A Last Chance to Make a Case
As Enron Corp. founder Kenneth L. Lay sees it, the government must have known its case against him was weak or prosecutors wouldn’t have spent so much of the trial talking about things he wasn’t charged with.
Lay’s personal sales of Enron stock and his attempts to contact potential witnesses, much stressed by prosecutors, were “issues extraneous to my indictment,” he reminded reporters outside the federal courthouse last week after the close of testimony in the landmark corporate corruption case.
Nor does former Enron Chief Executive Jeffrey K. Skilling, Lay’s codefendant, face charges in connection with his investment in a start-up company that was run by a former girlfriend and whose main customer was Enron.
Yet those issues, extraneous or not, provided some of the most dramatic moments of the 15-week trial and, according to legal experts, may still resonate with jurors when they begin deliberating Wednesday on the multiple fraud and conspiracy counts facing Skilling and Lay.
“At the end of any case where the defendants take the stand, it boils down to credibility,” said Robert A. Mintz, a securities litigator and former federal prosecutor in Newark, N.J. “While those things weren’t central to the case, they provided insight into a defendant’s personality.”
In closing arguments beginning this afternoon, the government is sure to revisit Lay’s sale of $70 million of Enron shares back to the company in 2001, some of which occurred while he was telling employees that the stock was “an incredible bargain.” The prosecution also is likely to remind the jury of Skilling’s faulty memory about the size of his investment in his then-girlfriend’s company and the duration of their romantic relationship.
The defense believes that credibility cuts more than one way.
Lawyers for Lay and Skilling did a good job of pointing out during the trial that several key prosecution witnesses, because they had pleaded guilty but not yet been sentenced, had much to gain by pleasing the government with their testimony, said Adam M. Gershowitz, assistant law professor at South Texas School of Law in Houston.
He was referring to the former Enron executives who testified that Skilling and Lay knew of accounting dodges that falsely inflated profit and hid losses and that the defendants lied in public about the energy company’s financial health in the run-up to its shocking collapse and bankruptcy filing in late 2001.
In the defense’s closing arguments Tuesday, Skilling’s chief lawyer, Daniel M. Petrocelli, also will attack the government’s credibility, or so the Los Angeles lawyer signaled last week during a hearing before U.S. District Judge Sim Lake.
Petrocelli said he planned to point out to the jury that one Enron figure whose name they often heard during the trial -- former Chief Accounting Officer Richard A. Causey -- was never called to the stand. The implication is that the government didn’t want them to hear from Causey, who was indicted along with Lay and Skilling but dropped out of the case last December when he pleaded guilty to securities fraud.
Petrocelli has complained for weeks -- outside the jury’s presence -- that the government was thwarting defense efforts to obtain what he claims would have been exculpatory testimony from other former Enron executives who have not been charged with crimes. He contends that the witnesses, including former Chief Risk Officer Richard B. Buy and former Treasurer Jeffrey McMahon, live in fear of indictment and would have refused to testify on self-incrimination grounds if the defense had subpoenaed them.
The government refused to grant such witnesses immunity from prosecution, and Judge Lake denied a defense motion to immunize them himself. Prosecutors have declined throughout the trial to comment on the case.
Joel M. Androphy, a Houston white-collar defense lawyer, said the “missing witness” issue might provide long-shot grounds for appeal if Lay or Skilling is convicted. But he noted that the U.S. 5th Circuit Court of Appeals in New Orleans, which hears Houston cases, has not been hospitable to the argument in the past.
Androphy believes that the defendants, especially Skilling, may have a stronger basis for appeal because of part of the charge that Lake will read to the jury this morning before the start of final arguments. Lake has said his charge, a lengthy instruction on the law designed to guide the jury in its deliberations, would tell the jurors they could consider whether the defendants acted with “deliberate ignorance” -- that is, that they turned a blind eye to wrongdoing by subordinates at Enron.
Petrocelli was upset that the judge included the language at the prosecution’s request. He said it was inappropriate because Skilling has argued all along that he was a hands-on manager well versed in Enron’s operations. Petrocelli said the standard for Skilling should be whether fraud was committed and whether he intended to defraud -- not whether he averted his eyes.
But according to Androphy, Lay may have opened himself to the “deliberate ignorance” standard because of his dealings with Enron whistle-blower Sherron S. Watkins. Watkins had warned Lay by letter and in person of what she viewed as serious accounting problems with off-the-books partnerships controlled by former Enron Chief Financial Officer Andrew S. Fastow.
Gershowitz agreed with Androphy, saying that he attended a portion of Lay’s direct testimony during which the former executive was questioned about a series of Wall Street Journal articles in October 2001 that raised more questions about the Fastow partnerships.
Lay dismissed the stories -- several of which were posted on the courtroom screen -- as misleading and inspired by short sellers who wanted to profit from a decline in Enron’s stock. Gershowitz thinks the jury may have seen it a different way.
“They’re putting up Journal article after Journal article,” Gershowitz said, “and at some point you wonder: How many of these does it take before you get up from your desk, walk down the hall and ask Andy Fastow what’s going on?”
The order of battle this week is for Lake’s charge to the jury this morning, followed by half of the prosecution’s allotted six hours of closing arguments, to be delivered by Sean M. Berkowitz or Kathryn H. Ruemmler. The government didn’t announce which prosecutor would begin.
Tuesday belongs to the defense, with Petrocelli giving his arguments in the morning and all four of Lay’s trial lawyers pitching in with their arguments in the afternoon. It’s an unusual arrangement, but Lay’s head lawyer, Michael W. Ramsey, underwent several surgeries during the trial and said he wasn’t up to taking the full load.
Because the government has the burden of proof beyond a reasonable doubt, it gets the last word. Its second three hours of closing arguments are scheduled for Wednesday morning.
Wednesday afternoon, if all goes according to plan, 107 days after the jury was selected Jan. 30, the eight women and four men will retire to ponder their verdict.
