Lawyers tussle over blame in Enron collapse
By Dan Whitcomb and Matt Daily
Jan 31, 2006
Prosecutors accused former Enron Corp. chief executives Ken Lay and Jeffrey Skilling of lying to cover up their company's crumbling finances, but defense attorneys said crooked underlings destroyed the energy trading giant in opening arguments of the two men's criminal trial on Tuesday.
The emotional arguments provided a glimpse of what lies ahead in the four-month-long trial that could land the two former corporate stars in prison for many years.
Lay's attorney, Mike Ramsey, told the eight-woman, four-man jury his client accepted responsibility for Enron's bankruptcy, but was not a criminal because of it.
"Failure is not a crime," Ramsey said. "Bankruptcy is not a crime. If it were we would have to turn Oklahoma back into a penal colony because there would be so many people to lock up."
Enron, said Skilling attorney Daniel Petrocelli, was "a wonderful company ... a shining star."
They said financial misdeeds by former Chief Financial Officer Andrew Fastow led to the company's collapse.
But Assistant U.S. Attorney John Hueston told the jury, "To the outside world, Enron appeared to be a picture of corporate success. Inside the doors of Enron, things were terribly wrong."
Lay, 63, and Skilling, 52, face multiple charges of fraud and conspiracy that accuse them of concealing Enron's mountain of debt and lying to analysts and investors.
"TICKING TIME BOMB"
When Skilling quit as Enron CEO after only a few months in the job and Lay returned to the CEO post in August 2001, "He is told the (company) is the equivalent of a ticking time bomb, that Enron is facing billions of dollars in losses," Hueston said.
"His response? He steps to the microphone and falsely assures the investing public" that the company is healthy, Hueston said.
Lay took home $220 million in compensation from the sale of Enron stock from 1999 through 2001, Hueston said, while Skilling pocketed $150 million.
But the defense lawyers said Andrew Fastow was the criminal in this case. They said he stole money from the company by stashing debt off the books and when the world found out about it in 2001, there was a financial panic.
"Andy stole peanuts. Andy stole crumbs. But what Andy stole from Enron was its good name," Ramsey said, and when Wall Street learned of the theft investors panicked. "The odor of the wolf got into the flock and the flock stampeded," he said.
Fastow has pleaded guilty to conspiracy and agreed to cooperate with prosecutors in exchange for a maximum 10-year prison sentence. He is expected to testify against his former bosses.
Ramsey, in a move reminiscent of the defense successfully used by HealthSouth CEO Richard Scrushy, listed his client's numerous charitable and civic activities, including helping the city build a new baseball stadium, named briefly Enron Field. He also cited Lay's long-time connection to his church, saying he was no "courthouse Christian."
Petrocelli said his client, Skilling, built Enron into a world-class corporation and never broke the law or stole a single nickel.
"I'm committing to you right now that this man will take the witness stand," Petrocelli said. "You could not keep him off that witness stand. He's going to tell you in his own words whether he did any of those things. He's going to tell you how much he loved that company."
The Enron name became synonymous with corporate greed and a wave of corporate scandals that went on to snare HealthSouth, WorldCom, Global Crossing, and Adelphia and led to the passage of a federal law that toughened financial reporting and auditing requirements for publicly owned companies.
Bitterness and anger over the company's demise linger in Houston, where thousands lost their jobs and saw their retirement accounts vanish with the company's December 2001 bankruptcy filing.
Copyright © 2006 Reuters Limited.
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