Jury Selection Begins in Enron Fraud Trial

Jeff Skilling and Kenneth Lay

Former Enron CEO Jeff Skilling, left, and company founder Kenneth Lay arrive separately at the federal courthouse in Houston for their trial, Jan. 30, 2006. Reuters hide caption

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Enron founder Kenneth Lay and former CEO Jeff Skilling go on trial Monday in Houston. Federal prosecutors will argue that Enron's top executives misled and defrauded investors through deals and statements designed to conceal growing losses at what was once the world's largest energy trading company.

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STEVE INSKEEP, host:

This is MORNING EDITION. From NPR News, I'm Steve Inskeep. On this day that former Enron executives go on trial, we have a scorecard. Several chief executives have gone on trial in recent years including Bernie Ebbers.

Mr. BERNIE EBBERS (Former Chief Executive, WorldCom): I believe that no one will conclude that I engaged in any criminal or fraudulent conduct during my tenure at WorldCom.

INSKEEP: They did conclude that and Ebbers now faces a 25-year prison term. Two Tyco executives, Dennis Kozlowski and Mark Swartz, are serving time: eight to 25 years each. Martha Stewart served five months. Richard Scrushy, of HealthSouth, was acquitted. And today, it's Kenneth Lay's turn to face trial. Lay and Enron's Jeffery Skilling go on trial in Houston. On his way to a Sunday service, Lay said that all will be fine. Federal prosecutors contend that Enron's top executives misled investors and concealed the company's losses.

NPR's Wade Goodwyn reports.

WADE GOODWYN reporting:

Ask the lead lawyers for Ken Lay and Jeff Skilling what their biggest worry is about the upcoming trial and they'll both give you the same answer. It's not the strength of the government's case, it's the state of mind of the Houston jury they're going to get.

Mr. DANIEL PETROCELLI (Defense Attorney, Jeff Skilling): The questionnaires confirmed our worst fears. People were still very angry, very upset and felt that my client, Mr. Skilling and Mr. Lay, were responsible for the fall of Enron and worse than that, felt that they were criminally responsible.

GOODWYN: Daniel Petrocelli is former Enron CEO Jeff Skilling's lawyer. The questionnaire he's referring to are the jury questionnaires. In 2001, Houston was rocked by Enron's bankruptcy and the subsequent media coverage. Feelings of disbelief, anger and shame coursed through the city. The problem for Mr. Petrocelli and his colleague, Michael Ramsey is that there are a lot of people in the City of Houston who want Skilling and Lay to get what they think is coming to them.

Mr. MICHAEL RAMSEY (Defense Attorney, Ken Lay): It's one of grave concern to us. It's the only concern we really have going into trial.

GOODWYN: Michael Ramsey is Ken Lay's lawyer. He also feels it is grossly unfair to try this case in Houston because he believes the jury pool is just too poisoned to be objective.

Mr. RAMSEY: They're saying really heated words, angry words on the questionnaire that, some of which won't do to repeat for family audiences. And I'm deeply concerned that we're likely to get on the jury, what lawyers refer to as stealth jurors people who don't reveal their feelings before they are seated.

GOODWYN: But Federal Judge Sim Lake has repeatedly denied the defense's motions to change the venue, believing he will be able to seat an objective jury.

One theme of the government's case is that Skilling and Lay conspired with other top executives at the company to misrepresent the true state of Enron's finances; that for much of the last two years of the company's life, Enron secret but real business plan was to put forward a deceptive fa├žade of success. Prosecutors declined to comment, but Robert Mintz is a former federal prosecutor who specialized in securities, fraud and white collar crime.

Mr. ROBERT MINTZ (Former Federal Prosecutor): They key to the government's case is going to be to present this as a clear-cut case of criminality. They're going to show the jury that in the one hand the defendant's were aware that Enron was in serious financial trouble and at the very same time, they were turning around and telling the investing public something entirely different.

GOODWYN: Prosecutors intend to use Lay and Skilling's rosy predictions about Enron's bright future against them. Mintz says the government will argue that Lay knew the company was suffering massive losses, but gave no hint of the truth when he briefed Enron employees, Wall Street and the investing public about the company's financial health.

Mr. MINTZ: The government is going to suggest that Ken Lay knew that this company was in dire financial straights and simply lied to the public.

GOODWYN: As for Jeff Skilling, prosecutors will try to prove that there was an overarching conspiracy of the company's top executives and that Skilling was right in the middle.

Mr. MINTZ: The government's case against Jeff Skilling will be simply that he was well aware of all of the questionable financial deals; that he knew that the company was being artificially propped up; and that he lied to the investing public about the health of the company.

GOODWYN: The government will try to demonstrate that Enron had become a financial house of cards propped up only by accounting tricks and lies. That once these deceptions came to light, once the conspiracy was unmasked, Enron naturally fell to pieces. But Jeff Skilling's lawyer, Daniel Petrocelli says this theory, that there was an overarching conspiracy involving numerous top executives, is ludicrous.

Mr. PETROCELLI: The idea that hundreds of people who worked at one of the most highly public corporations in the country, a corporation that was scrutinized by everybody, could pull off a massive wide ranging, far reaching, criminal conspiracy. I mean, the whole idea of this overarching conspiracy is a joke.

GOODWYN: Petrocelli intends to argue that everything that Skilling and Lay did was legal. He says there was criminal conduct, but it was a small group of executives who stole millions of dollars from Enron; but that the top men, Skilling and Lay, were victims, not perpetrators.

The challenge for this line of defense is the chorus line of former Enron executives the government is going to put on the stand. Andrew Fastow, former chief financial officer, Ben Glisan, former treasurer, and the most recent top executive to cop a plea is Richard Causey, the former chief accounting officer.

These men have already pleaded guilty to federal crimes. They are expected to get on the stand and say, I lied before, but I'm telling the truth now. Here's what happened.

Mr. PETROCELLI: It takes about ten seconds to say I did an illegal act and now I'm coming clean. But where's the evidence? How're they going to prove that they did illegal acts? What conversations are they going to point to? Where are the documents? What's the proof?

GOODWYN: For Ken Lay, among other things, prosecutors are going to focus on statements Lay made after Enron whistle-blower Sherron Watkins met with him a few months before the company collapsed. Watkins warned Lay that if he didn't do something, Enron would implode in a wave of accounting scandals. Prosecutors will assert that Watkins gave Lay an accurate, insiders account of what was really happening inside his company. The government is going to point out that Ken Lay kept that information to himself, and presented to the world a very different picture of his company; a fraudulent picture, they will argue. Mike Ramsey has to counter that.

Mr. RAMSEY: The statements that he's accused of are statements that any reasonably prudent CEO under the same or similar circumstances, in a bear market with his company under attack, would be calculated to make. You don't get to be CEO by being Chicken Little and claiming the sky is falling.

GOODWYN: And Lay's defense team will argue that whenever the CEO was presented with troubling information about his company, that he brought outside counsel in to investigate the allegations.

Mr. RAMSEY: He's not going to do a Sherlock Holmes. He didn't get out his magnifying glass and start investigating himself. He got his outside law firm, the biggest firm in Houston, to do a full bore investigation of Ms. Watkins' concerns.

GOODWYN: Ramsey is going to point out that Ken Lay took a bath by holding onto and even buying back Enron stock as it headed toward oblivion. He will make the case that Lay was completely unaware of the shenanigans going on in finance and accounting. He will say that Ken Lay wasn't a con man trying to pull the wool over investors' eyes, he was a true believer, and that's why he made all those positive statements from the bridge as his company sailed toward the iceberg.

Mr. RAMSEY: Let me give you an example. He said at one point that Enron's a good buy. It was a good buy, and the light God gave him to see, nobody could predict the stampede that occurred at the end. I have no discomfort whatsoever with what he said.

GOODWYN: What Ken Lay said and what he didn't say will be the grist that decides his fate. One of the biggest white-collar trials in American history begins today.

Wade Goodwyn, NPR News.

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