Guilty, Guilty and Guilty

It's pretty clear that the government prosecution hit a home run with the verdicts against former Enron chief executives Jeffrey K. Skilling and Kenneth L. Lay, which were just released. Lay was found guilty on all six couns, Skilling on 19 of 28 counts.

The jury, which began deliberation May 17, clearly wanted to put a hurt on the top two men of Enron. After getting guilty pleas from several lesser Enron executives -- some of whom gave damaging testimony against Lay and Skilling -- it was important for government prosecutors Kathryn Ruemmler, Sean Berkowitz and John Hueston to get convictions against Lay and Skilling.

Though the prosecution never produced a slam-dunk smoking-gun memo or e-mail, such as: "Dear Ken: Let's defraud the investors. Love, Jeff," it did a thorough job of damaging the credibility of both Lay and Skilling, essentially, saying, "If these two will lie about one thing, they'll lie about another."

In some ways, the case-within-a-case was the Photofete scandal. In his cross-examination of Skilling, Berkowitz revealed that Skilling had invested a tidy sum in a photo start-up business run by a former Enron employee and -- bonus! -- girlfriend of Skilling's.

Skilling was caught flatfooted by the questions and said he'd invested only a small amount. When Berkowitz produced canceled checks to show it was more, Skilling was forced to retreat.

For Lay, the government hammered away at his big stock dump during 2001. Lay sold $70 million in stock during the period while buying just a little. His purchases were disclosed in required quarterly filings, but his sales were not -- he was not required to report the sales until the end of the year because he sold the stock back to the company, and not through a broker.

Hence, prosecutors argued, a reasonable investor would believe that the chief executive of Enron -- which was facing bad press and questions from Wall Street -- was a net buyer of stock during this time, rather than a massive seller. This was a purposeful misrepresentation of the company's health, the prosecution charged. And the jury agreed.

More to come throughout the day. It's good to be back.

By Frank Ahrens |  May 25, 2006; 12:51 PM ET  | Category:  Dispatches
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Skilling and Lay got off easy. If this was a different era, their heads would be on stakes and paraded through the streets. I wonder if that would make executives think twice about shaking down shareholders and employees.

Posted by: Karen2g | May 25, 2006 02:28 PM

Yesterday, I was on a Jet Blue plane which has Dirext TV and I heard clapping from different parts of the plane. I got up and asked what happened. Enron, someone shouted. All Guilty.

Posted by: ana | May 26, 2006 09:12 AM

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