- The Washington Times - Thursday, May 25, 2006

HOUSTON — Kenneth L. Lay and Jeffrey Skilling were convicted of conspiracy and fraud yesterday by a federal jury that laid blame for one of the biggest business scandals in U.S. history squarely on Enron Corp.’s two former top executives.

Jurors found that the once-wealthy and powerful corporate chiefs repeatedly lied to cover up accounting tricks and business failures that led to its 2001 demise. The collapse wiped out more than $60 billion in market value, almost $2.1 billion in pension plans and 5,600 jobs.

The verdict came in the sixth day of deliberations after a criminal trial that lasted nearly four months. Lay also was convicted of bank fraud and making false statements to banks in a separate, nonjury trial before U.S. District Judge Sim Lake related to Lay’s personal finances.

The conspiracy conviction was a major victory for the government, serving almost as a bookend to an era that has seen prosecutors win convictions against executives from WorldCom Inc. to Adelphia Communications Corp. and homemaking diva Martha Stewart. The public outrage over the string of corporate scandals led Congress to pass the Sarbanes-Oxley act, designed to make company executives more accountable.

“The jury’s verdicts help to close a notorious chapter in the history of America’s publicly traded companies” said Rep. Michael G. Oxley, Ohio Republican, co-author of the Sarbanes-Oxley legislation. “Appeals aside, the end of the trial will mark the end of a dark era.”

Lay was convicted on all six counts of conspiracy, securities and wire fraud against him in the corporate trial and all four in the personal banking trial. Former Chief Executive Officer Skilling was convicted on 19 of the 28 counts in the corporate trial, including one count of insider trading, and acquitted on the remaining nine.

Judge Lake set sentencing for September 11. The charges against Lay, who is 64, carry a maximum penalty in prison of 45 years for the corporate trial and 120 years in the personal banking trial. The charges against Skilling, 52, carry a maximum penalty of 185 years in prison.

As Judge Lake read the verdict from the bench, Lay tossed his head at hearing the first “guilty” on the conspiracy count. He clutched his wife’s hand as he heard that word over and over again.

Lay sat with his wife, Linda; his daughter, Elizabeth Vittor, a member of his defense team; and Linda Lay’s daughter, Robyn. As Lay clutched his wife’s hand, the three women leaned forward and began to sob quietly.

Skilling, sitting with his brother, Mark, showed no emotion when the verdict was read.

The sentencing will come five years almost to the day after Skilling sold 500,000 shares of Enron stock for $15.5 million, for which he was convicted of insider trading.

“Obviously, I’m disappointed,” he told reporters outside the courthouse. “But that’s the way the system works.” Skilling said he will appeal.

Skilling’s $5 million bond, which restricts him to the continental U.S., remains in effect. Lay, who surrendered his passport, posted a $5 million bond secured with family-owned properties at a hearing after the verdict.

“I firmly believe I’m innocent of the charges against me,” Lay said afterward. “We believe that God in fact is in control and indeed He does work all things for good for those who love the Lord.”

Jurors found that both men had repeatedly lied to cover a vast web of unsustainable accounting tricks and failing ventures at Enron.

Both men testified in their own defense. But the panel rejected Skilling’s insistence that no fraud occurred at Enron other than that committed by a few executives skimming millions in secret side deals, and that bad press and poor market confidence combined to sink the company.

“I wanted very, very badly to believe what they were saying, very much so, and there were pieces in the testimony where I felt their character was questioned,” juror Wendy Vaughan said after the verdict was announced.

The government’s victory caps a 41/2 year investigation that garnered 16 guilty pleas from ex-Enron executives, including former Chief Financial Officer Andrew Fastow and former Chief Accounting Officer Richard Causey. All are awaiting sentencing later this year except for two, who either finished or are still serving prison terms.

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