Passionate Pitch by Enron Defense

Lawyers for Kenneth L. Lay and Jeffrey K. Skilling, in an emotional last pitch to jurors who could sentence their clients to prison for decades, accused the government Tuesday of building a sham case against the former Enron Corp. leaders because it needed scapegoats for a corporate scandal.

With “their eye on the prize” of two high-profile convictions, federal prosecutors coerced witnesses, selectively used “snippets” of taped presentations and misrepresented documents to concoct their case, Daniel M. Petrocelli, Skilling’s lead lawyer, claimed during his 3 1/2 -hour closing argument Tuesday morning.

Chip B. Lewis, one of four defense lawyers who spoke for Lay, raised the ante in the afternoon with a broadside against prosecutor John C. Hueston, formerly an assistant U.S. attorney in Orange County. Lewis said Hueston, in cross-examining Lay two weeks earlier, had deliberately ignored evidence to frame a damaging question.

Lewis, goateed, burly and well over 6 feet tall, leaned over the government’s table toward the much slighter prosecutor and said: “Don’t come to Houston, Texas, and lie to us.”

The eight-woman, four-man jury, though paying close attention, did not visibly react to Lewis’ outburst. But Lay’s wife, Linda, and her daughter, Robin, burst into brief applause from the front row of spectators.

Enron founder Lay, 64, and former Chief Executive Skilling, 52, are accused of lying to the public about the company’s financial health and conspiring with subordinates to inflate profit and hide losses through what the government terms “accounting trickery.”

Skilling faces 28 counts of conspiracy, fraud and insider trading. Lay is charged with six counts of conspiracy and fraud.

Lay also faces several bank fraud counts, which will be the subject of a separate bench trial scheduled to begin Thursday while the jury in the main case is in deliberations. U.S. District Judge Sim Lake will hear the evidence and decide the case alone. He said he would withhold his decision until the jury had delivered its verdict in the main case.

Enron’s collapse in December 2001 created a public outcry over corporate chicanery and led to congressional hearings and the formation of a special government task force to probe the company’s downfall.

Co-lead prosecutor Kathryn H. Ruemmler, in the first portion of the government’s closing argument Monday, tried to inoculate the jury against what she said would be a display of “passion” and “indignation” by defense lawyers. She warned jurors not to be swayed by theatrics.

Petrocelli, alluding to her remarks, began by saying: “I’m representing a man falsely accused and on trial for his life. Who wouldn’t be passionate? Who wouldn’t be indignant?”

The government, he said, started its massive investigation of the failed energy company with the conclusion that Lay and Skilling were to blame. It then “reverse-engineered” the evidence to prove it, he said.

“A snippet here, a snippet there, and you create a new story after the fact,” Petrocelli said.

He said the government built its case mainly by pressuring Enron subordinates with the threat of long prison terms and financial ruin if they refused to cooperate. Prosecutors, Petrocelli said, want jurors to “discard and disregard years of real facts and listen to the word of people who’ve been robbed of their will.”

In a theme that Lay’s lawyers would take up later, Petrocelli said the government avoided talking about its central allegation of conspiracy during the 15-week trial because conspiracy is difficult to prove without documents and it didn’t think it had a winning case. Instead, he said, prosecutors focused on Enron’s spectacular collapse and its macho corporate culture.

“Culture is not a crime,” Petrocelli said. “Bankruptcy is not a crime. Failure is not a crime.”

One of the most dramatic points of the trial came during Skilling’s cross-examination when prosecutor Sean M. Berkowitz peppered him with questions about his investment in a company that was run by his former girlfriend and whose main customer was Enron.

Petrocelli blasted the questioning as “a cheap shot,” noting that no charges resulted. “If that’s the best they have,” he said, “I’m breathing a sigh of relief.”

Petrocelli said the government often asked its witnesses to explain things that were outside their professional background because it didn’t trust the real experts to toe the government line. Noting, for example, that former Enron Chief Accounting Officer Richard A. Causey figured in crucial incidents in the case, Petrocelli asked: “Where is he? Why didn’t they call him?”

Causey was to have been tried with Lay and Skilling, but he pleaded guilty to securities fraud in December. Causey had supported Skilling and Lay’s defense for so long that legal experts considered him a risk for prosecutors to put on the stand.

One of Berkowitz’s likely tasks today, in the remaining two hours and 9 minutes of the government’s allotted six hours of closing argument, will be to explain Causey’s absence.

The relay-race format of Lay’s closing argument came about because of the illness of his lead lawyer, Michael W. Ramsey, who recently returned to the courtroom after two operations on blocked arteries. With Ramsey unable to handle the full load, the task was divided four ways.

Bruce Collins, leading off, sought to rebut allegations that Lay was motivated by greed. In February 2001, when Skilling succeeded Lay as Enron CEO, Collins said Lay could have cashed out Enron stock and options worth $550 million. Instead he held on to most of his shares until Enron’s bankruptcy wiped out 90% of his net worth.

Prosecutors accused Lay of ignoring warnings of accounting problems and other troubles at Enron. But when Lay reassumed the chief executive’s post upon Skilling’s August 2001 resignation, “he opened things up,” Collins said, pushing for more detailed information to be included in Enron’s financial reports and encouraging employees to speak up about problems.

George McCall “Mac” Secrest followed Collins, focusing most of his 20 minutes on the government’s witnesses, portraying them as so well prepared by conferences with prosecutors that they often began answering before questions were asked.

“Wind them up and point them in the right direction,” Secrest said.

Next came Lewis, who accused the government of trying to “tap into prejudice and sympathy” by raising issues, such as Lay’s stock sales, that weren’t part of the indictment.

Ramsey took the defense’s remaining 12 minutes to remind the jurors of the government’s burden of proof beyond a reasonable doubt. If a question causes someone to hesitate, he said, that is reasonable doubt.

“There is no question that a ‘not guilty’ across the board” would be an unpopular verdict, Ramsey said.

“There may be a court in America that bends to the popular will,” he thundered in conclusion, “but it’s not this court!”