Enron Defense Rests

The defense rested Monday in the fraud and conspiracy trial of Enron Corp. founder Kenneth Lay and former Chief Executive Jeffrey Skilling, bringing the former corporate celebrities closer to the end of their 15-week trial.

Both defendants testified as part of a 29-witness lineup. The government called 22 witnesses in its main case, which rested March 28.

Prosecutors aim to present a string of rebuttal witnesses to further reinforce their contention that Lay and Skilling committed crimes at the disgraced energy giant before it careened into bankruptcy protection in December 2001.

Deliberations could start as early as May 17, CBS News reports.

The stars among the defense witnesses were clearly Lay and Skilling. As expected, both adhered to their stance that no fraud occurred at Enron, they did nothing wrong, and a lethal combination of bad press in a skittish post-Sept. 11 market sapped market confidence and sank the company.

The government contends Lay and Skilling repeatedly lied by spouting false optimism about Enron's strength when they allegedly knew accounting tricks propped up a facade of success.

The prosecution lacked obvious smoking guns pointing to the defendants' guilt. The defense was equally lacking in tangible evidence, relying heavily on Lay and Skilling in a credibility battle of who jurors should believe — the defendants or government witnesses.

Observers expected Skilling to be temperamental in keeping with his reputation, but he was largely civil despite a few flare-ups with a prosecutor. But Lay shed his diplomatic persona, trying to control his own attorney and bristling with unbridled anger at a prosecutor who dared to question his honesty.

Lay insisted during six days of testimony that he told the truth when he praised Enron's strength to employees and investors throughout the fall of 2001 when the company was spiraling.

But on cross-examination Lay was bombarded with a slew of written warnings about Enron's accounting integrity that he received from various employees. Lay admitted he did not investigate the complaints, saying he was too busy trying to save the company.

Lay also defended how he tapped Enron for more than $70 million throughout 2001, even as the company cratered. He repaid most of those company loans with Enron stock. He didn't disclose those sales publicly because regulations at the time didn't require him to do so until 2002.

However, prosecutors sought to show he furthered an illusion that Enron was strong in the fall of 2001 by telling employees he bought stock — a fraction of what he sold back to the company — encouraged workers to buy shares as well.

He also insisted Enron's cash was his most efficient option when grilled about why he did not draw down credit lines he had with banks, sell other assets or cut back on his extravagant lifestyle to borrow less from the company.

Skilling took some bruises, but emerged without sustaining any knockout punches.

Like Lay, Skilling insisted he was truthful when he publicly touted the company's strength. He defended financial structures and partnerships that prosecution witnesses described as fraudulent tools to manipulate earnings.

Like the prosecution witnesses before him, Skilling lacked physical evidence to show his accusers lied about incriminating conversations and meetings.

But Skilling's fate could hinge largely on whether jurors believe his testimony regarding allegedly illegal stock sales.

He claimed he could not remember placing an order to sell 200,000 shares of his Enron stock in early September 2001 three weeks after his resignation even though jurors heard an audiotape of him doing so on a telephone call to his broker.

That sale was held up, and he ended up selling 500,000 shares for $15.5 million on Sept. 17, 2001. He insisted his fear of a market roiled by the Sept. 11, 2001, terrorist attacks prompted that sale, which is alleged to be illegal in the last of 10 insider trading counts against him.

The jurors will begin deliberations next week after hearing each side present six hours of closing arguments starting Monday.

Skilling will await a verdict, while Lay has another trial slated to start May 18.

He is charged with bank fraud in a separate case, which will be tried before U.S. District Judge Sim Lake without a jury.

Lay's bank fraud case involves his personal banking. Prosecutors allege he obtained $75 million in loans from three banks and then reneged on an agreement with the lenders that he wouldn't use the money to carry or buy margin stock.

The banking case was originally part of the conspiracy indictment. Its Enron connection is that the $75 million in loans were collateralized by Lay's company stock. Those lenders issued the margin calls he said prompted him to tap the company for cash and repay the energy giant with Enron shares.