Ex-Enron CEOs Lay, Skilling convicted of fraud, conspiracy

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HOUSTON – In the end, multimillion-dollar lawyers and complicated denials didn’t wash with 12 ordinary Americans. A jury Thursday convicted Enron founder Kenneth Lay and former chief executive Jeffrey Skilling of fraud and conspiracy in the 2001 collapse of Enron Corp.

Lay, 64, was convicted of all six counts against him, including conspiracy, wire fraud and securities fraud. Skilling, 52, was found guilty of 19 of 28 counts against him, including insider trading and lying to auditors as well as conspiracy and fraud. Both face decades in prison and millions of dollars in fines.

U.S. District Judge Sim Lake, who tried Lay on charges of personal banking violations while the jury deliberated the main case, also found him guilty on those four counts. The judge scheduled sentencing for Sept. 11, but allowed both men to remain free on $5 million bond pending his decision on prison time and fines. Appeals are expected.

The case had come to symbolize an era of corporate excess and abuse. Enron’s December 2001 bankruptcy lost investors billions and cost thousands of employees their jobs and retirement savings.

Prosecutors, who accused Lay and Skilling of lying to investors and using accounting tricks to get rich off Enron stock, called the outcome a victory for American justice.

“The message of (the) … verdict is simple,” said Deputy U.S. Attorney General Paul McNulty in Washington. “Our criminal laws will be enforced just as vigorously against corporate executives as they will street criminals.”

Jurors “have sent an unmistakable message,” Enron Task Force director Sean Berkowitz said. “You can’t lie to shareholders (and) … no matter how rich and powerful you are, you have to play by the rules.”

Both Lay and Skilling continued to proclaim their innocence.

“We’re surprised. I think probably even more appropriately … we’re shocked,” Lay told reporters as he gripped the hand of his wife Linda, who obviously had been weeping. “Certainly this is not the outcome we expected. I firmly believe I am innocent of all the charges against me.”

Skilling let his lawyer, Daniel Petrocelli, do most of the talking, but when asked whether he could now admit he did anything wrong, Skilling responded: “No. I didn’t.”

Petrocelli said defense lawyers will take time to consider their next move, but promised “a full and vigorous appeal” when pressed by reporters.

The two former executives maintained that they believed what they said about Enron. And they blamed the company’s failure on market panic driven by media reports of misconduct by chief financial officer Andrew Fastow, which they said they didn’t know about until it was too late.

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Jurors said they found it hard to believe the defendants’ claim that they were busy and didn’t know everything that was going on.

“They both said they had their hands on the wheel,” said juror Freddy Delgado, an elementary school principal.

The jury rejected the defendants’ claims that witnesses against them were testifying under pressure from the government.

“Even if the government did persuade them, twisted their arms, you could not get all of them to say the same thing,” Delgado said.

“To orchestrate that would have been a tremendous task,” said Deborah Smith, the jury foreman who works in human relations for an oilfield service company.

Jurors deliberated five full days after hearing 16 weeks of testimony and argument. They said they didn’t have a target date for a decision, worked methodically through the evidence and were prepared to deliberate longer. But they found themselves in agreement Thursday, so they announced a verdict, Smith said.

“This is an emotional thing. It’s not something to take light-hearted,” said Nancy Thomas, whose husband is a disabled retired policeman. But she said the verdict is the right one.

Jurors said they wanted their verdict to send a message. Smith said the government should look at tightening the rules on the behavior of corporate executives.

“I also hope … that this decision will make them more conscientious,” Thomas said. “Those in charge have a responsibility. There’s a lot of losers in this. There’s too much hurt here.”

Some said Lay appeared to have two personalities.

He did good things in the community, Don Martin said, “But when he went in the company, I think he was a different personality entirely.”

Analysts said the fact that there were some acquittals makes the verdict stronger. It “highlights the fact that they actually did separate the counts and the conduct,” said Jacob Frenkel, a former federal prosecutor now in private practice in Maryland.

“The “it never happened’ defense … I think the jury immediately grasped that it was transparent,” said Alan Bromberg, a law professor at Southern Methodist University. “To pretend that we at the top never knew. … What are they being paid all that money for?”

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The guilty verdicts pleased former employees and investors who were big losers in Enron’s collapse.

Chris Jones, 35, a specialist in information technology who worked at Enron for three years, said although he won’t recover his investment the verdict gives “closure.”

“You feel like there is a sense of justice in the country,” Jones said. “I think it does send a signal to CEOs that the buck stops with them.”

Investor Lou Xu agreed. “I think it’s a good verdict,” said Xu, who works at Reliant Energy but lost thousands of dollars on Enron stock. “I think they deserve it. … They’re guilty.”

Jones said he “kept expecting them to get off” and still expects a fight on appeals.

“I’ll take a wait and see on appeals, but it’s such a solid verdict, I think it’s going to stand up.”

Jones also expressed “satisfaction” that the investigation continues because he said others, including Enron’s law firm, have escaped. “They were … involved but never brought to justice,” he said.

The law firm denies any wrongdoing.

The outcome was historic for American business, analysts said.

“This shows that Sarbanes-Oxley was not a hysterical reaction to a non-problem,” said Columbia University law professor John Coffee, referring to the accounting reform law passed by Congress in the wake of Enron and other corporate scandals. “This suggests that there was a problem and that we are appropriately addressing it.”

The verdict also marked a turning point for Houston, which suffered damage to its image and its economy when Enron collapsed. The city has rebounded on both fronts, garnering praise for taking in evacuees from Hurricane Katrina and experiencing a new boom with oil prices hovering around $70.

Richard Murray, a political scientist at the University of Houston and longtime observer of the city, said that “if any community could deal with something like this, Houston would be high on the list because of the long history of boom and bust here.”

Frank Michel, spokesman for Mayor Bill White, said “Enron is only one chapter in a very thick book, and the overall book on Houston is that we’re a very resilient place. … The city has moved beyond Enron.”



(Dallas Morning News correspondent Brendan M. Case contributed to this report.)



(c) 2006, The Dallas Morning News.

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AP-NY-05-25-06 2051EDT

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