitted no wrongdoing. However, they each agreed to pay $30,001 to settle the charges.

Leboe and Rasmussen both worked on an Enron project called Coyote Springs 2, involving the sale of a power plant project in Oregon, according to court documents filed in U.S. District Court in Houston. Leboe was the lead accountant for Enron North America, and Rasmussen was then senior counsel for Enron North America’s West Power Origination Legal Group.

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