By Truman Lewis
ConsumerAffairs.com
May 26, 2006
Consumer representatives and prosecutors applauded the news that a federal jury in Houston had convicted former Enron Chief Executive Officers Kenneth L. Lay and Jeffrey K. Skilling on charges including conspiracy, securities fraud, wire fraud, and making false statements.
"The fact that former Enron executives Ken Lay and Jeffrey Skilling have been found guilty of conspiracy and fraud will be little comfort to the Enron employees whose jobs and retirement accounts evaporated with the companys collapse, or to the shareholders, institutional investors and retirees who lost billions," said Public Citizen President Joan Claybrook.
"Nor will it cheer consumers in the West, who lived through an unnecessary and manufactured 'energy crisis' that stemmed from the freewheeling and corrupt energy trading system that Lay and Skilling helped create.
Claybrook said the convictions send an important message to corporate chieftains: "Dont cook the books, or you could do hard time".
California Attorney General Bill Lockyer also hailed the jury's decision.
"Today's verdict brings the two individuals who led Enron one step closer to being held accountable for ripping off California consumers and businesses, destroying the pensions of hundreds of workers and their families, and defrauding investors on a massive scale," Lockyer said.
"But this case is not just about punishing Ken Lay and Jeff Skilling. Hopefully, this verdict sends a strong message to corporate America. Hopefully, it will help deter corporate crime, and nurture the fair dealing and honesty essential to the well-being of our economy," he said.
Lockyer, state agencies and utilities in July 2005 reached a $1.52 billion settlement with Enron to resolve allegations the firm engaged in large-scale market manipulation during the California Energy Crisis of 2000-01. Given the companys bankruptcy, Lockyer estimates Enron ultimately will pay about $260 million.
The eight-woman, four-man jury returned its verdict today on its sixth day of deliberations, following 56 days of trial proceedings before U.S. District Judge Sim Lake.
Lay, 64, was convicted on all of the six counts with which he was charged: conspiracy, two counts of wire fraud and three counts of securities fraud. Skilling, 52, was convicted on 19 of the 28 counts pending against him: conspiracy, 12 counts of securities fraud, one count of insider trading, and five counts of making false statements to auditors. He was also acquitted of nine insider trading counts.
Sentencing for both defendants is scheduled for Sept. 11, 2006. They face years in prison and fines amounting to tens of millions of dollars.
"The message of today's verdict is simple: our criminal laws will be enforced just as vigorously against corporate executives as they will be against street criminals," said Deputy U.S. Attorney General Paul J. McNulty, chairman of the President's Corporate Fraud Task Force. "No one -- including the heads of Fortune 500 companies -- is above the law."
The convictions stem from a wide-ranging scheme that Lay, Skilling and other Enron executives engaged in at various times between at least 1999 and 2001, to deceive the investing public, the U.S. Securities and Exchange Commission and others about the true performance of Enron's businesses.
The scheme was designed to make it appear that Enron was growing at a healthy and predictable rate, consistent with analysts' published expectations, that Enron did not have significant write-offs or debt and was worthy of investment-grade credit rating, that Enron was comprised of a number of successful business units, and that the company had an appropriate cash flow.
It had the effect of inflating artificially Enron's stock price, which increased from approximately $30 per share in early 1998 to over $80 per share in January 2001, and artificially stemming the decline of the stock during the first three quarters of 2001.
