Judge Drops Some Enron Charges

Former Enron CEO Kenneth Lay and his wife Linda leave the federal courthouse after the prosecution rested in week nine of his fraud and conspiracy trial Tuesday, March 28, 2006 in Houston. U.S. district Judge Sim Lake Tuesday, March 28, 2006, dropped one of the seven counts against Lay. (AP Photo/Pat Sullivan) AP Photo/Pat Sullivan

Twenty-two witnesses. Piles of documents. Hours of audiotapes and videotapes. And lots of memories of allegedly shady discussions with no explicit orders to commit wrongdoing.

Bit by bit, those pieces made up the puzzle of the government's fraud and conspiracy case against former Enron Corp. chiefs Kenneth Lay and Jeffrey Skilling. Prosecutors rested Tuesday and a judge approved their request to drop several charges they hadn't addressed.

Now it's the defendants' turn.

Both Lay and Skilling have argued publicly — Skilling before Congress and Lay to reporters — that they committed no crimes.

But after the defense opens its case on Monday, the pair will make good on promises to make their case to the only people who really matter — eight women and four men on the jury.

Observers looking for an incriminating e-mail, a tape recording of conspirators planning illegal acts or any other obvious smoking gun were disappointed. The government built its case on the recollections of witnesses who said the former corporate titans' optimistic public statements didn't jibe with internal discussions during which no one was wearing a wire.

"The government has really made its case that what Lay and Skilling said and were told in private were very different from what they were doing and saying in public. It really comes down to that," said Michael Wynne, a former federal prosecutor who has observed much of the trial firsthand.

Robert Mintz, another former federal prosecutor who has followed the trial, said each prosecution witness is intended to be viewed as part of a whole that when combined paints a "very damning portrait of these two defendants."

But, he said, "This is still a difficult case for prosecutors because there is no 'smoking gun' evidence. There are no bombshells. There's nothing that conclusively ties the defendants to a scheme to defraud the investing public," he said.

The government rested its case Tuesday, but the defendants appeared undaunted.

"We're looking forward to getting on the stand and getting our case out there — the positive case," Lay told reporters outside the federal courthouse in Houston.

"We are anxious to get our story told," said lead Skilling lawyer Daniel Petrocelli, his client at his side.

Prosecutors declined comment, as is customary during a high-profile trial.

Lay and Skilling will enter the defense phase a little lighter because U.S. District Judge Sim Lake approved a government request to drop several charges against them to streamline an already complicated case. Specifically, two counts of securities fraud and one count of lying to auditors pending against Skilling were dropped, leaving 28 criminal counts remaining; and a single count of securities fraud against Lay was dropped, leaving six.

Lake denied routine requests from the defense for acquittal.

The dropped counts against Skilling stemmed from allegations the former chief executive signed a fraudulent quarterly report submitted to the Securities and Exchange Commission; lied about Enron's health during a first-quarter earnings conference call; and signed a statement to auditors that vouched for fudged financial statements.

The count against Lay that was dropped grew from allegations the company founder lied to analysts about Enron's finances during a conference call.

The government says Lay and Skilling repeatedly lied about Enron's financial health, optimistically praising the company's strength when they allegedly knew it was weak but for accounting tricks to book earnings and hide losses.

Prosecutors sought to bolster its allegations through the memories of witnesses, audiotapes of conference calls with Wall Street analysts and videotapes of employee meetings.

The two men counter that there was no fraud at Enron other than that by a few employees who skimmed money for themselves from secret scams, including former Chief Financial Officer Andrew Fastow. They say they did nothing wrong and attribute Enron's descent into bankruptcy protection in December 2001 to negative publicity coupled with loss of market confidence.

The government's 22 witnesses included eight former executives who have pleaded guilty to crimes, one with an immunity deal, one who settled regulatory allegations and three who have not been accused of any wrongdoing who said they voiced concerns about financial peril that fell on deaf ears.

Petrocelli said the government's lineup offered only "glancing blows" and the defense case will present "hard facts."

"We're scrambling to get witnesses to testify, and it has not been easy," Petrocelli said. "You'll probably see more than the government called."

  • Gina Pace

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