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Non-Tech : The Enron Scandal - Unmoderated -- Ignore unavailable to you. Want to Upgrade?

To: Raymond Duray who wrote (2929)	2/20/2004 9:29:35 PM
From: stockman_scott	Read Replies (2) \| Respond to of 3602

Enron's Ken Lay may be tough to prosecute salon.com By Kristen Hays Feb. 20, 2004 \| HOUSTON (AP) -- While the government has had the former top two executives at Enron Corp. in their crosshairs for more than two years, only former chief executive Jeffrey Skilling was in handcuffs this week. Experts said the indictment and comments by prosecutors suggest any case against former chairman and CEO Kenneth Lay, known as a less hands-on manager than his former protege, likely would be more difficult to prove. Whether prosecutors will take the last step up the fallen company's ladder to charge Lay remains to be seen. But comments by the head of the Justice Department's Enron Task Force shortly after Skilling's indictment Thursday on 35 criminal charges seemed to suggest that the government considers Skilling the bigger catch. "This was THE guy at Enron," said Deputy Attorney General James Comey. When asked about Lay, however, Comey declined to comment on specifics and said people wouldn't want to live in a country where he or the FBI could lock someone up because a company failed and people are angry. "Our business is facts. We need to assemble a case. That's really hard, and it should be hard," Comey said. Skilling pleaded innocent to fraud, conspiracy, insider trading and other counts. His lawyers said the government has no case. Robert Mintz, a former federal prosecutor with McCarter & English in Newark, N.J., said the government likely came within striking distance of Skilling and Lay upon securing a guilty plea to two counts of conspiracy and cooperation last month from Andrew Fastow, former Enron finance chief. "The fact that they've moved only against Skilling leads to the conclusion that they simply don't have the evidence against Ken Lay at this time," Mintz said. "The question is whether they will ever be able to make that case." Fastow admitted to using complicated partnerships wrongly treated as independent of Enron to hide debt and inflate profits as well as enrich himself on the side. The company went bankrupt in December 2001 less than four months after Skilling abruptly resigned, citing personal reasons he never explained. Fastow's lawyers have said he was hired to do off-the-books financing, never knew he was committing a crime, and his work was approved and praised by Enron's board, chairman and CEO -- the latter two titles formerly belonging to Lay and Skilling. In a statement filed with his plea agreement, Fastow, who was hired by Skilling in 1990, said, "I and other members of Enron senior management fraudulently manipulated Enron's publicly reported financial results," adding that the purpose was to mislead investors and inflate the company's stock price and credit rating. Lay and Fastow had little contact, Sherron Watkins, the former Enron executive worked for Fastow and warned Lay of the company's impending financial doom shortly after Skilling resigned, said in an interview Friday. Fastow joined Skilling and other executives on ski trips and other sports-oriented outings, but such activity didn't interest Lay, who was a generation ahead of most top managers. Lay "might as well have been another board member who wasn't a company insider," Watkins said. "Things were presented to him in the same fashion they were presented to the board." Lay's attorney, Michael Ramsey, declined comment Friday on the charges against Skilling, reiterating that his client has committed no crimes. He has said before that Lay's $100 million of stock sales in the months before Enron's bankruptcy in 2001 were to pay debts, not dump shares, and Lay is safe as long as Fastow tells prosecutors the truth. The government could pursue a theory of "willful blindness" on Lay's part, said Mark Biros, a former Washington D.C. federal prosecutor now with Proskauer Rose LLP. To apply willful blindness, a defendant has to be charged with a crime -- such as securities fraud -- and then prosecutors seek to prove the defendant knew something was amiss and purposely didn't check into it when he or she would have normally done so, he said. Whether Skilling should be the last defendant charged in the Enron probe is "hard to say," said Jim Schwieger, a former vice president in Enron's defunct gas trading division who worked at Enron for 23 years until 2001. "I don't think Lay knew what was going on but he was getting paid to know and that's what bothers me," Schwieger said. "I definitely think he was negligent. For 10 years he accepted full glory for building Enron and accepted bonuses the board gave him and because he was negligent, he didn't deserve it." - - - - - - - - - - - -

To: Raymond Duray who wrote (2929)	2/21/2004 1:08:05 PM
From: Glenn Petersen	Read Replies (1) \| Respond to of 3602

Petrocelli is going to get a nice payday out of this. While there is no doubt in my mind that Lay was culpable, Skilling was the master mind at Enron. If Fastow is truthful, the feds should have a decent shot at nailing him. The following is an article that appeared in the WSJ a few weeks ago addressing the problems associated with a Lay prosecution. Lay’s Last Months at Enron Probed Federal Officials Explore Grounds for Criminal Case Against Former Chairman By John R. Emshwiller Wall Street Journal February 2, 2004 Federal officials are exploring whether there are grounds to bring criminal charges against former Enron Corp. chairman Kenneth Lay regarding what he knew about the energy company’s festering, yet still largely secret, financial problems in the months before its collapse. The critical period under examination began in August 2001, when Mr. Lay’s longtime lieutenant, Jeffrey Skilling, unexpectedly quit as Enron’s chief executive after only six months in the top job. Mr. Lay resumed the chief executive post that he had held for some 15 years and remained there through the company’s collapse in the fall of 2001 and eventual bankruptcy-court filing that December. Federal officials are comparing what Mr. Lay knew in those final months to his upbeat public remarks about the company’s condition, said people familiar with the probe. Mr. Lay has denied any wrongdoing during his tenure at Enron. He and his representatives have said that his public remarks about the company in the last half of 2001 were made in good faith and that he was unaware of the scope of some of the problems facing Enron. In response to an interview request, a spokeswoman for Mr. Lay said her client had not further comment. Federal investigators are interested in the months before the bankruptcy filing, in part because the departure of Mr. Skilling meant that Mr. Lay “can’t say that he wasn’t in charge” during that critical period, said one person familiar with the matter. Mr. Skilling is also under federal criminal investigation and has denied any wrongdoing. However, the prosecutors believe that they might be in a position to file criminal charges against him within the next several weeks, said one person familiar with the probe. The government isn’t that close to making a decision, one way or the other, regarding Mr. Lay, said people familiar with the matter. Mr. Skilling was widely credited with transforming Enron from a staid natural-gas pipeline company into a red-hot global energy trader. Many inside and outside the company believed that Mr. Skilling had a much better grasp than Mr. Lay of Enron’s complexities. Many of Enron’s most contentious financial activities – involving the use of off-balance-sheet entities to create hundreds of millions of dollars of reported income and hide like amounts of debt – occurred after Mr. Skilling became president and chief operating officer in 1997. Though the 61 year-old Mr. Lay was Enron’s chief executive for some 15 years, he apparently didn’t leave many fingerprints. A recent report by a court-appointed examiner in the Enron bankruptcy case, for example, said that Mr. Lay, as well as Mr. Skilling, was an infrequent user of e-mail and “also apparently did not retain many documents.” While federal investigators have long been interested in Mr. Lay’s activities in the months before Enron’s bankruptcy filing, their search received a boost recently with the guilty plea of former Chief Financial Officer Andrew Fastow. In return for a 10-year prison sentence, Mr. Fastow agreed to cooperate with the continuing criminal probe. Mr. Fastow is in a position to give investigators specifics about conversations he had with other top executives, including Messrs. Lay and Skilling, said people familiar with the matter. It isn’t known what specifically prosecutors are looking at regarding Mr. Lay during the several-month period preceding the Enron bankruptcy filing. Nor is it known whether Mr. Fastow has tried to link Mr. Lay to any criminal activity. However, questions have arisen about Mr. Lay’s conduct based on publicly know information. For instance, on August 2001, when Enron announced Mr. Skilling’s departure, Mr. Lay told The Wall Street Journal that the resignation had nothing to do with Enron’s falling stock price. Mr. Lay later told an internal company investigation that Mr. Skilling had cited worries about the falling stock price when he first told the chairman of his plans to resign, according to a memo prepared by Enron lawyers in connection with that investigation. Various investigations have found that Enron had been using its own stock to bolster off-balance-sheet financial structures that were hiding from the public large losses on company investments. The drop in Enron’s stock price during 2001 badly undermined those structures. In his interview with company investigators, Mr. Lay indicated that he took Mr. Skilling’s concern over the falling stock price as an expression of personal frustration by the Enron president rather than a sign of trouble at the company. A few days after Mr. Skilling’s resignation, Mr. Lay was contacted by Enron Vice President Sherron Watkins, who in a now-famous memo detailed her concerns about off-balance-sheet entities, known as the Raptors. The Raptors were helping the company hide millions of dollars of company losses from the public and Ms. Watkins thought the entities were on shaky ground. Subsequent outside investigators have said that the Raptors violated accounting standards and were improperly used to manipulate company financial statements. As late as October 2001, Mr. Lay was expressing relative ignorance about the Raptor arrangement in another Journal interview, to the point of saying that he couldn’t even recall its name. In a later written reply to reporters’ questions, Mr. Lay said he hadn’t been trying to hide information but simply hadn’t remembered the name. In a roughly two-week period after being contacted by Ms. Watkins, Mr. Lay pulled about $16 million out of Enron by borrowing money from the company and repaying the loans with some of his Enron stock, according to records obtained by the Enron bankruptcy examiner. Mr. Lay’s defenders have said that the stock transactions were pieces of a legitimate investment strategy. They have also said that Mr. Lay passed up other opportunities to dispose of Enron stock in 20001 on the belief that the share price would rebound. Prosecutors have been looking at Mr. Lay’s stock dealings but haven’t found a basis to bring criminal charges, said one person familiar with the probe.