Prosecutors presented a strong case in the fraud trial of former Enron chief executives Kenneth Lay and Jeffrey Skilling, but the defence still has a chance to win acquittal, legal analysts said.
The government, which concluded its case on Tuesday in just under two months in a trial seen as a test for the United States crackdown on corporate crime, has created a formidable task for the defence, said analysts.
“I think the government should be fundamentally quite happy,” said John Coffee, a Columbia University law professor specialising in white-collar crime.
“They have put on a variety of witnesses that have communicated the same story … each of those people have been cross-examined and have had to retreat a bit, but each one adds up, and it is cumulative.”
Coffee said the prosecution avoided any major surprises or mistakes, and did not allow the case to get bogged down in financial minutiae.
“The worst thing that can happen [for the prosecution] is that the jury can become confused and bored,” Coffee said. “A confused jury is less likely to convict.”
Jacob Frenkel, a former government prosecutor who has worked with the Securities and Exchange Commission, said the prosecution appeared to have presented a solid case, but that the trial is only about halfway over.
“To say the government did a good job would be the equivalent of saying at halftime in a football match the government is ahead,” Frenkel said.
“Unfortunately the game is not over yet.”
Lay (63) and Skilling (52) have denied the charges, which carry long prison terms.
Enron collapsed in 2001 with estimated losses of more than $40-billion.
What was then the biggest corporate collapse in history sent panic through Wall Street, and Enron’s auditor Arthur Andersen went out of business in the storm that followed.
Lay, who founded Enron and served as chairperson and chief executive, faces six counts of fraud and conspiracy. He also faces a separate trial on federal banking violations. Skilling, a company veteran who served several months as chief executive, faces 28 charges of fraud, conspiracy, insider trading and lying to auditors about Enron’s financial position.
Several Enron executives have already pleaded guilty and have been sentenced to jail, and some are helping prosecutors in their cases against Lay and Skilling.
Former Enron chief financial officer Andrew Fastow, seen as the architect of the secret parternships that hid Enron’s massive debts and who testified under a plea agreement, ended up as an effective witness, according to Frenkel.
“The defence made Mr Fastow an effective government witness by overaggressively questioning someone who clearly was conveying his remorse and his regret,” Frenkel said.
Although the defence wanted to make Fastow the scapegoat, the lawyers may have erred by being too tough on the former executive, said Frenkel.
“You have a jury of 12 human beings watching another human being being pummeled by a trained gladiator, the lawyer,” said Frenkel.
“If the jury develops sympathy for that witness, then the cross examination has failed.”
One potential witness not called was Richard Causey, the former chief accountant at Enron who was to be tried with the two former CEOs but reached a last-minute plea agreement.
Frenkel said Causey is the prosecution’s “ace in the hole” who could be used in rebutting any testimony from Lay or Skilling.
“Dangling the prospect of Richard Causey as a witness will influence the defence presentation,” Frenkel said.
“The defence needs to think about what Causey would say in response” to accounts from Lay or Skilling.
The defence teams plan on calling about 25 witnesses from an original list of 170 and expect testimony to last about four or five weeks.
“The government’s case was long on atmosphere and short on facts and we are going to get the facts in front of the jury,” said Daniel Petrocelli, Skilling’s lead attorney, told reporters. “We are very hopeful and confident.”
“There’s been no case in this case,” Michael Ramsey, Lay’s lead lawyer, told reporters outside the courthouse.
Coffee said the case “could still be won or lost” on the testimony of Lay and Skilling, who have both indicated they will take the witness stand.
“They have to testify because there is a strong case against them and they have a lot of explaining to do,” said Coffee.
Yet Coffee said the defense strategy may be flawed.
“I think it will be hard to convince a Houston jury that Enron was a healthy company that was a victim of a market panic,” he said. “It’s like denying there was a Holocaust.” – AFP