Lay still no easy fish to hook
(so the guy had the connections and audacity to run Enron.. but he didn't know what was going on? wow what a chancer. Andrew Fastow was hired for a reason .. pb)
seattletimes.nwsource.com
By MARCY GORDON
The Associated Press
MICHAEL STRAVATO / AP
Former Enron Chief Executive Kenneth Lay is led into federal court in Houston yesterday. He pleaded not guilty to 11 criminal counts, including conspiracy and securities fraud.
WASHINGTON — Federal prosecutors will need much more than the word of Andrew Fastow to persuade a jury to convict former Enron chief Kenneth Lay of participating in an audacious scheme to deceive the government and investors, private attorneys say.
Lay, who founded the failed energy company in 1985, insists he was kept in the dark by Fastow, Enron's former chief financial officer. Fastow pleaded guilty in January to orchestrating partnerships and financial ruses to conceal Enron's massive debt and inflate profits while pocketing millions for himself.
"I did not know what he (Fastow) was doing. He didn't share with me what he was doing," Lay told reporters yesterday outside the federal courthouse in Houston, where he pleaded not guilty to 11 criminal counts including conspiracy, securities fraud and bank fraud.
For the government, making the case against Lay hinges heavily on providing corroboration in documents or witness testimony to what Fastow likely will say at trial, according to Andrew McBride, a former federal prosecutor now in private practice.
"That's the way to win that case," he said. "If it's Fastow alone, the government loses."
Much of the case will depend on the testimony of Fastow, the firm's former treasurer who pleaded guilty and is now facing a 10-year sentence.
"Fastow led a life so permeated with deceit and deception that he is going to be torn to shreds on cross-examination," said Christopher Bebel, a former U.S. attorney who specializes in securities law. "The government will not be able to rest its case on his testimony alone."
In addition, Lay will maintain his role was more ceremonial.
"He was not in the trenches and was not involved in key decisions on a daily basis, and he's going to be able to use that to his advantage," added Bebel.
Yet Henry Hu, a law professor at the University of Texas, Austin, said it's likely the government has compiled a formidable case.
"They don't want to be embarrassed by a hung jury, so you can be sure they have a lot of evidence suggesting that Ken Lay was not simply an innocent dupe," he said. "They've already sent a great message to corporate America, to would-be criminals, and they don't want to do anything to undermine that."
Unlike former Enron CEO Jeffrey Skilling and ex-top accountant Richard Causey, Lay wasn't required to sign off on the Byzantine deals and partnerships that Fastow hatched. The government wants to try the three together, but Lay's legal team is pushing for him to stand trial alone ahead of Skilling and Causey.
It will be "very, very tough" for Lay to get a separate trial because a conspiracy is being alleged, said Ronald Allen, a professor of criminal law at Northwestern University. And Frederic Fox, a trial lawyer in New York, added that the prosecutors want a trial of the trio "so the jury would see the whole picture" from that perspective.
In the indictment released yesterday and an accompanying civil complaint from the Securities and Exchange Commission, the government asserts there is ample evidence to tie Lay to the company's collapse.
"Mr. Lay is being charged, not for where he sat, but for what he did. Mr. Lay is today a defendant not because he was a disengaged figurehead, but rather because he was an all-too-engaged participant in the fraud that was Enron," said Linda Thomsen, the SEC's deputy enforcement director.
At the trial, Lay "is going to portray himself as as much a victim of this fraud" as any hapless Enron employee or shareholder, said Robert Mintz, a former Justice Department prosecutor. Lay will paint himself as "more glad-hander than bookkeeper," he said.
Once worth about $400 million, Lay says he has been wiped out by Enron's collapse and pegs his current net worth at less than $20 million.
Sherron Watkins, the Enron accounting executive who warned Lay in 2001 that the financial house of cards was set to collapse, has drawn a distinction between Lay and Skilling, his hand-picked protégé. Watkins testified to Congress in 2002 that she believed Fastow and Skilling "did dupe Ken Lay and the board."
Contrasting with other high-profile corporate cases, the government's case against Lay does not accuse him of personally profiting from a company conspiracy.
For millions of Americans, Lay's indictment carried a certain resonance. After Enron, scores of companies were caught falsifying their books, illegally fattening executives' pockets or lying to shareholders.
While the recent wave of prosecutions — one of the largest in modern corporate history — has certainly changed some business behavior, it's also exposed something more tangible: the financial losses of tens of billions of dollars and, in many cases, life savings.
Because this is a presidential election year, the Lay indictment has quickly taken on political overtones. Some view the event as proof President Bush has followed through on his pledge to crack down on white-collar crime — particularly given that the handcuffs were snapped on a former friend and major contributor.
Enron executives contributed more than $600,000 to Bush campaigns, according to the Center for Public Integrity, making the company the second-largest contributor to Bush throughout his public career. The Washington-based nonprofit group said Lay and his wife, Linda, had given $139,500 to Bush's political campaigns over the years.
The Lays donated $882,580 to federal candidates from 1989-2001, according to the Center for Responsive Politics. All but $86,470 went to Republicans.
Democratic challenger John Kerry has singled out Enron when he attacks the Bush administration for its ties to "corporate interests."
It didn't help the White House that many television newscasts yesterday showed old footage of Bush enjoying a baseball game with Lay.
Still, the details of the case may not prove too harmful to Bush. The trial, if there is one, isn't expected until 2005, well after the election.
"President Bush is not the first president to have associated with folks in the business community who ran afoul of the law," said Kirby Behre, a former federal prosecutor. "It is not as if he's been hanging out with Ken Lay for the last three years." |
