Johnson and Ahrens Discuss the Week Ahead: Lay on the Stand

Former Enron chief executive Jeffrey K. Skilling finished nearly eight full days on the witness stand on Thursday, defending himself against 28 counts of fraud, conspiracy and insider trading charges.

Today, Enron founder Kenneth L. Lay takes the stand, facing six counts of fraud.

Frank Ahrens sat down with Business section reporter Carrie Johnson, who has been covering this trial since it began 13 weeks ago, to find out what's in store for the week.

Q. Hi, Carrie. Thanks for spending some time to answer a few questions. Why does Lay face so many fewer charges than Skilling?

A: Ken Lay focused more on international pursuits and on cultivating lucrative relationships with political leaders during the late 1990s while his protege, Skilling, handled day-to-day operations. Lay faces criminal charges based on his actions between August and December 2001, after he had taken over the reins from Skilling, who resigned abruptly that summer.

Q: Over the past two weeks we saw an animated Skilling, who by turns was professorial, combative and even jovial at times. What is Lay's personality like and how might that show itself on the stand?

A: By all accounts, Lay is much more accustomed to being a public figure. On his rise to the top, he charmed his way into business and political circles and became one of two or three key figures in Houston society before Enron's collapse. He has a sharp side, but he is used to speaking and persuading people with a manner far more avuncular -- and less bristling -- than Skilling.

Q: With Skilling, the government attempted to prove a pattern of deception as the mastermind behind a conspiracy to hide losses at Enron and pump up the stock by misleading investors. Lay has been known as much less of a day-to-day influence at Enron. What strategy will the prosecution pursue with Lay?

A: Prosecutors are trying to turn Lay's record of optimistic public statements to investors and employees in late 2001 into ammunition they can use against him. They will contrast Lay's urging of employees to buy Enron shares with his own stock sales during that period, which were not fully disclosed to the public until after the company fell apart. Lay argues that he sold stock only to cover margin calls on loans that had come due because of volatile technology investments he made.

Q: Skilling has said that he is innocennt of all charges, and that Enron's collapse was caused by a lack of investor confidence. Is this Lay's defense, as well?

A: Lay and Skilling both contend that no massive accounting fraud took place at Enron, aside from some tricks and thievery by then-finance chief Andrew S. Fastow and a few of his confederates. Both men argue that the bulk of the 16 former executives who pleaded guilty and agreed to help prosecutors were coerced into making deals under the threat of long prison terms. The government contends that so many bright insiders with top defense lawyers would never have admitted wrongdoing if they did not believe they were guilty.

Q: Do you think Lay will be on the stand for as long as Skilling? What will come after Lay is off the stand?

A: Lay is likely to be on the witness stand for most of the week, about half of the time that Skilling spent testifying. More character witnesses and a few expert witnesses are due up next.

Q: Once the criminal trial is over, do Lay and Skilling face any civil actions?

A: Both men face multiple shareholder lawsuits that seek millions of dollars from them. Prosecutors say Skilling earned more than $150 million between 1999 and 2001 and Lay reaped $220 million during that period.

Thanks Carrie. See you in court.

By Frank Ahrens |  April 24, 2006; 7:20 AM ET  | Category:  Dispatches
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