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Postponed Enron hearings get uglier

By SHIHOKO GOTO, UPI Senior Business Correspondent

WASHINGTON, Aug. 12 (UPI) -- While the criminal activities of domestic doyen Martha Stewart and Tyco chief Dennis Kozlowski have had more than their fair share of the media spotlight, all eyes are now on the trial of former employees of collapsed energy giant Enron, particularly its former head, Kenneth Lay.

But the case against Lay keeps getting postponed, and Wednesday was no exception as a federal judge pushed back the ex-chairman's trial to late September or early October, instead of Sept. 14 as had been expected.

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For Lay, though, a quick trial would work to his advantage as his legal team expects fewer charges to be made against him, which could allow him to get off relatively easily. The man who headed a company that had once been ranked seventh in the Fortune 500 list of best U.S. companies had also requested earlier in the week for the judge to waive a jury trial and decide the verdict himself.

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Whether or not a jury is involved or not, however, the Lay trial will certainly be one of the most closely-watched cases for white-collar crime, given the impact it had not only on the employees of Enron and its investors, but also on broader corporate governance practices and legislation in the United States.

It is believed that Lay's legal team fear a jury, particularly in Houston where many residents were either directly hurt by Enron's collapse or know someone who was, would be hostile towards Lay from the get-go.

"This case is far more complex than the usual white-collar fraud case," said U.S. District Judge Simeon Lake in Houston, adding that "it would be premature to set the case for trial" in light of the importance of the charges against Lay and Enron.

Motion papers prepared by Lay's defense team to the Federal District Court in Houston released earlier this week said that "the government has set in motion events it no doubt hopes will lead to a sensational, protracted 'mega-trial', with all the inevitable prejudice that flows from such a proceeding, which will work to maximum prejudice, who is accused of plying a minor role, at best, in the events that allegedly brought down one of the largest corporations in the United States."

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So far, Lay has been charged with 11 counts of bank fraud and false statements indictment deals during the few months before the company filed for bankruptcy in December 2001, charges that were brought before him last month. Meanwhile, former chief executive Jeffrey Skilling and accounting chief Richard Causey have been charged since the beginning of this year with criminal activities including fraud, conspiracy, and insider trading dating back to 1999. If charges against Lay are made to his activities going back to that time as well, it is believed that charges against him would increase and thus potentially increase his sentencing time, if found guilty as charged.

All three have pleaded not guilty, and Skilling and Causey's legal team are asking the judge to postpone their trial until 2006 in light of the sheer amount of documents and testimonies that need to be examined in advance. Government lawyers, on the other hand, are hoping to schedule a trial for all three by March 2005.

But Lay's team has argued that the former chairman's case must be separated from that of Skilling and Causey, given that "from an evidentiary standpoint, much of the government's 'proof' as to the superseding indictment's accusations (and Mr. Lay's defense thereto) will differ significantly from the proof offered against Mr. Skilling and Mr. Causey due in no small measure to the lack of commonality among the accounts."

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And while Skilling and Causey are hoping to delay their trial as far back as possible as the Justice Department prepares its case by setting up a special Enron task force headed by Andrew Weissmann, Lay's lawyers have said such government efforts to look into the case should allow his trial to go ahead quickly.

"In light of a 'tenaciously' conducted investigation by the specially created Enron task force, it would be untenable, if not unfathomable, for the government to suggest it is not ready now for trial," Lay's lawyers said in their motion papers.

Whenever the Lay trial begins, it is certain that the legal proceedings will invoke bitter feelings among former Enron employees and its investors. The company had deliberately gone out of its way to hide its losses and misguide investors as it concealed billions of dollars in debt on the one hand, while it ran secret business partnerships on the other. Its collapse has also led to a surge in public interest to crack down on corporate malfeasance, and has led to the establishment of the Sarbanes-Oxley act to improve corporate accounting standards.

Enron's former chief financial officer Andrew Fastow has been regarded as one of the key executives who made the concealing of such huge sums in losses possible for such a long period. Fastow pleaded guilty earlier this year, and both he and his wife are currently serving time for their roles in the demise of Enron. Fastow is expected to be testify against Lay, Skilling, and Causey.

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