HOUSTON (AFX) -- A Texas jury found former Enron chiefs Kenneth Lay and Jeffrey Skilling guilty Thursday of conspiring to hide the company's crumbling finances, defrauding investors and its own employees of billions of dollars as it careered toward bankruptcy in late 2001.
The two men emerged from the rubble of what had been the world's biggest energy-trading company as leading representatives of an era marked by corporate greed and recklessness.
The verdicts cemented that reputation.
Scapegoat defense
At the same time, the jury tossed aside the notion that the two executives were unwitting victims of illegal accounting schemes by subordinates, caught in a media-driven stock sell-off, and unfairly scapegoated by overzealous federal prosecutors for actions beyond their control.
When the eight-woman, four-man jury returned to the courtroom after five days of deliberations, they pronounced former Chief Executive Officer Lay guilty on all six counts of fraud and conspiracy.
Lay's prot?g?, former CEO Skilling, was found guilty on 19 counts of fraud and conspiracy, but the jury acquitted him on all but one count of insider trading. The one insider-trading count of which he was found guilty stemmed from his sale of 500,000 shares of Enron on Sept. 17, 2001.
All told, Skilling sold about $62 million worth of company stock over the year leading up to Enron's headlong plunge into Chapter 11 on Dec. 2, 2001 -- at the time the biggest bankruptcy in U.S. history.
The bankruptcy wiped out about $68 billion in market capital, measured from Enron's $80 peak share price in early 2001. It also left about 9,000 employees without a job, cleaning out retirement savings built mostly on Enron stock.
'Justice has been served today. The jury's verdicts help to close a notorious chapter in the history of America's publicly traded companies. Appeals aside, the end of the trial will mark the end of a dark era,' Sen. Michael Oxley, chairman of the House Financial Services Committee, said in a statement issued moments after the verdict was read.
Oxley, together with Sen. Paul Sarbanes, forged the tough 2002 securities act that bears their names in an effort to rein in rogue executives and rebuild shaken investor confidence in
Corporate America after a series of high-profile scandals at companies like WorldCom, Tyco and HealthSouth.
Lay, 64, surrounded by his family on the first bench of the spectator gallery, showed little emotion in response to the verdict, shaking his head as jury forewoman Deborah Smith replied 'guilty' as each count was read.
'I am innocent'
'I firmly believe I am innocent of the charges against me,' Lay later told reporters outside the courthouse. He declined to comment on the possibility of an appeal.
Skilling, 52, who took the helm of the Houston-based firm in February 2001 and held it until his sudden departure six months later, rocked gently in his chair alongside lead defense lawyer Daniel Petrocelli.
Petrocelli spun his defense around the argument that Skilling was unaware of the elaborate off-book accounts stitched together by then-Chief Financial Officer Andrew Fastow in a bid to mask Enron's massive debt. He vowed to appeal the verdict against his client.
Fastow, who took the witness stand against his former bosses, pleaded guilty to fraud in January 2004. He agreed to cooperate with prosecutors preparing the case against Skilling and Lay in exchange for a reduced, 10-year sentence.
Freddy Delgado, one of the jurors, told reporters the argument that Skilling and Lay didn't know what was going on inside the company was simply not a credible defense.
'To say that you didn't know what was going on was not the right thing,' Delgado said.
Fellow juror Wendy Vaughan agreed. 'I think they had a duty to find out what was going on,' she told reporters gathered on the sixth floor of the federal courthouse in Houston.
Jurors said the string of witnesses brought before the court, especially ex-Enron executives that have already admitted guilt in the company's demise, were among the most powerful tools used by the prosecution.
'The witnesses came from different areas of the company and different perspectives, but they all came to the same conclusion ... [their testimonies] all pointed in the same direction,' said Don Martin, also among the 12 jurors impaneled for the past four months.
Asked why Skilling had been found guilty on just one of the 10 insider-trading counts against him, forewoman Smith said, 'The judge's instructions were that 'not guilty' meant not proven, not that they were innocent.'
That turned out to be the only aspect of the trial in which prosecutors failed to produce the evidence the jurors needed to convict.
Judge Sim Lake, presiding over the trial, set sentencing for Sept. 11. Maximum sentences for the two executives would keep them behind bars for the rest of their lives.
Each was required to post a $5 million bond before leaving court. Judge Lake also ordered Lay to hand over his passport. This story was supplied by MarketWatch. For further information see www.marketwatch.com.
© 2006 AFX News
