The snake oil salesmen ran out of snakes Thursday when a federal jury in Houston convicted former Enron officials Kenneth Lay and Jeffrey Skilling of the vast majority of fraud and conspiracy charges against them. There will be no more pitches, no more audacious claims, no more bluff and bluster from the financial geniuses who worked so hard to raise up Enron and then glibly watched as it came crashing down.
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.