Prosecution, Defense Wrap in Enron Trial; Case Goes to the Jury

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.


Advertisement


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.

You may like these other stories...

IRS audits less than 1 percent of big partnershipsAccording to an April 17 report from the Government Accountability Office (GAO), the IRS audits fewer than 1 percent of large business partnerships, Stephen Ohlemacher of the...
Legislation coming out of Washington just might reduce homeowners' burden for disaster insurance. It's a topic very much on everyone's minds since the mudslide in Oso, Washington. The loss of human life was...
Divorce is hard, and the IRS isn't going to make it any easier. The IRS generally says "no" to tax deductions that might ease the pain of divorce. In certain circumstances, however, you might be able to salvage...

Upcoming CPE Webinars

Apr 22
Is everyone at your organization meeting your client service expectations? Let client service expert, Kristen Rampe, CPA help you establish a reputation of top-tier service in every facet of your firm during this one hour webinar.
Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.