The Aftermath

Whatever will we talk about now?

Now that a Houston jury has convicted former Enron executives Kenneth L. Lay and Jeffrey K. Skilling on fraud and conspiracy charges, let's do a little housekeeping, then take a look ahead.

There are a couple of good stories in today's Houston Chronicle worth checking out. One is a profile of John Hueston, the government prosecutor who cross-examined Lay with such irritating jabs that the Enron founder turned into the Mean Old Man of the trial, destroying any chance he might have thought he had to charm the jury. Right out of the chute, Hueston accused Lay of witness tampering, something that he knew would disorient and anger Lay because it was outside of the indictment and most likely a surprise.

The second is a Q-and-A with Jennifer Binder, the former Skilling girlfriend who started a digital photo business that did business with Enron and in which Skilling invested, while not disclosing the conflict of interest to the Enron board. The prosecution used the company, called Photofete, to argue: If Skilling will lie about one thing, he'll lie about another.

Now, moving forward.

The chief job of Lay and Skilling now is to ready their appeals. They're free on bail until sentencing on Sept. 11. Legal folks estimate they have a few grounds for appeal: that presiding Judge Simeon T. Lake III would not change the venue, that he would not grant separate trials for Lay and Skilling, and that he told the jury they could consider intent to fraud if they decided the defendants took measures to not know what was going on.

However, a number of lawyers quoted in various publications today seemed to think that hopes for a reversal on appeal are dim, largely because they focus on Lake's decisions, and appellate courts usually give trial judges wide latitude. Further, "SL3" is known for running a tight ship and does not play fast and loose with the law.

Many commenters to this blog were flabbergasted that, even after such a slam-dunk pair of convictions, Lay and Skilling still deny they did anything wrong. They argue that the government had criminalized standard, albeit cutting-edge, business practices.

After listening only to the testimony of Lay and Skilling, I can see the merit in such an argument. The lack of a smoking-gun document by the prosecution was noteworthy. Also, Skilling especially had reasonable-sounding (and fairly easy-to-understand) explanations for Enron business practices that the government said were criminal.

However ... I did not have the benefit of listening to the testimony of previous prosecution witnesses, such as former finance chief Andrew S. Fastow, who admitted to crimes, and others who swore that Lay and Skilling were either in the room where such crimes were being committed, or explicitly or implicitly knew about them and signed off on them.

Therefore, Lay and Skilling were forced to testify that a) they didn't remember such meetings or b) such meetings never happened. That meant it became a question of their credibility, and the prosecution did do an effective job of tearing that down.

There are a lot of ways to win a case. The satisfaction felt by the prosecution team -- Hueston, Sean Berkowitz, Kathryn Ruemmler and the others -- must be immense. To have spent the past two-plus years on this and have an acquittal or hung jury would have been devastating to them.

Me, I'm very interested now in what day-to-day life will be like for Skilling and Lay over the rest of the summer. The government has its eyes on their abodes. Both also face civil suits filed by shareholders who seek billions of dollars.

Lay is 64, Skilling is 52. A sentence of at least 10 years most likely will be a life sentence for Lay. But if Skilling pulled only 10 years, he could have a life afterward. What would he do? Who would hire him? He's a brilliant businessman and an expert in the energy industry. But would he be forever tainted?

These will be interesting questions to chew on as In the Pipeline goes dark for now. However, it will pop back up from time to time over the summer when the Enron news merits it, and we'll be back full-force around sentencing in September, so keep checking back.

And, whatever you're going to do over the next three months, be assured you're going to have a better summer than Ken Lay and Jeff Skilling.

By Frank Ahrens |  May 26, 2006; 4:09 PM ET  | Category:  Dispatches
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If you haven't seen it yet, it's a must: The documentary about the Enron collapse produced (I think) by a Fortune reporter. I want to say it is called "The Smartest Guys in the Room."

Both men got what they deserved!

Posted by: Paul | May 26, 2006 05:07 PM

I am assuming that Lay and Skilling will be sent to the same prison and it will not be one where one would want to drop the soap in the shower.

Posted by: CS | May 26, 2006 05:34 PM

I don't get the Skilling as great businessman thing . . . What he calls "cutting edge business" is in fact; according to the law, the jury, and common sense - LYING. How can you talk about Skilling as a knowledgable energy executive. He and Lay are con artists. Pure and simple. If you disagree, do business with them if, god forbid, they get out of jail. Just don't complain when they take you for every dime - just like they've taken every other person they've ever done "business" with.

Posted by: Dave | May 26, 2006 07:52 PM

Jennifer Binder wasn't asked any tough questions in that interview. Why would ANY Enron employee "invest" in a startup vendor who is doing business with their company ??? Especially the Chairman and the CEO ? When it clearly violated the company's policies ? Couldn't the Q & A easily have asked Ms. Binder about her special "investors" ?

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Posted by: Jim | June 2, 2006 08:29 AM

I have to agree. Neither Skilling nor Lay were particularly
good businessmen. Lay papered over loose operations
in the 1980's that had wall street found out would have tanked
the stock for years. Skilling let Rebecca Mark go insane
buying water utilities. Neither understood the insane
levels of risk the firm was taking. Skilling was trying to
run an assets free business so they could maximize
ROE and ROI. What neither failed to grasp is that Assets-free
is Cash free. The first cash crisis they hit killed the firm.
Real businesses, not one's run by Harvard MBA's build assets,
build cash, build value. Enron did none of that.
Skilling was just another 1990's Dot-Conners who
lied his way up the ladder.

Posted by: Pat B | June 2, 2006 08:36 AM

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