Jury Selection to Begin in Enron Trial

After a spectacular collapse that left thousands jobless and slammed Wall Street with billions in losses, the firm's founder and former CEO are to be tried in a federal courthouse — only a few blocks from the firm's former headquarters with its swiveling "E" logo.

More than 100 potential jurors were slated to pack a cavernous federal courtroom here on Monday, the first step in the trial of Kenneth Lay, 63, and Jeffrey Skilling, 52.

Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors for allegedly lying about Enron's financial strength. Lay faces seven counts of fraud and conspiracy for perpetuating the alleged scheme after Skilling resigned in August 2001.

Both men have pleaded not guilty. If convicted, each could face decades in prison and millions of dollars in penalties.

http://www.bloomberg.com/apps/news?pid=10000103&sid=a.30HLPzmFos&refer=us

Excerpt:

`High-Class Crook'

Fewer than 7 percent of potential jurors summoned in the case could be fair, based on responses given by people who were considered for the jury pool, said Edward Bronson, an expert hired by the defense to examine their questionnaires. One referred to Lay as the ``biggest lying crook of all.'' Skilling was also described as a ``thief'' and a ``high-class crook.''

Lay and Skilling, who pleaded not guilty to all charges, face potential prison sentences of more than 30 years, said Kirby Behre, a former federal prosecutor and author of a book on U.S. sentencing guidelines.

Their trial, which will be covered by hundreds of U.S. and foreign journalists, will last at least 18 weeks, prosecutors and defense lawyers estimated. Lake, a graduate of the University of Texas Law School, has a reputation for moving cases along quickly, sometimes timing lawyers' arguments.

Enron collapsed in December 2001 and filed for the largest bankruptcy after WorldCom Inc. The company fired more than 5,000 people. Investors claim in a lawsuit that they lost $30 billion as Enron stock plummeted following disclosures of improper accounting. Employees allege they lost $1 billion on Enron shares in retirement funds.

CEOs Convicted

A government crackdown on corporate crime after Enron's bankruptcy led to the prosecutions of the CEOs of WorldCom, HealthSouth Corp., Adelphia Communications Corp., Tyco International Ltd. and Rite Aid Corp. All the CEOs were convicted of fraud except HealthSouth founder Richard Scrushy, who now faces bribery charges in an unrelated case.

The demise of Enron led to the Sarbanes-Oxley Act, the broadest revision of U.S. securities laws in seven decades. The 2002 law strengthened auditing standards and forced companies to enhance financial controls. CEOs and top financial officers must now sign financial statements, certifying their accuracy.

http://www.businessweek.com/magazine/content/06_06/b3970082.htm

Excerpt:

It is entirely possible that Lay will beat the rap. As last year's acquittal of HealthSouth Corp. (HLSH ) CEO Richard Scrushy showed, financially complex executive suite prosecutions are problematic by definition. Fraud and conspiracy are crimes of commission, not omission -- Lay's managerial forte. Lay "glided on the coattails of others and a Rolodex of influential relationships," says Jeffrey A. Sonnenfeld, senior associate dean at the Yale School of Management and founder of the Chief Executive Leadership Institute. "When he sensed dangerous truths, he saw his job as one of containment, rather than showing courage or character."

Lay is as audacious a defendant as he once was a corporate promoter. Even as the disgraced ex-CEO was readying himself for trial, he launched a PR campaign to overturn history's verdict against him with a defiant speech on Dec. 13. "Contrary to popular belief today, I firmly believe that Enron was a great company," Lay told some 250 invited VIPs at the Houston Forum. If not for the wrongdoing of "less than a handful" of rogue employees, he added, Enron would not have gone belly-up and would "still be a great and growing company today."

Here in Houston, they said this morning that no one can get the movie rental for a while, very long waiting lists. That may not be true elsewhere.

It's a very "thin" movie and concentrates on really superficial things, like strippers and call girls and wild parties. Most of what went on with the company does not translate well into sound bites or movie scenes. And the fake Texas accents are atrocious.

I also remember noting at least a few "poetic license" embellishments of relationships, too. Other than all that, it might be educational for watching during the trial--but it's not "must-see," for sure.

As last year's acquittal of HealthSouth Corp. (HLSH ) CEO Richard Scrushy showed, financially complex executive suite prosecutions are problematic by definition. Fraud and conspiracy are crimes of commission, not omission

You're right.

The defense will want to complicate the issue, and put the jurors to sleep. The prosecutors will need to keep it as simple as possible.

If they are to be successful, they will need to avoid getting bogged down in the accounting dodges and shell corporations. Just show how the executives lied to shareholders - lay the statements down side by side.

Compare the public comments about how "strong" the company was with private emails about how weak the company was, and show the jury the dates of each. They said one thing in public, and another in private.

That's how they're going to nail the crooks. Anything more complicated than that plays into the hands of the defense.

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