Enron's Snakes Finally Snared

Attorney Andrew Cohen analyzes legal issues for CBS News and CBSNews.com.

The verdicts tell the men in a loud voice that the real world is different from the corporate world. The defendants figured they would walk into a hostile courtroom, full of jurors whose friends and neighbors were harmed by Enron, and still charm the socks off the panel the way they routinely charmed the socks off business associates, financial analysts, investors and socialites when things were good at Enron in the 1990s. They figured wrong — and now they'll have to pay for their arrogance.

So bulletproof did these guys think they were that they stood in front of the jury and under oath said that the rotten-to-the-core company that destroyed so many lives and fortunes was a decent one at heart.

"Who are you going to believe," the defendants rhetorically asked jurors, "us or your own eyes?"

The defendants thus tried to sell themselves to jurors the same way that Enron sold itself to the market 10 years ago — with plenty of smoke and mirrors and very little substance. Corporate America couldn't, or wouldn't, see through the charade a decade ago; the eight women and four men of the jury did.

Prosecutors strung together their largely circumstantial case by telling jurors that the two men were simply too smart, too savvy and too involved in Enron to not know about the off-the-book partnerships that hid the company's massive losses from investors and regulators.

The defendants had told jurors that not only did they not know anything about any fraud at Enron, they didn't believe that the company was in trouble until the moment of Enron's implosion. It wasn't fraud and colossally bad management that took down Enron, the defense said, it was investor panic and bad media. They laid out all this lame spin while they earnestly told jurors that they, indeed, took responsibility for the company's collapse.

Jurors clearly didn't buy this elaborate bank-shot of a defense.

Two major themes emerged when jurors spoke briefly with reporters after the verdicts were announced. First, the panel believed many of the former Enron officials who testified for prosecutors against Lay and Skilling. Second, the testimony of the defendants themselves failed to persuade jurors that they were men of "character" who deserved to be believed. One juror told the media that she "wanted very badly to believe" what Lay and Skilling were telling her under oath, but that she just couldn't do it.

Apart from federal prosecutors, whose case was never as easy or as preordained as it now appears to have been, the big winner today is Andrew Fastow, the former chief financial officer at Enron, who made a deal with federal prosecutors and testified against his former bosses.

Fastow, who was the instrument of the fraud at Enron, will end up spending far less time in prison than either Lay or Skilling despite the fact that he was more intricately involved in the corruption at Enron than anyone else. Team Fastow made the decision to cut and run. Teams Lay and Skilling made decisions to stand and fight. Turns out Fastow made the right call and Lay and Skilling did not. They may have to spend the rest of their lives in prison thinking about that choice.

The next big chapter in this saga will be sentencing day, scheduled to take place on Sept. 11, the fifth anniversary of the terror attacks on America. There is no doubt, absolutely no doubt, that the two men will end up serving lengthy prison sentences unless these convictions are overturned on appeal.

Lay, in particular given his age, now faces the equivalent of a life sentence. Even if he does not get the maximum sentence from the trial judge, Skilling, too, could end up with a prison sentence that keeps him in a federal penitentiary until people have nearly forgotten his name.

There will likely be a big fight at sentencing over whether the men ought to be allowed to remain free pending their appeal. Prosecutors will contend that the men should be sent to prison even as they pursue their legal appeals. Defense attorneys will contend that the men are not threats to their communities or flight risks and thus should remain free on bond pending the resolution of their appeals. And the trial judge will have to decide.

It's a close call, especially when you consider that the appeal here could take a year or two.

The pair does have some decent issues to raise on appeal. In spite of the venue of the trial, and even though potential jurors had some awful things to say about Lay and Skilling, U.S. District Judge Sim Lake blasted through jury selection in a little more than a day. And Judge Lake also gave jurors an instruction about "willful ignorance" that arguably lowered the government's burden of proof against the two men.

There are a number of other, more technical arguments, too, that we are likely to see on appeal. The trial may be over. But the case will live on for years.

For Houston, though, the worst is over. The jury chosen almost in the shadow of Enron's former corporate headquarters spoke today for all the men and women of Enron who didn't engage in fraud, or otherwise cook the books, or otherwise act with recklessness and negligence. It spoke for the employees who kept investing in their own company at Lay's urging, or who didn't sell in time like Skilling, and who thus lost their pensions, their savings, their nest eggs.

It spoke for all the men and women around the world who invested in the company — who believed all the slick talk from the snake-oil salesmen — and who lost their bundles.

In the end, Enron failed because it could not support the financial fantasy it had created for itself. In the end, Lay and Skilling failed because they could not convince jurors to join them in the defense fantasy that Enron's apple wasn't rotten to its core. It was — and it's not just today's verdict that says so.

By Andrew Cohen