Skilling and Lay
guilty
Lay and
Skilling found guilty
Ex-CEO and founder
convicted on fraud and
conspiracy charges in
Enron case.
CNN.com Breaking News
from the Web May 25, 2006
HOUSTON -- Enron former chief
executive Jeffrey Skilling and founder Kenneth Lay were found guilty Thursday of
conspiracy and fraud in the granddaddy of all corporate fraud cases.
On the sixth day of deliberations, a jury of eight women and four men convicted
the former executives of misleading the public about the true financial health
of Enron, whose collapse in late 2001 symbolized the wave of corporate fraud
that swept the United States early this decade.
Skilling was found guilty on 20 counts of conspiracy, fraud, false statements
and insider trading. He was found not guilty on eight counts of insider
trading.
Lay was found guilty on all six counts of conspiracy and fraud.
In a separate bench trial, Judge Sim Lake ruled Lay was guilty of four counts of
fraud and false statements.
Both Lay and Skilling could face 20 to 30 years in prison, legal experts say.
The verdict is a major victory for the government and marks the end of one of
the most scandalous chapters in the history of corporate America.
Houston-based Enron, once one of the hottest companies on Wall Street, imploded
in a matter of months after Skilling abruptly resigned as CEO in August 2001.
Lay, who was chairman at the time, postponed his retirement plans to return to
the helm.
Enron's collapse marked the first of the high-profile corporate scandals that
rocked the nation, followed by WorldCom, Global Crossing, Adelphia and Tyco.
The wave of fraud led to passage of the Sarbanes-Oxley law that tightened
oversight of how American companies are audited.
After a government investigation that took 4-1/2 years, prosecutors presented
evidence that Lay and Skilling orchestrated a conspiracy to artificially inflate
profits, hide millions in losses and misrepresent the true nature of the
company's finances.
The long-awaited trial began Jan. 31 in Houston, despite repeated protests from
defense attorneys calling for a change in venue.
The defense argued that it was impossible to get a fair trial in Houston -- the
epicenter of Enron's collapse. Enron's bankruptcy, the biggest in U.S.
history when it was filed in December 2001, cost 4,000 employees their jobs and
many of them their life savings. Investors lost billions.
Over 16 weeks, the government presented 22 witnesses, including former top
executives, who testified that Skilling and Lay fostered a culture that put the
company's image and stock price above everything else, at any cost.
Sixteen people pleaded guilty for crimes committed at the company, and five
others, including four former Merrill Lynch employees, were found guilty at
trial. Eight former Enron executives testified against Lay and Skilling,
their former bosses.
But it was Enron's former finance chief, Andrew Fastow, who was the star witness
for the government.
Fastow, who pleaded guilty to wire and securities fraud in 2004 in exchange for
an expected 10-year sentence, testified that special partnerships were created
to help the company hide millions of dollars in losses.
But defense lawyers dismissed the testimony of Fastow and other witnesses,
saying that not only were Lay and Skilling innocent, but that no crimes were
committed at Enron, except for the shady deals that enriched Fastow.
As for those other than Fastow who testified against Lay and Skilling, defense
attorneys said they were strong-armed by the government and compelled to lie on
the stand out of fear for themselves and their families.
In an attempt to explain away the company's aggressive accounting and the
optimistic comments executives made to Wall Street, both Skilling and Lay
testified during the trial.
But that yielded decidedly mixed results.
Skilling, known for his harsh attitude, came off in a mostly positive light,
though he did lose his temper on the stand. But Lay's congenial reputation
took a blow as he appeared confrontational and irritable at several points
during his testimony.
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