Opening Arguments Begin in Enron Trial
{{#rendered}} {{/rendered}}A lawyer for former Enron Corp. chief Jeffrey Skilling insisted Tuesday his client and Enron founder Kenneth Lay are guilty of no crimes, arguing the company was never infested with fraud and fell victim to a sudden, unexpected cash crisis.
Earlier in the day, federal prosecutor John Hueston laid out a 90-minute case against the two men, saying they illegally covered up crumbling finances at the energy trader in 2001.
• Raw Data: Enron Executive Employment Agreements (FindLaw pdf)
{{#rendered}} {{/rendered}}• Raw Data: Enron Indictments and Plea Agreements (FindLaw pdf)
Lawyer Daniel Petrocelli, making his opening argument to jurors at Lay and Skilling's fraud trial, went so far as to suggest 13 of the 16 Enron executives who have pleaded guilty to federal crimes were innocent but caved into intense pressure from zealous federal prosecutors.
"This is not a case of hear-no-evil, see-no-evil," Petrocelli said, at times animatedly jabbing his finger at the jury. "This is a case of there was no evil."
{{#rendered}} {{/rendered}}Directly countering four years of negative publicity that turned the very name Enron into a symbol of accounting chicanery, Petrocelli said, "There's no evidence any books were cooked at Enron."
But Hueston said Skilling and Lay lied to Wall Street and their own employees, and sold Enron stock before a massive fraud was exposed, driving the company into bankruptcy in December 2001.
"This is a simple case," Hueston told jurors, pacing slowly before the jury. "It is not about accounting. It is about lies and choices."
{{#rendered}} {{/rendered}}The dramatically different portrayals before a jury of eight women and four men kicked off what could be a four-month trial of Lay and Skilling, who are accused of fraud and conspiracy and could face prison for the rest of their lives if convicted.
The Enron trial is perhaps the most closely watched of the corporate fraud cases that followed the implosion of the Houston energy-trading giant more than four years ago.
Petrocelli portrayed Skilling, who faces 31 criminal counts, as a dedicated innovator who transformed the market for energy trading during the 1990s, eventually building Enron into an industry leader.
{{#rendered}} {{/rendered}}When Skilling resigned as Enron CEO in August 2001, returning the reins to Lay, "He left a sound, vibrant and wonderful company," the defense lawyer said. Lay had been CEO and chairman of the company from 1986 until his resignation in January 2002, except for the six months when Skilling was CEO.
Petrocelli blamed three men — former Enron finance chief Andrew Fastow, Fastow aide Michael Kopper and treasurer Ben Glisan Jr. — for stealing from Enron. All three have pleaded guilty to federal crimes.
But he said the other Enron executives who have struck plea deals with the government were "hooked" by prosecutors, and he challenged jurors to find the true facts about Enron and ignore four years of "opinion" about its collapse.
{{#rendered}} {{/rendered}}"They're not guilty of the crimes they pled guilty to," he said, referring to those executives.
He called Enron's bankruptcy a tragedy and said the company "was the victim of an immediate, unexpected and temporary drain on its liquidity."
Petrocelli promised Skilling would testify in his own defense, saying he could not keep his client off the witness stand even if he wanted to. Lay has said he will testify as well.
{{#rendered}} {{/rendered}}Lay's chief lawyer was expected to make his opening statement later in the day, with prosecution testimony beginning Wednesday.
Hueston, part of the U.S. Justice Department's Enron Task Force, said Lay and Skilling sold Wall Street, auditors and their own workers a story of a "simply magical ability" for Enron to record consistently impressive growth.
"But inside the doors of Enron, something was terribly wrong," he said.
{{#rendered}} {{/rendered}}Hueston sought to draw out contradictions between what the two chief executives told employees and stock analysts and the realities of Enron's increasingly crippled balance sheet.
In one example, he said Lay received a memo from Enron vice president Sherron Watkins on Aug. 15, 2001, warning him that the company could "implode in a wave of accounting scandals." Yet just five days later, in an interview with Business Week Online, Lay was quoted as saying there were "no accounting issues" at the company, and that "there is no other shoe to fall."
Brandishing a penny before the jury, Hueston said Skilling had ordered up $14 million in adjustments to Enron's books in the second quarter of 2000 alone so the company could beat Wall Street earnings estimates by 2 cents per share.
{{#rendered}} {{/rendered}}"Accounting hocus-pocus," the prosecutor concluded. "Corporate trickery. Cooked books."
Skilling sat calmly, with his right hand clasped over his left in his lap, for most of Tuesday morning's opening statements. Lay made occasional notes on a pad. Both wore serious faces.
The first prosecution witness Wednesday is expected to be Mark Koenig, former head of Enron's investor relations department, who worked with Lay and Skilling on quarterly conference calls with analysts. He has pleaded guilty to aiding and abetting securities fraud.