Lay and Skilling guilty
Ex-CEO and founder convicted on fraud and conspiracy
charges in Enron case.
May 25, 2006: 12:31 PM EDT
HOUSTON (CNNMoney.com) - Enron former chief executive
Jeffrey Skilling and founder Kenneth Lay were found
guilty Thursday of conspiracy and fraud in the
granddaddy of all corporate fraud cases.
On the sixth day of deliberations, a jury of eight
women and four men convicted the former executives of
misleading the public about the true financial health
of Enron, whose collapse in late 2001 symbolized the
wave of corporate fraud that swept the United States
early this decade.
Skilling was found guilty on 19 counts of conspiracy,
fraud, false statements and insider trading. He was
found not guilty on eight counts of insider trading.
Lay was found guilty on all six counts of conspiracy
In a separate bench trial, Judge Sim Lake ruled Lay
was guilty of four counts of fraud and false
Both Lay and Skilling could face 20 to 30 years in
prison, legal experts say.
Judge Lake set sentencing for the week of Sept 11 and
ordered Lay to surrender his passport and post a cash
bond. No home confinement was ordered.
The verdict is a major victory for the government and
marks the end of one of the most scandalous chapters
in the history of corporate America.
Outside the courtroom after the verdict, Skilling
said, "We fought a good fight. Some things work. Some
Houston-based Enron, once one of the hottest companies
on Wall Street, imploded in a matter of months after
Skilling abruptly resigned as CEO in August 2001. Lay,
who was chairman at the time, postponed his retirement
plans to return to the helm.
Enron's collapse marked the first of the high-profile
corporate scandals that rocked the nation, followed by
WorldCom, Global Crossing, Adelphia and Tyco. The wave
of fraud led to passage of the Sarbanes-Oxley law that
tightened oversight of how American companies are
After a government investigation that took 4-1/2
years, prosecutors presented evidence that Lay and
Skilling orchestrated a conspiracy to artificially
inflate profits, hide millions in losses and
misrepresent the true nature of the company's
The long-awaited trial began Jan. 31 in Houston,
despite repeated protests from defense attorneys
calling for a change in venue.
The defense argued that it was impossible to get a
fair trial in Houston - the epicenter of Enron's
collapse. Enron's bankruptcy, the biggest in U.S.
history when it was filed in December 2001, cost 4,000
employees their jobs and many of them their life
savings. Investors lost billions.
Over 16 weeks, the government presented 22 witnesses,
including former top executives, who testified that
Skilling and Lay fostered a culture that put the
company's image and stock price above everything else,
at any cost.
Sixteen people pleaded guilty for crimes committed at
the company, and five others, including four former
Merrill Lynch employees, were found guilty at trial.
Eight former Enron executives testified against Lay
and Skilling, their former bosses.
But it was Enron's former finance chief, Andrew
Fastow, who was the star witness for the government.
Fastow, who pleaded guilty to wire and securities
fraud in 2004 in exchange for an expected 10-year
sentence, testified that special partnerships were
created to help the company hide millions of dollars
But defense lawyers dismissed the testimony of Fastow
and other witnesses, saying that not only were Lay and
Skilling innocent, but that no crimes were committed
at Enron, except for the shady deals that enriched
As for those other than Fastow who testified against
Lay and Skilling, defense attorneys said they were
strong-armed by the government and compelled to lie on
the stand out of fear for themselves and their
In an attempt to explain away the company's aggressive
accounting and the optimistic comments executives made
to Wall Street, both Skilling and Lay testified during
But that yielded decidedly mixed results.
Skilling, known for his harsh attitude, came off in a
mostly positive light, though he did lose his temper
on the stand. But Lay's congenial reputation took a
as he appeared confrontational and irritable at
several points during his testimony.