No Enron Verdict; Lay Starts 2nd Trial

Jurors in the trial of former Enron Corp. leaders Kenneth L. Lay and Jeffrey K. Skilling ended a second day of deliberations Thursday without reaching a verdict, meeting behind closed doors as Lay returned to court for a separate trial.

The jury of eight women and four men left the courthouse in downtown Houston for a long weekend, having decided at the beginning of their deliberations that they would not work on Fridays. The panel has so far made no requests of U.S. District Judge Sim Lake.

While Skilling, 52, has remained out of sight since the jurors retired to weigh the evidence, Lay was back in Lake’s fourth-floor courtroom for the opening of his second trial, this one centering on charges that he misused personal bank loans.

In the second case, which is being heard by Lake without a jury at Lay’s request, prosecutors say the once highflying executive used Enron stock as collateral for $75 million in loans, signing documents required by the bank and federal regulators pledging that he would not use the money to buy more stock.

But Lay, 64, did buy stock with those loans, Assistant U.S. Atty. Rob Adkins said in opening arguments.

“This is the stock he promises the banks he would not purchase,” Adkins told Lake in a brief opening statement as the trial began. “Banks take these forms very seriously to protect against [stock] market failure.”

Government witness James Shelton, a Bank of America Corp. executive who oversaw the bank’s loans to Lay starting in 1993, told the judge that he explained to Lay many times that he was forbidden under federal law from using some of the credit lines to buy stock. Shelton said he also got Lay to sign forms explaining the limitation.

During cross-examination, Lay’s attorney, Ken Carroll, suggested that many of the loan documents may have been signed by an automatic signature machine both Lay and his wife, Linda, used, and that Lay’s assistants would have used the machine “if somebody sends him a pile of bank documents and had to be signed in order to get a loan done.”

When Lake asked Carroll whether there was a distinction to be made if the signatures were made electronically, Carroll responded that although it could be a civil or regulatory matter, “It’s not a crime.”

Carroll declined to make an opening argument. As he did in the first case, Lay was expected to take the witness stand in his own defense.

Each of the four counts of bank fraud and false statements to banks carry prison terms of as many as 30 years and a fine of $1 million. Those penalties are in addition to the decades in prison Lay could face if convicted in the fraud and conspiracy trial.

In the first case, Lay is charged with six counts of conspiracy and fraud, and Skilling with 28 counts of conspiracy, fraud and insider trading linked to Enron’s 2001 collapse.

Lay and Skilling have denied any wrongdoing at the company.