Count By Count, the Charges Against Lay and Skilling

Here is a breakdown of the specific charges against Enron founder Kenneth Lay and former Chief Executive Officer Jeffrey Skilling. Both pleaded not guilty.

A judge approved prosecutors’ request to drop three counts against Skilling and one against Lay when the government rested its case March 28. Skilling then faced 28 counts, and Lay faced six. Both were accused of lying about Enron’s financial health before the company filed for bankruptcy protection in December 2001.

Gaps in the counts appear because of those dropped in March and elimination of other counts that had been pending solely against Richard Causey, former Enron chief accounting officer. Causey was slated to go to trial alongside Lay and Skilling until he pleaded guilty Dec. 28 to one count of securities fraud. Also, the government dropped four wire fraud counts that had been pending against Skilling shortly before the trial began because they were related to charges against Causey.

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COUNT 1: Lay guilty, Skilling guilty

Conspiracy to commit securities and wire fraud, against Lay and Skilling. Covers alleged acts from late 1999 through December 2001. The government contends Skilling spearheaded a fraud to lie about Enron’s true financial health by claiming the company was strong when he knew of various accounting tricks and spouted false optimism to craft an illusion of success. He signed quarterly and annual reports submitted to the Securities and Exchange Commission that he allegedly knew misstated revenues and earnings and conducted misleading quarterly conference calls with Wall Street analysts.

Lay is alleged to have perpetuated the ruse when he resumed as CEO upon Skilling’s abrupt resignation in August 2001 after serving in that role for just six months. Prosecutors contend Lay lied to employees, credit rating agencies and analysts with claims that Enron was healthy or that its books had been sanitized of problems when he knew otherwise. Among those lies is an alleged lie by omission by failing to tell employees that he had sold $70 million in Enron stock back to the company in 2001 when he disclosed in September 2001 that he had bought stock and encouraged workers to do the same as the company had begun to spiral. Under regulatory rules at the time, executives didn’t have to report stock sales back to a company to the Securities and Exchange Commission until a year after they occurred.

Maximum penalty: 5 years in prison.

COUNT 2: Guilty

Securities fraud, against Skilling alone. Stems from so-called Raptors, four financial structures backed by Enron stock that the government contends were used to hedge inflated asset values and keep hundreds of millions of dollars in debt off the energy company’s books. Prosecutors say Skilling knew the Raptors were used to help Enron inflate earnings and hide losses from decreases in asset values.

Ben Glisan Jr., former Enron treasurer and architect of the Raptors, is serving a prison term for creating the first of the four structures. Both he and former Chief Financial Officer Andrew Fastow testified that the Raptors were created to further Enron’s illusion of success by hiding losses from bad investments and assets. The Raptors crumbled in the fall of 2001 because they could no longer cover losses in values of assets and investments they held because they contained only falling Enron stock. Enron shut them down in the third quarter, which accounted for $544 million of a $1 billion charge announced as part of third-quarter earnings.

Maximum penalty: 10 years.

COUNT 12: Guilty

Wire fraud, against Lay alone. Stems from alleged false statements made to Enron employees via the Internet or video teleconference. Prosecutors allege that as Lay assured employees in a Sept. 26, 2001 online forum that third-quarter performance was “looking great” and “we will hit our numbers,” he knew Enron in mid-October would announce the $1 billion charge and a $1.2 billion writedown in shareholder equity. He said nothing about his personal stock sales back to Enron to cover margin calls on his personal debt while he announced he had bought stock himself and encouraged employees to do the same.

Maximum penalty: 5 years.

COUNT 13: Guilty

Wire fraud, against Lay alone. False and misleading statements at an Oct. 23, 2001 employee meeting via video teleconference. Lay told employees the company was “doing well financially and operationally” when Glisan had told him Enron was so weak that “bankruptcy is inevitable.” Lay also told employees he had confidence in Fastow, who was ousted the next day when banks said he had to go or they would no longer do business with Enron. On Oct. 25 that year Enron drew down its entire $3 billion in bank revolvers.

Maximum penalty: 5 years.

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COUNTS 14, 16-20: All securities fraud against Skilling alone, alleging he knew quarterly and annual reports filed with the SEC in 2000 and 2001 were intentionally misleading about Enron’s revenues, earnings and business operations because accounting schemes hid the true picture. Those accounting schemes were Raptors, Fastow’s LJM partnerships, moving retail risk into wholesale to hide losses, overvalued assets, etc.

The breakdown of each:

COUNT 14: Guilty

Securities fraud. Fraudulent financial statement, 1999 annual 10-K, filed in March 2000. Maximum penalty: 10 years.

COUNT 16: Guilty

Securities fraud. Fraudulent financial statement. Second quarter 2000 10-Q, filed August 2000. Maximum penalty: 10 years.

COUNT 17: Guilty

Securities fraud. Fraudulent financial statement. 10-Q for third quarter 2000, filed in November 2000. Maximum penalty: 10 years.

COUNT 18: Guilty

Securities fraud. Fraudulent financial statement. 2000 annual 10-K, filed April 2001. Maximum penalty: 10 years.

COUNT 19: Guilty

Securiites fraud. Fraudulent financial statement. First quarter 2001 10-Q, filed in May 2001. Maximum penalty: 10 years.

COUNT 20: Guilty

Securities fraud. Fraudulent financial statement. Second quarter 2001 10-Q, filed Aug. 14, 2001 (Day Skilling announced resignation). Maximum penalty: 10 years.

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COUNTS 22-26: Securities fraud, against Skilling alone. Allege Skilling omitted bad news or lied when he said Enron’s revenues from energy trading in California were small while touting Enron’s performance and financial health to analysts in several conference calls and an analyst conference in 2000 and 2001.

The breakdown:

COUNT 22: Guilty

Presentations to securities analysts and rating agency representative. Jan. 22, 2001 fourth quarter 2000 conference call with analysts regarding earnings. Maximum penalty: 10 years.

COUNT 23: Guilty

Presentations to securities analysts and rating agency representative. Jan. 25, 2001, annual conference for analysts. Maximum penalty: 10 years.

COUNT 24: Guilty

Presentations to securities analysts and rating agency representative. March 23, 2001 conference call with analysts to discuss Enron’s stock price after it had fallen from the $80 per share range to less than $60 per share. Maximum penalty: 10 years.

COUNT 25: Guilty

Presentations to securities analysts and rating agency representative. April 17, 2001 conference call with analysts regarding first quarter 2001 earnings. Maximum penalty: 10 years.

COUNT 26: Guilty

Presentations to securities analysts and rating agency representative. July 12, 2001 conference call with analysts regarding second-quarter 2001 earnings. Maximum penalty: 10 years.

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COUNT 27: Guilty

Securities fraud, against Lay alone. Alleges Lay misled a credit rating agency analyst in an Oct. 12, 2001 phone call days before Enron announced massive quarterly losses by assuring him no more writedowns of overvalued assets were on the horizon.

Maximum penalty: 10 years.

COUNT 28: Guilty

Securites fraud, against Lay alone. Alleges Lay minimized impact of writedowns and lied about Enron’s true financial health in an Oct. 16, 2001 conference call with analysts regarding third-quarter earnings.

Maximum penalty: 10 years.

COUNT 29: Guilty

Securities fraud, against Lay alone. Alleges Lay again lied to minimize Enron’s financial problems on an Oct. 23, 2001 conference call with analysts.

Maximum penalty: 10 years.

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COUNTS 31-32: False statements to auditors, against Skilling alone. Alleges he signed letters to auditors at Arthur Andersen LLP that were misleading about Enron’s annual financial statements in 2000 and 2001.

The breakdown:

COUNT 31: Guilty

Signed audit representation letter for 1999 10-K, dated March 13, 2000. Maximum penalty: 10 years.

COUNT 32: Guilty

Signed audit representation letter for 2000 10-K, dated Feb. 23, 2001. Maximum penalty: 10 years.

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COUNTS 34-36: False statements to auditors, against Skilling alone. Alleges he signed letters to auditors that were misleading about the veracity of Enron’s quarterly financial statements for the middle two quarters of 2000 and the first quarter of 2001.

The breakdown:

COUNT 34: Guilty

Signed audit representation letter for second-quarter 2000 10-Q, dated Aug. 11, 2000. Maximum penalty: 10 years.

COUNT 35: Guilty

Signed audit representation letter for third-quarter 2000 10-Q, dated Nov. 13, 2000. Maximum penalty: 10 years.

COUNT 36: Guilty

Signed audit representation letter for the first-quarter 2001 10-Q, dated May 15, 2001. Maximum penalty: 10 years.

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COUNTS 42-51: Insider trading, against Skilling alone. Alleges Skilling sold $62.6 million in stock when he knew Enron shares were inflated by internal efforts to hide the company’s true financial condition. The counts pertain to nine trades from April through November in 2000 and a single trade in September 2001 about a month after he resigned from Enron.

The breakdown:

COUNT 42: Not guilty

April 25, 2000 sale of 10,000 shares for $738,893.75. Maximum penalty: 10 years.

COUNT 43: Not guilty

April 26, 2000 sale of 86,217 shares for $6.3 million. Maximum penalty: 10 years.

COUNT 44: Not guilty

Aug. 30, 2000 sale of 15,000 shares for $1.3 million. Maximum penalty: 10 years.

COUNT 45: Not guilty

Sept. 1, 2000 sale of 60,000 shares for $5.2 million. Maximum penalty: 10 years.

COUNT 46: Not guilty

Sept. 5, 2000 sale of 11,441 shares for $972,485. Maximum penalty: 10 years.

COUNT 47: Not guilty

Nov. 1, 2000 sale of 72,600 shares for $6 million. Maximum penalty: 10 years.

COUNT 48: Not guilty

Nov. 2, 2000 sale of 20,000 shares for $1.6 million. Maximum penalty: 10 years.

COUNT 49: Not guilty

Nov. 7, 2000 sale of 46,068 shares for $3.8 million. Maximum penalty: 10 years.

COUNT 50: Not guilty

Nov. 15, 2000, beginning of preprogrammed plan to sell 10,000 shares per week for 31 weeks. Total gain was $20.98 million. Maximum penalty: 10 years.

COUNT 51: Guilty

Sept. 17, 2001, sale of $500,000 shares for $15.5 million.

Maximum penalty: 10 years.

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THE BANK FRAUD/BENCH TRIAL COUNTS AGAINST LAY. TOTAL MAXIMUM PENALTY: 120 YEARS.

From January 1999 through November 2001

COUNT 38: Guilty

Bank fraud. Alleges Lay obtained $75 million in loans and then reneged on an agreement with the lenders that he would not use the money to carry or buy margin stock. These loans were secured by stock, primarily Enron stock. Maximum penalty: 30 years.

COUNT 39: Guilty

False statements to banks. February 1999 pledge agreement with Bank of America that he would not use his two lines of credit for $10 million and $40 million to buy or carry margin stock. Maximum penalty: 30 years.

COUNT 40: Guilty

False statements to banks. June 1999 Form U-1 with Chase Bank of Texas that he would not use his $12 million to $15 million line of credit to buy or carry margin stock. Maximum penalty: 30 years.

COUNT 41: Guilty

False statements to banks. November 1999 Form U-1 to Compass Bank that he would not use his $10 million line of credit to buy or carry margin stock. Maximum penalty: 30 years.