clutchy

bad news for these kids, but uh, i think they deserved it. sorry i'm posting the whole article, but wsj, is subscription only.

http://online.wsj.com/article/SB1147...ecial_coverage

Lay Convicted on All Counts;
Skilling Guilty on Most Charges
Juror Says Testimony From Ben Glisan,
Enron's Former Treasurer, Was Key
By JOHN R. EMSHWILLER and GARY MCWILLIAMS
May 25, 2006 1:24 p.m.


HOUSTON -- A federal jury found former Enron Corp. Chairman Kenneth Lay and former President Jeffrey Skilling guilty of a variety of conspiracy and fraud charges in connection with Enron's 2001 collapse, giving prosecutors a sweeping victory in a landmark case that culminates an era of corporate crime in the U.S.

U.S. District Judge Sim Lake set sentencing for Sept. 11. He ordered Mr. Lay to surrender immediately his passport and asked for a $5 million bond co-signed by his children. Mr. Skilling already filed a $5 million bond. Both were allowed free pending sentencing.

Mr. Lay, Enron's founder and the company's public face during its rise to prominence during the 1990s, was found guilty of all six charges against him, including conspiracy, wire fraud and securities fraud. Mr. Skilling, meanwhile, was found guilty on 18 counts of conspiracy and fraud. He was acquitted on nine counts of insider trading, but found guilty on one insider trading count.

Skilling and his lead lawyer Daniel Petrocelli spoke outside the courtroom after the verdict was read.

"Obviously, I'm disappointed," Mr. Skilling told reporters outside the courthouse. "But that's the way the system works." Mr. Skilling's lawyer, Daniel Petrocelli, said the verdict "doesn't change our view of what happened at Enron … or Jeffrey Skilling's innocence."

Mr. Lay didn't come outside the courthouse to speak with reporters immediately after the verdict.

Juror Freddie Delgado, an elementary school principal, named former Enron Treasurer Ben Glisan as one of the best witnesses. "We kept going back to [his] testimony to corroborate things."

Juror: Wall Street Journal Issue 'Wasn't Critical'

Another juror, asked about the defense contention that The Wall Street Journal's coverage created a panic around the company, said: "I think The Wall Street Journal thing was not that critical in anything." It may have played a role in Enron's collapse, but "as far as what we were concerned with in this case it didn't have that much bearing."

In a separate case that was heard by Judge Sim Lake after the main conspiracy trial concluded, Mr. Lay was also found guilty of bank fraud and misrepresentation in personal loans. That case was decided by Judge Lake without a jury.
WALL STREET JOURNAL VIDEO


Watch CNBC's coverage of the verdict as it was being read. Plus, Messrs. Skilling and Petrocelli speak to reporters outside the courtroom and former Enron vice president Sherron Watkins discusses the verdicts.

The trial lasted nearly four months, involved about four dozen witnesses and hundreds of documents. The verdicts climax a landmark case that grew of Enron's December 2001 collapse into bankruptcy. The energy giant's failure sparked wide-ranging corporate and governmental reforms as well as numerous investigations, including a federal criminal probe by the specially created Enron Task Force.

The task force, which at various times over its four-year existence has involved dozens of lawyers and investigators, sifted through millions of pages of Enron documents and interviewed hundreds of individuals. The investigation initially focused on Enron's business dealings with controversial outside partnerships run and partly owned by former Enron Chief Financial Officer Andrew Fastow. Those partnerships, known as LJM1 and LJM2, were major threads in what government investigators came to believe was a web of illegal financial and accounting manipulations at Enron.

To date, about 30 people have been criminally charged for Enron-related activities. More than a dozen of them have pleaded guilty to crimes. Several testified as government witnesses in the trial of their former bosses, Messrs. Lay and Skilling. These included: Mr. Fastow, the former chief financial officer; Ben Glisan, Jr., Enron's former treasurer; Mark Koenig, the former head of investor relations; Paula Rieker, the former corporate secretary as well as Kenneth Rice and David Delainey, former heads of the telecommunications and retail electricity units, respectively.

Former Enron Executives Were Key

In the absence of any smoking-gun documents, the testimony of these former executives formed the heart of the government's case against Mr. Skilling and Mr. Lay. These government witnesses testified that they had been involved with one or both of the defendants in various efforts to manipulate Enron's report results and lie to the public.

During their own turns on the witness stand, Messrs. Lay and Skilling denied any such wrongdoing. Their attorneys attacked the credibility of the government witnesses. They argued that these former Enron executives had been pressured by the government into admitting to nonexistent crimes and implicating their clients in hopes of winning leniency.

The jury that convicted Lay and Skilling.

During the trial, the prosecution and defense presented diametrically different views of what had occurred at Enron. The government claimed that beginning in the late 1990s, Enron suffered from growing financial and operational problems, which included billions of dollars of underperforming foreign assets and troubles at its high-profile telecommunications and retail-energy units. Prosecutors alleged that Enron, under the leadership of Messrs. Skilling and Lay, illegally hid those problems from the public through various financial and accounting devices, some of which involved the LJM partnerships.

By contrast, the defense portrayed Enron as a fundamentally healthy company where no crimes occurred. The lone exception, the defense said, involved thefts from the company by Mr. Fastow and his subordinates in connection with his LJM operation, which were hidden from the defendants.

This defense position differed from the stance taken in other high-profile corporate-crime cases recently, including those involving former top executives of WorldCom Inc. and HealthSouth Corp. In those cases, the defense attorneys conceded that large-scale financial wrongdoing occurred at the companies but said that these misdeeds had been hidden from their clients.

Defense attorneys for Mr. Skilling and Mr. Lay argued that Enron's 2001 collapse was caused by a post-Sept. 11 financial market panic about the company, partly caused by Wall Street Journal stories that raised questions about the LJM operation. They said that the political and press furor resulting from Enron's downfall caused the government to try to criminalize legitimate business activities. "This is not a case of hear no evil, see no evil. This is a case of there was no evil," Daniel Petrocelli, Mr. Skilling's lead attorney, told the jury during his opening argument in early February.

Prosecutors countered that Enron collapsed because investors in late 2001 finally began learning about some of the company's long-hidden problems. "The truth was coming out," said Enron Task Force chief Sean Berkowitz in his closing remarks to the jury. "Enron couldn't survive the truth."

Write to John R. Emshwiller at john.emshwiller@wsj.com and Gary McWilliams at gary.mcwilliams@wsj.com

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LK was treated unfairly

thanks X