HOUSTON -- Either they lied and stole, or got fooled.
The court case against Kenneth L. Lay and Jeffrey K. Skilling of Enron Corp., a blockbuster trial about corporate ambition waylaid, began yesterday with lawyers for the prosecution and defense laying out their arguments.
Lay and Skilling, Enron's top two executives, lied to investors and employees about the company's mounting financial problems as they sold millions in Enron stock, a government prosecutor told a packed federal court.
"The two men at the helm of this company told lie after lie," said Assistant U.S. Attorney John Hueston. "Lies that deceived shareholders and lies that misled the public."
Michael Ramsey, Lay's attorney, described the energy trading company's rapid fall into bankruptcy in late 2001 as both a sudden, unfortunate business break and the work of three underlings. The main target: Enron's former chief financial officer, Andrew Fastow - scheduled to be a key prosecution witness - whom Ramsey called a "pitiful man" and "a lost creature."
In a corporate era marked in part by ugly scandals, the failure of Enron stood apart.
For a time in the late 1990s, Enron was applauded as one of the most innovative companies in the world. Then it collapsed, in a downfall so spectacular that it took a major accounting firm, Arthur Andersen, with it. All of its 31,000 employees lost their jobs, many lost their pensions, and Enron became a catchword for the excesses of executive pay and the sometimes cavalier financial dealings of the recent economic boom.
The trial will apportion blame, deciding if Enron's leaders crossed the line between being aggressive and criminal.
Daniel Petrocelli, Skilling's lead attorney, revealed that his client plans to testify. "You could not keep him off the witness stand," Petrocelli said.
Lay has said he plans to take the witness chair.
Ramsey and Petrocelli will try to pin Enron's collapse on Fastow; Ben Glisan Jr., the company's former treasurer; and Mark Koenig, the one-time head of investor relations. They claim Fastow's accounting manipulations triggered the crisis of confidence in Enron on Wall Street that led directly to bankruptcy.
"They [the government] have the audacity to say that Ken Lay presided over a big conspiracy," Ramsey said. "We'll prove there never was such a thing."
Petrocelli intimated that the government will call Koenig to testify today .
By calling as witnesses many executives who worked closely with Lay and Skilling at Enron, Hueston said the government would demonstrate that both men were keenly aware that Enron's finances were illegally structured.
In pretrial comments, Lay often said he had no idea that Enron's finances were vulnerable to a sudden collapse.
Lay, 63, Enron's former chairman and chief executive, is charged with seven counts of conspiracy, wire fraud and securities fraud. Skilling, 52, is charged with 31 counts, including conspiracy, fraud and insider trading.
During the government's opening statement, Skilling sat with his shoulders forward, clasping and folding his hands. Lay sat alongside him, taking notes and smiling at one point when Petrocelli described his co-defendant as "initially not a very good student." Skilling later became a Harvard Business School Baker Scholar.
In a riveting, fast-paced opening statement, Hueston, of the Justice Department's Enron Task Force, repeatedly accused Lay and Skilling of "engaging in a wide-ranging scheme" to falsify the company's financial condition in order to deceive investors, Enron shareholders and the Securities and Exchange Commission.
At one point, he laid a single penny on the banister in front of the jury's seating area. By beating Wall Street estimates by that tiny amount, Enron's share price would almost assuredly go up; to do otherwise was to risk a reversal in the stock's meteoric price rise between 1999 and 2001.
"For Enron, you will learn that just a penny a share is all the difference," Hueston said.
Leon Lazaroff writes for the Chicago Tribune.