Friday, June 02, 2006

Justice Served: Enron Cronies Found Guilty

This happened at the end of last week, but is still worth talking about as millions of people recieved justice with the guilty verdicts of Enron's Ken Lay and Joesph Skilling:

The U.S. government's Enron task force scored a historic victory yesterday in winning guilty verdicts against former chairman Kenneth Lay and onetime chief executive officer Jeffrey Skilling, the two men most responsible for Enron's Corp.'s stunning collapse.

The guilty verdicts capped a 4½-year effort by the U.S. Department of Justice to prosecute senior Enron executives who were responsible for the most infamous business collapse in corporate history.

Mr. Lay, 64, the company's founder and a prominent Texas power broker, faces a lengthy term in federal prison after a Houston jury convicted him of six counts related to defrauding investors and his own employees. He was also convicted separately by the judge on four counts of defrauding a bank, related to his use of Enron stock as collateral.

Former CEO Jeffrey Skilling, who was considered the architect of Enron's most audacious deal making, was convicted on 18 counts of fraud and one of insider trading. The central allegation was the pair hid company debt, inflated profits and sold stock before the fraud was revealed.

The sentences they face could theoretically add up to 165 years for Mr. Lay and 185 years for Mr. Skilling if applied consecutively. Lawyers, however, say that, realistically, they will serve about 20 years behind bars. They are to be sentenced on Sept. 11 and remain free on $5-million (U.S.) bonds until then.

Mr. Lay is the most high-profile corporate executive to be targeted by the Justice Department following the wave of corporate scandals that was ushered in by Enron's collapse.

He was a well-connected Republican and, prior to Enron's financial troubles, was considered a likely candidate to join the cabinet of U.S. President George W. Bush.

Enron itself was once the seventh-largest company in the United States, at least according to its own questionable accounting.

But the company's implosion in December, 2001, cost thousands of jobs and wiped out $2.1-billion in pension assets and billions more in stock market value. The Enron bankruptcy also began an era of scandals that rocked the business world, scaring off investors and prompting regulators to tighten corporate governance regulations.

"Enron really did epitomize the era," said Jonathan Halpern, a New York lawyer who once headed the major crimes unit for the U.S. Attorney's Office in Manhattan.

"The trial was the culmination of a series of federal criminal prosecutions on accounting and other types of white-collar fraud."

After the verdict was announced, deputy attorney-general Paul McNulty said it represented a vindication for the federal prosecutors and a warning to executives.

"No one, not even the head of a Fortune 500 company, is above the law," Mr. McNulty said. "We will continue to pursue relentlessly this type of corruption."

In the Houston courtroom yesterday, family and friends of Mr. Lay wept openly as federal court Judge Sim Lake read out guilty verdicts on six counts of securities and wire fraud. The group then gathered in prayer inside the courtroom after it had cleared.

Mr. Lay -- who is a prominent member of the city's First United Methodist Church -- told reporters that he maintained his innocence but said he was putting his fate in the hands of God. "We believe God in fact is in control and he does indeed work all things for the good," he said.

Mr. Skilling was convicted on 19 of 28 charges against him, after the jury of eight women and four men deliberated for just six days. His lawyer, Daniel Petrocelli, promised to appeal.

Known for his brilliance and arrogance, Mr. Skilling appeared more stoic than his former colleague. "I will fight these charges until the day I die," he said.

While Mr. Skilling was often credited with driving Enron's aggressive business practices and giving rise to the "smartest guys in the room" tag, Mr. Lay represented the company's more genial and philanthropic public face.

The son of a poor preacher from Oklahoma, the former chairman was one of the most acclaimed corporate executives of the 1990s -- a friend of former president George Bush and supporter of the current President; a political fundraiser who contributed nearly $800,000 to the Republican Party; and a prominent Houston philanthropist and public figure.

Prior to his indictment in July, 2004, Mr. Lay stood as an election-year symbol for Democratic critics, who argued that the Bush administration was soft on the ultimate perpetrators of corporate crime.

In building the case against Mr. Lay, federal lawyers obtained guilty pleas from 19 Enron executives, most of whom received clemency in return for their testimony against their former chairman during the 15-week trial.

Jurors said yesterday that they were particularly impressed with the testimony of former Enron treasurer Ben Glisan Jr., who tied both Mr. Skilling and Mr. Lay to actions taken to mislead investors, and that of former head of investor relations Mark Koenig.

The Justice Department's white-collar crime unit had come under criticism after the acquittal of HealthSouth Corp. chairman Richard Scrushy last year, and after the U.S. Supreme Court overturned a conviction against Enron auditor, Arthur Andersen LLP, which has since folded.

And a jury either acquitted or failed to agree on charges in the fraud trial of former managers of Enron's failed broadband division. Five executives are being retried in three separate trials over the next few months.

Former federal prosecutor Ross Albert said the convictions of Mr. Lay and Mr. Skilling were critical to the government's crackdown on white-collar crime.

"Many observers had questioned whether the government could win a conviction in a complex accounting case," Mr. Ross said. "This is a tremendous vindication for the government."

While the criminal case marks a watershed in the Enron saga, it is not the finale. Civil class-action lawsuits are pending against Enron and several of its bankers, including Toronto-Dominion Bank and Royal Bank of Canada.

Just this week, a Houston judge signed off on a $6.6-billion settlement with three major defendants in the class-action case, including Canadian Imperial Bank of Commerce.

KENNETH LAY

CONVICTED OF SIX CHARGES OF CONSPIRACY AND SECURITIES AND WIRE FRAUD

ALSO CONVICTED OF BANK FRAUD AND MAKING FALSE STATEMENTS IN A SEPARATE, NON-JURY TRIAL

MAXIMUM SENTENCE

165 YEARS IN PRISON

QUOTE: 'GOD'S GOT ANOTHER PLAN RIGHT NOW.'

JEFFREY SKILLING

CONVICTED OF 19 COUNTS OF CONSPIRACY, SECURITIES FRAUD, LYING TO AUDITORS AND INSIDER TRADING

MAXIMUM SENTENCE

185 YEARS IN PRISON

QUOTE: 'I THINK WE FOUGHT A GOOD FIGHT BUT SOME THINGS WORK AND SOME THINGS DON'T.'

Hopefully the same fate will rest on those who demonstrate corruption in our government. People deserve a government that is honest and works for them.

However, John Boehner and the Republicans do not believe that. If they did, they would get serious about ethics reform.

These verdicts send a very good message saying that public corruption will not be tolerated.

I expect the people's verdicts this November (in the form of votes) will echo that sentiment.