Thursday, May 25, 2006
It's about Time. Bush's Buddy "Kenny Boy" Lay can add CONVICT to his resume.
Former CEOs convicted of securities, wire fraud
The Associated Press
Updated: 1:04 p.m. ET May 25, 2006
HOUSTON - Former Enron Corp. chiefs Kenneth Lay and Jeffrey Skilling were convicted Thursday of conspiracy to commit securities and wire fraud in one of the biggest business scandals in U.S. history.
The verdict put the blame for the 2001 demise of the high-profile energy trader, once the nation’s seventh-largest company, squarely on its top two executives. It came in the sixth day of deliberations following a trial that lasted nearly four months.
Lay was also convicted of bank fraud and making false statements to banks in a separate trial non-jury trial before U.S. District Judge Sim Lake related to Lay’s personal banking.
Lay was convicted on all six counts against him in the trial with Skilling. Skilling was convicted on 19 of the 28 counts against him, including one count of insider trading, and acquitted on the remaining nine.
“Obviously, I’m disappointed,” Skilling told reporters outside the courthouse. “But that’s the way the system works.”
Skilling’s lawyer, Dan Petrocelli, said the verdict “doesn’t change our view of what happened at Enron ... or Jeffrey Skilling’s innocence.”
Lay did not come outside the courthouse to speak with reporters immediately after the verdict.
Lake told jurors, “you have reflected on this evidence for the last few days and reached a very thorough verdict, and I thank you.”
He set sentencing for Sept. 11.
Lake set a $5 million bond for Lay and ordered him to surrender his passport before he leaves the courthouse. The judge said the bond already in place for Skilling was sufficient. The judge said he did not believe home confinement was necessary for either.
The former corporate titans are now felons facing years in prison after being convicted of running an elaborate fraud that gave the company a glamorous illusion of success.
Jurors declared through their verdict that both men repeatedly lied to cover a vast web of unsustainable accounting tricks and failing ventures that shoved Enron into bankruptcy protection in December 2001.
The conviction was a major win for the government, serving almost as a bookend in an era that has seen prosecutors win convictions against executives from WorldCom Inc. to Adelphia Communications Corp. and homemaking maven Martha Stewart. The public outrage over the series of corporate scandals led Congress to pass the Sarbanes-Oxley act, designed to make company executives more accountable
The panel rejected Skilling’s insistence that no fraud occurred at Enron other than a few executives skimming millions from secret scams behind his and Lay’s backs, and a lethal combination of bad press and poor market confidence sank the company.
Both men testified in their own defense. Skilling is expected to appeal.
The government’s victory caps a 4 1/2 year investigation that nabbed 16 guilty pleas from ex-Enron executives, including former Chief Financial Officer Andrew Fastow and former Chief Accounting Officer Richard Causey.
Former Enron chairman Ken LayAll are awaiting sentencing later this year except for two who either finished or are serving prison terms.
Many deemed the outcome of the Lay-Skilling case a final exam of sorts of the federal government’s ability to prove complicated corporate skullduggery.
Enron’s implosion and the subsequent scandals vexed Wall Street, sent skittish investors fleeing, increased regulatory scrutiny over publicly traded companies and prompted Congress to stiffen white collar penalties.
Former WorldCom head Bernard Ebbers awaits a 25-year prison term for orchestrating the $11 billion accounting fraud that bankrupted the company. Stewart did five months in prison and more time confined to work and home for lying about a stock sale. Adelphia Communications Inc. founder John Rigas and his son got double-digit prison terms for looting their company.
HealthSouth Corp. founder Richard Scrushy bucked the trend with his acquittal last year of fraud charges despite five former finance chiefs pointing the finger at him in a $2.7 billion scheme to inflate earnings. He dropped in on the Lay-Skilling case during Fastow’s lengthy testimony in March, saying the ex-CFO couldn’t be believed.
But those cases were much simpler than that against Lay and Skilling.
The government’s vast investigation seemed to stall until Fastow pleaded guilty in January 2004 to two counts of conspiracy and paved the way for prosecutors to secure indictments against his bosses. Fastow also led investigators to Causey, who was bound for trial alongside Lay and Skilling until he broke ranks with their unified defense and pleaded guilty to securities fraud just weeks before the trial began.