by John M. Curtis
(310) 204-8700

Copyright May 23, 2006
All Rights Reserved.

itting on pins and needles, former Enron CEOs Ken Lay and Jeffrey K. Skilling await their fate, as a Houston jury deliberates over their guilt or innocence. What seems like a no-brainer to outsiders, the jury must apply carefully crafted instructions, designed to force jurors to stick to the facts. After five days of work, the jury asked for trial exhibits and transcripts, a sign that they're seeking more information on which to render a judgment. Seeking more information usually favors the prosecution, where jurors try to be careful before passing judgment. While it could go either way, seeking more exhibits and trial transcripts indicates that the jury wants ample justification when they deliver guilty verdicts. Juries prone toward acquittal don't have the same compelling need to justify an innocent verdict. With Lay and Skilling's lives on the line, the jury wants to get it right.

      Lay's attorney Michael W. Ramsey and Skilling's defense counsel Daniel Petrocelli both argued that their clients were victims of zealous prosecutors, seeking to pin them with Enron's collapse. They tried to convince jurors that both were clueless about Enron's real financial condition, when the government's star witness, rogue Chief Financial Officer Andrew Fastow, fleeced the company, causing the bad publicity sending Enron into a tailspin. Defense attorneys did their best to paint Fastow as an untrustworthy witness, tainted by his plea deal with prosecutors. Categorical denial was designed to induce reasonable doubt, allowing Skilling and Lay to get off the hook. As with all trials, it boils down to credibility. That's why jurors want more hard facts to convict the dynamic duo. Defense attorneys asked jurors to not believe their own eyes and reject the government's case.

      Petrocelli did his job, repeatedly attacking Fastow's credibility, in effect invoking legendary defense attorney Johnnie Cochran's familiar line, “you can't trust the messenger.” Fastow, after all, had firsthand dealings with Lay and Skilling, both of whom deny any wrongdoing. For the jury to acquit Lay and Skilling, they would have to believe both CEOs were clueless about Enron's financial operation. We know that Wall Street and the general public were oblivious to Enron's internal problems, believing company's schemes to exaggerate earnings and hide liabilities. Eight women and four men must now cut through the defense's smokescreen and see the most egregious corporate fraud in U.S. history. Lay and Skilling blame the Wall Street Journal for causing the “run-on-the-bank,” that left Enron's share prices tumbling from $90 to zero in less than a month.

      No business goes up in smoke when it's a legitimate revenue-producing enterprise. Whether it was Enron's energy trading or broadband units, the lack of a legitimate business model sank the company. Wall Street simply caught up with Enron and former big-five accounting firm Arthur Andersen who cooked the books. With the jury still out, there's rampant speculation about the trial's outcome, largely centering on Lay's testimony. Unlike cool-and-collected Skilling, the otherwise gentlemanly Lay turned surly under cross examination, not the outcome defense attorneys wanted. Juries saw directly Lay spar with lead prosecutor John C. Hueston when he presented brokerage records proving he sold millions of dollars in Enron stock before it hit the skids in Dec. 2001. Watching Lay's hostility could prove disastrous as jurors battle with his credibility.

      Lay faces six counts of fraud and conspiracy, with a maximum sentence of 45 years. Skilling faces 28 counts of fraud, conspiracy and insider trading with a possible sentence of 275 years. Jurors take very seriously the job of sending otherwise law-abiding citizens to life in prison. Lay asked jurors to believe he knew nothing about his massive stock sales, blaming it on his son Mark, who he claimed sold his stock. In opening statements, Lay's lead defense attorney Ramsey called short sellers “vultures.” Lay bristled when Hueston asked him whether his son was a “vulture,” forcing him to read Mark's e-mail to Enron's media relations director Mark Palmer saying that the “shorts are trumpeting the insider sales.” When confronted with hard facts, the jury watched the otherwise polite Lay turn combative. While it's hard to predict juries, Skilling and Lay are sweating bullets.

      Seeking more exhibits and trial testimony doesn't bode well for Skilling and Lay. While defense attorneys did a commendable job impeaching Fastow, they failed to rehabilitate their clients' credibility. Jurors must decide whom to believe. Without defense attorneys blowing smoke in the jury room, jurors are forced to use logic and common sense. Jurors must ask themselves how Lay managed in the year before Enron collapsed to liquidate $153.7 million in company stock, cash-in $81.5 million in stock options and secure $81.5 million in loan advances, totaling $269.5 million. Before Enron's stock crashed, Skilling cashed-in $200 million in stock and options. Jurors may be vulnerable to influence but they're not deaf, dumb and blind. Whether they want to or not, jurors must be conscientious before reaching a verdict in the most despicable corporate fraud in U.S. history.

About the Author

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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