Testimony has ended in the trial of former Enron executives Jeffery Skilling and Ken Lay. Both are facing multiple counts of fraud and conspiracy. Lay faces six counts, while Skilling faces 28 counts, in addition to insider trading and lying to auditors, according to the Associated Press. Lay and Skilling allegedly conspired to portray Enron as healthy to the public, while employing accounting tricks to maintain the image.
Skilling finished his testimony almost two weeks ago, leaving Lay and Assistant U.S. Attorney John Hueston to spar and wrangle throughout his six days on the stand, according to the Associated Press. Lay ended his time on the stand today, telling the court, “When Enron went into bankruptcy, Linda and I still owned a little over 1 million shares of Enron stock and 4 million vested options, options we could have exercised and, for most of the year, would have had substantial value,” according to the Houston Chronicle.
“I continued to have faith in Enron stock most of the way through 2001, certainly into November 2001,” Lay said in the Houston Chronicle. Enron declared bankruptcy on December 2, 2001. Lay finished telling the jurors in the courtroom, “I loved Enron very much and I loved Enron’s employees very much.”
Lay borrowed cash from Enron in $4 million amounts and ended up selling $70 million in company shares to pay back margin calls from banks that didn’t have to be disclosed to the public immediately, according to the Associated Press. The Houston Chronicle reports that Lay had between $6 and $11 million available in bank revolving credit. Lay also sold $7 million of stock in companies other than Enron in Spring 2001.
Lay understood his decision to sell company stock in order to repay Enron lines of credit was in full compliance with all Securities and Exchange Commission rules. The law now requires that any CEO selling back shares to a company must report the sale within two days. “I call that the Ken Lay provision,” said Gary Brown, a securities attorney and special counsel for the Senate Committee on Governmental Affairs, during its 2002 investigation of Enron’s 2001 collapse into bankruptcy.
“We could have reduced some living expenses, but as I said earlier, we realized the American dream. We were living a very expensive lifestyle,” according to the Associated Press. The Houston Chronicle reports that Lay continued, “It’s the type of lifestyle that’s difficult to turn on and off like a spigot.”
In February 2001, Lay chartered a boat named the “Amnesia” for $200,000 to celebrate his wife’s January 2001 birthday, while only spending $12,000 for his birthday celebration at a resort. They also spent $4,700 for a few nights on the French Rivera, in addition to a $20,000 credit-card purchase on antiques in Majorca, Spain. They spent $32,000 to reserve a trip to Park City, Utah for 2002.
Lay and his attorney did not have a seamless courtroom rapport, apparently. He would regularly interrupt his attorney George McCall “Mac” Secrest and ask, “Where are you going with this?” in response to questions.
“Skilling’s attitude was, ‘I’m right, and I’m going to prove it to you.’ Lay seems to be setting himself up as the ultimate skeptic, saying ‘I’m above the charges you brought against me, so you prove your case to me.’” Dennis Herlong, trial attorney, speaking in the Houston Chronicle in describing Lay’s use of a very different style than Skilling on the stand.
“Lay was supposed to be the grandfatherly foil to Skilling’s bullying big brother. Now he’s making Skilling look like Dr. Phil.” Brian Wice, defense attorney attending the trial, speaking with the Houston Chronicle.
“Ken Lay is what I would call a fix-it man who thinks he can pick up the phone and take care of it because of who he is, a man of power. It’s as though he thinks he can call anyone, any time. They’re not going to like that kind of attitude,” said Gary Brown.
“This is looking like a textbook case of the dangers of putting defendants on the stand,” said Sam Buell, currently teaching at the University of Texas School of Law and former member of the Justice Department’s Enron Task Force. He continued, “It was widely agreed that the government had a stronger case against Skilling than Lay, there was less explaining for Lay to do, and more questions about his links to the fraud.”
“There are three kinds of people you don’t make look bad: your mom, the home plate umpire and your own lawyer on direct. Direct examination is supposed to be the open-book exam, the 200 points you get on your SAT for spelling your name right. By making his attorney look bad, Ken Lay blew it.” Brian Wice, defense attorney attending the trial, speaking with the Houston Chronicle.
Lay has another trial following this one, concerning four counts of bank fraud, that will be tried by U.S. District Judge Sim Lake. The Houston Chronicle reports that Lake asked attorneys to complete testimony by May 11 in order for closing arguments to begin on May 15.