Houston – Ken Lay and Jeff Skilling, the chief executives who guided former energy giant Enron through its spectacular rise and even more stunning fall, were found guilty Thursday of fraud and conspiracy.
They are among the most prominent corporate leaders in a wave of scandals that marked the get-rich-quick excesses and management failures of the 1990s.
A jury of eight women and four men reached the verdicts after a little more than five days of deliberations. Skilling was convicted of 18 counts of fraud and conspiracy and one count of insider trading. He was acquitted on nine counts of insider trading. Lay was found guilty on six counts of fraud and conspiracy and four counts of bank fraud.
The conspiracy and fraud convictions each carry a sentence of five to 10 years. The insider-trading charge against Skilling carries a maximum of 10 years.
Both men are likely to appeal.
The judge in the case, Simeon Lake III, set sentencing for Sept. 11. Until then, the two men are free on bail. If they lose their appeals, Skilling and Lay face potential sentences that experts believe will keep them in prison for the rest of their lives.
Skilling, who had few family members in attendance, reacted with little emotion as the verdict was read, briefly searching the audience’s faces and later striding confidently alone out of the courtroom ahead of his lead lawyer, Daniel Petrocelli.
“Obviously, I’m disappointed,” Skilling said as he left the courthouse, “but that’s the way the system works.”
Once jurors and the judge left the courtroom, Lay’s family members huddled around him. Elizabeth Vittor, Lay’s daughter and a lawyer who had worked on his defense team, sobbed uncontrollably.
Two local ministers also leaned in and hugged Lay, whose family members soon formed a circle in the courtroom, with arms over shoulders, and cried together. “I know, I know,” Lay said to several of them in a soothing voice, as they clutched at his suit coat.
After he emerged from the courthouse, Lay said, “I firmly believe I’m innocent of the charges against me.”
In televised remarks he said, “We believe that God, in fact, is in control, and indeed he does work all things for good for those who love the Lord.”
For a company that once seemed so complex that almost no one could understand how it actually made its money, the cases ended up being simpler than most people envisioned. Lay, 64, and Skilling, 52, were found guilty of lying – to investors, employees and government regulators – in an effort to disguise the crumbling fortunes of their energy empire.
The 12 jurors and three alternates, who all agreed to talk to about 100 reporters at a news conference after the verdict, said they were persuaded – by the volume of evidence the government presented and by Skilling’s and Lay’s own appearances on the stand – that the men had perpetuated a far-reaching fraud by lying to investors and employees about Enron’s performance.
The panel rejected the former chief executives’ insistence that no fraud occurred at Enron other than that committed by a few underlings who stole millions in secret side deals. And the jurors said they did not believe that negative news media reports and failing market confidence combined to sink the company.
“The jury has spoken, and they have sent an unmistakable message to boardrooms across the country that you can’t lie to shareholders, you can’t put yourself in front of your employees’ interests, and no matter how rich and powerful you are, you have to play by the rules,” Sean Berkowitz, director of the Justice Department’s Enron Task Force, said outside the courthouse.
Lay was forced to remain in the courthouse for more than three hours after the verdict for a hearing on securing a $5 million bond, which will come from a mix of financial pledges from his children. He also must surrender his passport.
Lake will have broad discretion in determining the former executives’ sentences.
He is not known for his leniency. Two years ago, he sentenced Jamie Olis, a former midlevel executive at Dynegy, an Enron competitor, to 24 years for his role in a scheme to disguise the company’s finances. An appeals court last year ordered the judge to revise the sentence. A hearing is set for June 9.
The verdicts could have limited impact on a spate of civil cases.
“They are not the ones who are going to pay the billions of dollars in additional recoveries that we hope to obtain on top of the $7.2 billion we already have from banks in our previous settlements,” said William Lerach, the lead lawyer in the largest civil case, set to go to trial in October.
From the beginning, the Enron leaders’ trial was not what many people expected after revelations of secret off-the-books schemes that earned a small fortune for Andrew Fastow, Enron’s former chief financial officer, and his cadre of co-conspirators. Those transactions were used to artificially prop up the company’s profits, but prosecutors never seriously attempted to prove that Lay and Skilling were responsible for them.
Rather than delve into whether those intricate accounting structures were legitimate, prosecutors focused almost exclusively on what they cited as the false statements Skilling and Lay made to employees and outside investors. The “lies and choices” theme transformed the case into a test of credibility between the former executives and the more than half-dozen witnesses from inside Enron who testified for the government.