Enron Verdict: Lay and Skilling Guilty (Updated)
The jury in the Enron case has reached a verdict, and the decision in the corporate fraud case will be announced at noon, a court clerk announced today. The jury of eight women and four men reached their verdict on the sixth day of deliberations in the case of Enron founder Kenneth Lay and former CEO Jeffrey Skilling, who were charged with conspiring to hide the financial losses that brought down what was once the nation’s seventh-biggest company.
Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors, and a maximum of 275 years in prison if convicted on all counts. Lay faces six counts of fraud and conspiracy, with a combined maximum punishment of 45 years. Both are accused of repeatedly lying to investors and employees about Enron’s health before its December 2001 collapse into bankruptcy proceedings, when they allegedly knew accounting tricks masked losses and failing ventures. The defendants deny any wrongdoing and attribute Enron’s failure to bad publicity and lost market confidence.
Lay also is awaiting a verdict in a bank fraud case that was tried before Lake without a jury during the first three full days of deliberations in the conspiracy case. Lake has said he will announce his verdict in the bank case after the conspiracy jury renders its decision. Lay faces one count of bank fraud and three counts of making false statements to banks regarding his use of personal loans to buy stock. Each count carries a maximum penalty of 30 years in prison.
Former Enron Corp. chiefs Kenneth Lay and Jeffrey Skilling were convicted Thursday of conspiracy to commit securities and wire fraud in a case born from one of the biggest business scandals in U.S. history. The verdict put the blame for the demise of what was once the nation’s seventh-largest company squarely on its top two executives. It came in the sixth day of deliberations following a trial that lasted nearly four months. Lay was also convicted of bank fraud and making false statements to banks in a separate trial related to his personal banking.
The former corporate titans are now convicted felons facing years in prison when the panel found them guilty of running an elaborate fraud that gave the nation’s onetime seventh-largest company a glamorous illusion of success. Jurors declared through their verdict that both men repeatedly lied to cover a vast web of unsustainable accounting tricks and failing ventures that shoved Enron into bankruptcy protection in December 2001.
The conviction was a major win for the government, serving almost as a bookend in an era that has seen prosecutors win convictions against executives from WorldCom Inc. to Adelphia Communications Corp. and homemaking maven
Not surprising. Jurors are composed of ordinary people who hold corporate titans in very low esteem. Unlike pop culture figures like singers and athletes, who tend to get a break from jurors awed by their celebrity, people hate CEOs.
Further, the complicated nature of these cases actually works in the government’s favor here. Oftentimes, weeks of evidence and confusing procedure work in the favor of defendants and their quest to establish reasonable doubt. When there’s malfeasance at a company, as their assuredly was at Enron, the public wants to blame someone. The people at the top are the obvious choices.
Update: Steve Bainbridge provides commentary and a roundup of reactions from other law bloggers. Particularly noteworthy is that Skilling was acquitted on several insider trading charges but not on the more serious fraud charges. Those results seem contradictory.
Update: In a follow-up post, Bainbridge explains why, from a legal standpoint, the results aren’t all that contradictory.