Prosecutors Lay Out Case in Enron Fraud Trial

Jeffrey Skilling

Former Enron CEO Jeffrey Skilling arrives at the federal courthouse in Houston, Jan. 31, 2006. Reutersr hide caption

itoggle caption Reutersr

During the opening day of the Enron fraud and conspiracy trial, federal prosecutors present their case against former executives Kenneth Lay and Jeffrey Skilling. Defense lawyers also give their opening statements. The energy giant collapsed in 2001 — the largest bankruptcy in U.S. history at the time.

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MELISSA BLOCK, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Melissa Block.

ROBERT SIEGEL, host:

And I'm Robert Siegel. In Houston today, federal prosecutors presented their opening statement in the case that the judge calls one of the most interesting and important cases ever tried. It has been four years since the Enron Corporation collapsed in an accounting scandal that still reverberates on Wall Street and in corporate boardrooms. Enron's bankruptcy was the largest in U.S. history at the time.

And today, the government laid out its case against former Enron executives Ken Lay and Jeffrey Skilling, and defense lawyers countered with opening statements of their own. NPR's Wade Goodwyn was there, and, Wade, I understand that the chief prosecutors in this case, John Hueston, tried to keep things simple today.

WADE GOODWYN reporting:

Well, the government told the jury several times that this trial wasn't about accounting, it was about lying. I think this case is going to be about both accounting and lying, but I agree, Hueston was concentrating on making things simple for the jury.

The government began by playing audio and video of Jeff Skilling talking to his top executives and employees about the health of Enron's broadband division. The jury heard Skilling tell executives that the division's cost structure was out of control, that it was like someone had turned out the lights on the revenue stream, that they were going to have to transfer people out of the division. Hueston turned to the jury and said, you just heard the facts, now here's the fiction.

And then the jury heard Skilling telling investors and analysts that the broadband division was coming along just fine, that he was feeling good about its prospects. The government's opening was so effective, that Skilling's lawyer, Daniel Petrocelli, went over and congratulated the prosecution's team during the break. I thought to myself, that can't be a very happy sight if you're Jeff Skilling.

SIEGEL: Now Enron's former chief financial officer, Andrew Fastow, has already pleaded guilty, and he's cooperating with the prosecution. Did his name come up often today?

GOODWYN: There was quite a bit of discussion about Fastow. The government was quick to tie Jeff Skilling and Andrew Fastow together. Hueston said that Skilling embraced a variety of accounting tricks brought to him by Fastow and other accountants, all of which were designed to artificially inflate earnings. Hueston said that Fastow was going to get on the stand and tell the jury about secret agreements between himself and Skilling that guaranteed that Fastow and his partnerships would never lose money. And the government made certain the jury knew that Fastow pocketed $45 million while he managed these partnerships.

SIEGEL: Now, Ken Lay and Jeff Skilling are being tried together, because that was the decision of the judge who's hearing this case, Simeon Lake. Are the prosecutors treating them, approaching the two prosecutions in the same way?

GOODWYN: The specifics of the case against the two men are different, but the government's themes today were similar, and that was that Skilling and Lay lied. With Lay, the government juxtaposed what Lay was being told by Enron insiders about the true state of his company versus what he was saying to employees, Wall Street and the investing public. Whistleblowers like Sharon Watkins warned Lay that Enron was going into a death spiral and would implode into an accounting scandal. But instead of telling the truth, prosecutors said Lay was focused on reassuring investors. In an online chat, he told anxious Enron employees that the company's reserves were in fine shape. And that the company's accounting was sound and Enron stock was a hell of a good buy. But prosecutor Hueston said this was all just a pack of lies.

SIEGEL: That's what the prosecutor says. What did the defense lawyers say?

GOODWYN: Skilling's lawyer, Daniel Petrocelli, depicted his client as an idea man and a workaholic who loved Enron and would've never done anything to damage it. Petrocelli said there was no overarching conspiracy and that in fact the vast majority of the 16 Enron executives who pleaded guilty were coerced by prosecutors into copping their plea. Lay's lawyer, Mike Ramsey, attacked the government indictment directly, saying it seemed like it was written by someone with a nervous disorder. He said the indictment was overflowing with words like willfully and intentionally, but devoid of any content when it came to charging Lay with specific illegal acts. And finally, Mike Ramsey said failure in business was not a crime, and that if it were, we'd have to turn Oklahoma into a penal colony to hold all the executives who've gone bankrupt.

SIEGEL: Thank you, Wade.

GOODWYN: My pleasure.

SIEGEL: That's NPR's Wade Goodwyn reporting from Houston.

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