Enron Task Force prosecutor Kathryn Ruemmler wrapped up the government’s case against Kenneth Lay and Jeffrey Skilling, former chief executives of the bankrupt company, in a four-hour presentation on Monday in Houston, asking the jury to hold both men accountable for the choices they made and the lies they told.
Defense attorneys, who presented their arguments on Tuesday, admitted bad business judgment on the part of their clients but emphatically denied criminal intent or conduct that would support the government’s charges of conspiracy and securities fraud against the two men.
Sean Berkowitz, lead prosecutor for the government, rebutted the defense’s claims for two hours on Wednesday before the jury of eight women and four men retired for its deliberations.
“The company failed, but it did not fail because of a fraud,” Lay’s lawyer Bruce Collins told the jury. “I’ll grant you there are a lot of business decisions you could second guess in this case . . . but those business judgments are not crimes.”
Daniel Petrocelli, Skilling’s attorney, described his client as a “tortured soul”, prone to depression and with a weakness for drink, the New York Times reports. Petrocelli accused the prosecution of conducting “an autopsy on Enron.” Referring to the conspiracy charges, he said, “Their approach to this case was that Enron was a mob organization.”
“Culture is not a crime,” Petrocelli said, according to the Times. “Bankruptcy is not a crime. Failure is not a crime.”
Defense attorneys cited weaknesses in the government’s case that included the absence of a paper trail connecting the defendants with illegal activity and the prosecution’s use of witnesses who had already admitted their own guilt in the financial dealings that led to the collapse of the company.
Ruemmler argued that the two executives used “accounting tricks, fiction, hocus-pocus” and outright lies to deceive investors and auditors about the real condition of Enron’s finances.
She reviewed evidence that Skilling had lied about problems in the broadband and Energy Services businesses and the use of LJM –off-the-books partnerships to manufacture earnings, and argued that the Raptors vehicles were used to hide losses, according to the Times.
Ruemmler referred to the government’s strongest evidence, testimony by David Delainey that $200 million in losses was moved from the Energy Services to the wholesale unit for “efficiency” reasons, a move signed off by Skilling, as proof of intent to defraud, the Times says.
Ruemmler expressed outrage at Lay’s sale of his own Enron stock back to the company in August 2001, when he told company employees he was purchasing stock. “He’s charged with telling people he was buying it when he was selling it back to the company,” she said, according to the Houston Chronicle. “He’s not charged with insider trading. But he chose to make those statements and they were flat lies.”
Petrocelli said that moving money from the energy business to the wholesale unit was blessed by Enron’s accountants, Arthur Andersen, and other executives, and argued that the Raptors were legitimate hedging instruments, CNNMoney said.
Lay’s lead attorney Michael Ramsey concluded his passionate defense of his client with, “A not guilty verdict is not an innocent verdict. Innocence is for God and Holy providence. When you say not guilty, you’re not saying innocent, you’re saying not proven.”
Sean Berkowitz rebutted defense arguments, saying that the prosecution followed the evidence, which included phone calls and emails, according to the Times. He said that former Enron executives had no reason to plead guilty to fraud charges if they believed they weren’t guilty and called attention to the suggestion by the defense that the prosecution had coached witnesses, Bloombergnews.com said.
Berkowitz argued that the defense attorneys had presented Lay’s and Skilling’s decisions as “business as usual.” “It’s not business as usual. It’s a crime to fudge your numbers; it’s a crime to lie to investors,” he said.
Jurors should not be swayed by the emotional appeals of defense attorneys who suggested that Ken Lay might end his life in a cage, Berkowitz said, according to Bloomberg. “You are not to consider punishment. . . That’s for the judge to decide. Put that out of your mind."
The jury’s instructions from U.S. district Judge Simeon Lake, delivered last Friday, include the “willful blindness” clause. “Knowledge can be inferred if the defendant deliberately blinded himself to the existence of a fact,” Lake told the jurors, according to the Chronicle.
Bernard Ebbers, former WorldCom executive, was convicted of fraud based on this clause. Ebbers is currently appealing his conviction.