Judgement day arrived for Enron’s two former chief executives on Monday, about four years after the fraud that rocked the corporate world.
Kenneth Lay and Jeffrey Skilling were set to go on trial in Houston federal court, facing hefty prison terms for securities fraud and conspiracy in connection with the 2001 meltdown of the energy giant that was one of the largest United States corporations.
Scores of news organisations are in Houston to cover the opening of the trial, which could last several months. As with other federal court trials, it will be open to media only with pen and pad, or sketch artists. No photographs or recordings are allowed in the courtroom.
Unlike some of the other CEOs accused of crimes, Lay and Skilling have not shied from publicity ahead of the trial.
“We’re ready; bring it on,” Skilling (52) said in an interview a last week with the Fort Worth Star-Telegram.
“But I have absolutely no question that what we did at Enron was correct. I have absolutely no question that we are innocent of any criminal wrongdoing. I’ll stand by that. I’ll make that fight.”
Lay (63) who founded Enron and served as chairperson and as CEO except for a short time when Skilling occupied the job, has set up his own website and has given speeches proclaiming his innocence.
Legal analysts said prosecutors must steer clear of the minute details of the fraud and focus on lying and deceiving by Lay and Skilling. The two former CEOs will seek to show that they were simply following the advice of their accountants and lawyers.
The trial will be a major test for the for the US Justice Department task force set up after the massive scandals at Enron, WorldCom and other companies to crack down on corporate misdeeds.
“This is the championship game,” said Maryland securities lawyer Jacob Frenkel, a former government prosecutor who has worked in enforcement with the Securities and Exchange Commission.
Although prosecutors have been able to put several key executives behind bars, an acquittal in the Enron case, the most notorious scandal of this era, could be a severe blow to the government, the lawyer noted.
“If Skilling and Lay are acquitted, corporate fraud prosecutions in the United States will be judged at best as a moderate success and possibly even a waste of money,” he said.
“I don’t think it’s a slam dunk either way,” said Ross Albert, a former prosecutor and SEC enforcement lawyer who practices securities law in Atlanta, Georgia.
The complexity of the case — Enron’s myriad of special entities it created to hide its debts — was a reason for the long delay in bringing the case to trial. But experts said prosecutors have to be able to state the fraud in clear terms.
“That complexity is both the major factor behind the long delay in bringing the case to trial, and the major hurdle the prosecution now faces,” said Albert.
“If the government cannot explain why what happened at Enron was wrong in terms 12 lay people can understand, then the government will likely fail to obtain convictions.”
Enron was the largest-ever US bankruptcy at the time of its demise in 2001. The once high-flying energy firm overstated its profits and underestimated its debts by billions of dollars, using a myriad of off-balance-sheet partnerships.
A big challenge in the trial presided by US District Court Judge Sim Lake will be finding an impartial jury for the proceedings, which could last for several months. – AFP