The verdict put the blame for the 2001 demise of the high-profile energy trader, once the nation's seventh-largest company, squarely on its top two executives. It came in the sixth day of deliberations following a federal criminal trial that lasted nearly four months.
Lay was also convicted of bank fraud and making false statements to banks in a separate, non-jury trial before U.S. District Judge Sim Lake related to Lay's personal finances.
The conspiracy conviction was a major win for the government, serving almost as a bookend to an era that has seen prosecutors win convictions against executives from WorldCom Inc. to Adelphia Communications Corp. and homemaking maven Martha Stewart. The public outrage over the string of corporate scandals led Congress to pass the Sarbanes-Oxley act, designed to make company executives more accountable.
Enron's collapse alone took with it more than $60 billion in market value, almost $2.1 billion in pension plans and 5,600 jobs.
"It's a huge victory for prosecutors, a watershed case for them, and a crushing blow for the two defendants, who right up until the end thought they might be able to convince jurors that the apple wasn't rotten to the core," CBS News legal analyst Andrew Cohen says.
"The jury's verdicts help to close a notorious chapter in the history of America's publicly traded companies" said Rep. Michael Oxley, R-Ohio, co-author of the Sarbanes-Oxley legislation. "Appeals aside, the end of the trial will mark the end of a dark era."
Enron founder Lay was convicted on all six counts against him in the corporate trial and all four in the personal banking trial. Former Chief Executive Skilling was convicted on 19 of the 28 counts in the corporate trial, including one count of insider trading, and acquitted on the remaining nine.
Lake set sentencing for Sept. 11. Lay's charges carry a maximum penalty in prison of 45 years for the corporate trial and 120 years in the personal banking trial. Skilling's charges carry a maximum penalty of 185 years in prison.
CBS News correspondent Lee Cowan reports the heart of the prosecution's case was the assertion that both Lay and Skilling lied to employees and investors about the health of Enron, and conspired to inflate earnings and hide losses through complex accounting tricks — so they could get rich off the stock.
"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," Cohen said.
As Lake read the verdict from the bench, Lay tossed his head at hearing the first "guilty" on the conspiracy count. He clutched his wife's hand as he heard that word over and over again.
Lay sat with his wife, Linda; his daughter, Elizabeth Vittor, a member of his defense team; and Linda Lay's daughter, Robyn. As Lay clutched Linda Lay's hand, the three women leaned forward and began to sob quietly.
After Lake left the courtroom, Lay's family and some friends gathered around him as the ex-chairman, red-faced and fighting back tears, hugged them and thanked them for their support.
Skilling, sitting with his brother, Mark, showed no emotion when the verdict was read.
The sentencing will come five years almost to the day after Skilling sold 500,000 shares of Enron stock for $15.5 million, for which he was convicted of insider trading.
"Obviously, I'm disappointed," Skilling told reporters outside the courthouse. "But that's the way the system works."
"We're going to stand behind him," his lawyer, Daniel Petrocelli, said. "As I told him, we've just begun to fight."
Skilling's $5 million bond, which restricts him to the continental U.S., remains in effect. Lay, who surrendered his passport, posted a $5 million bond secured with family-owned properties at a hearing following the verdict.
The Enron founder was also ordered to stay in the Southern District of Texas or Colorado, avoid contact with any victim of the offense charged, report to pre-trial services regularly and must not own a gun or use alcohol excessively or drugs.
"I firmly believe I'm innocent of the charges against me," Lay said following the hearing. "We believe that God in fact is in control and indeed he does work all things for good for those who love the lord."
The jury rejected Skilling's insistence that no fraud occurred at Enron other than that committed by a few executives skimming millions in secret side deals, and that bad press and poor market confidence combined to sink the company.
"I wanted very, very badly to believe what they were saying, very much so, and there were pieces in the testimony where I felt their character was questioned," juror Wendy Vaughan said after the verdict was announced.
Both men testified in their own defense.
The government's victory caps a 4 1/2 year investigation that garnered 16 guilty pleas from ex-Enron executives, including former Chief Financial Officer Andrew Fastow and former Chief Accounting Officer Richard Causey.
All are awaiting sentencing later this year except for two, who either finished or are still serving prison terms.
"This verdict will resonate throughout the nation because Enron's fall was the biggest corporate collapse in American history," CBS News' Barry Bagnato adds. "But it's perhaps most closely watched by the thousands upon thousands of former Enron employees and investors who lost jobs, pensions and pride."
"You can't lie to shareholders, you can't put yourselves in front of your employees' interests. No matter how rich and powerful you are, you have to play by the rules," prosecutor Sean Berkowitz told reporters outside the courthouse.
He expressed sympathy for the Enron employees who lost their life savings when the company collapsed.
"Nothing that happened today is going to bring that back for them. ... What we do hope is that today's verdict lets them know that the government will not let corporate leaders violate their trust and get away with it."
Prosecutor John Hueston, who sparred with Lay on the stand, said the founder had missed "a golden opportunity to save Enron.
"He made that choice to put his own interests ahead of that of the shareholders and investors. And he did that by choosing not to tell the unvarnished truth and he did it by choosing not to ask the hard questions."
Asked what was next, Berkowitz joked, "We're probably going to step aside and go get a well deserved drink and an afternoon off."
The Enron case tested the government's ability to prove complicated corporate skullduggery. Its implosion and the subsequent scandals scared off investors, increased regulatory scrutiny over publicly traded companies and prompted Congress to stiffen white collar penalties.
The government's vast investigation seemed to stall until Fastow pleaded guilty in January 2004 to two counts of conspiracy and paved the way for prosecutors to secure indictments against his bosses. Fastow also led investigators to Causey, who was bound for trial alongside Lay and Skilling until he broke ranks with their unified defense and pleaded guilty to securities fraud just weeks before the trial began.
"This verdict encourages us ... to continue to combat corruption wherever we find it," said Deputy Attorney General Paul McNulty, at the Justice Department in Washington. Attorney General Alberto Gonzales was recused from the Enron case because he once was a partner at Houston law firm Vinson & Elkins LLP, which represented Enron.
When Enron collapsed, it hit investors hard, but it was the company's employees who were hurt the most. CBS News correspondent Anthony Mason reports they not only lost what was their investment in the company but their pensions as well.
Charles Prestwood spent more than 33 years working in the field for Enron, and its predecessor, Houston Natural Gas. The year after he retired he saw Enron stock plummet from $90 a share to 61 cents.
"On the Enron stock I lost $1,310,000," Prestwood told Mason. "And now what the bad part is I can look back over my life and see a great big 33-year-and-a-half void."