Enron’s Lay and Skilling guilty

ENRON TIMELINE
1985: Enron formed
Oct 2001: Enron reports $638m third quarter loss and $1.2bn fall in shareholder equity
Oct 2001: Securities and Exchange Commission begins inquiry into firm
Nov 2001: Enron shares sink to 10-year lows as buyout deal falls through and further losses are revealed at the firm
Dec 2001: Enron files for Chapter 11 bankruptcy
2002: Criminal investigation launched
2004: Skilling and Lay charged over Enron collapse Former finance chief Andrew Fastow pleads guilty to criminal charges and agrees a 10-year jail term
Jan 2006: Enron trial begins
May 2006: Enron trial ends with guilty verdicts for Skilling and Lay on 25 out of 34 charges

Former Enron bosses Ken Lay and Jeffrey Skilling have both been found guilty on fraud, conspiracy and other charges.

The two presided over the spectacular collapse of the energy giant in 2001 and were also accused of lying to investors about its financial problems.

The two former chief executives faced 34 counts relating to Enron’s collapse.

The energy trading firm went from being the US’s seventh largest company to bankruptcy, amid allegations of accounting irregularities.

As the verdict was read Skilling looked down, while Lay sighed heavily and shook his head as his sobbing wife Linda clutched his arm tightly.

Former Enron worker Deborah Defforge said she was “glad it’s over, it’s put closure to it”.

“I feel sorry for the families, but at the same time the reality was that we suffered the most when we were let go.”

“I think that contrary to what the defendants were saying I think everybody recognised there were severe problems at Enron,” added Philip Hilder, lawyer for Enron whistleblower Sherron Watkins.

A spokesman for President George W Bush said the verdict should be seen as a warning to other corporate criminals.

“The administration has been pretty clear there is no tolerance for corporate corruption,” said White House spokesman Tony Snow.

“The Justice Department has been going aggressively after those who are involved in corporate corruption.”

The way it works

The Enron saga has been both messy and confusing since October 2001, when the company announced huge losses as its shares dived.

Two months later, it filed for bankruptcy as allegations began to emerge that it had used off-the-books offshore firms to hide losses.

The firm’s auditor, Arthur Andersen, was forced out of business following the collapse of Enron, as it was seen as having colluded in the accounting practices.

In a separate case, Lay has also been found guilty by a District Court judge of four charges of bank fraud totalling $75m (£40m).

The two plan to appeal their convictions.

“We fought the good fight,” Skilling told reporters outside the court after the verdict.

“Some things work, some things don’t. Obviously I am disappointed but that’s the way the system works.”

USA Inc in the dock

The Enron case is the culmination of a string of high-profile cases involving corporate misbehaviour.

Among them was the conviction of Worldcom chief executive Bernie Ebbers for fraud and conspiracy, and homecare queen Martha Stewart for insider trading.

Andrew Fastow, Enron’s former chief finance officer, pleaded guilty to his part in the scandal in 2004 having agreed to testify against his former bosses.

He paid fines totalling $23m and received a sentence of 10 years in jail.

Numerous other Enron executives have been convicted – many after pleading guilty – in court cases across the US.

Sony Wilson, a former Enron employee, said she had hoped that Lay and Skilling would “at some point… have taken responsibility for at the very least creating the culture that allowed for an Andy Fastow to occur”.

Blockbuster trial

The trial of Lay and Skilling in Houston follows four years of investigation by the Department of Justice’s Enron Task Force. It lasted for 15 weeks, with 54 witness called by the two sides.

The verdict came on the jury’s sixth day of deliberations.

In all, Skilling has been found guilty on 19 of the 28 counts he faced – with the “not guilty” verdicts coming on some of the charges of insider trading.

He could face as much as 185 years in jail.

Lay, however, has been found guilty of all six fraud and conspiracy charges that he faced. He could face as much as 45 years behind bars.

Source