Secrest (R) talks to reporters
Former Enron chief executives Ken Lay and Jeffrey Skilling were found guilty today of lying about their company's crumbling finances in one of the biggest US business scandals and could face years in prison.
The jury verdict, in a trial that began on January 30th, capped a four-year-long government effort to get those responsible for a corporate collapse that cost investors billions of dollars, wiped out thousands of jobs and sent shockwaves through Wall Street and Washington.
Lay, 64, and Skilling, 52, who were once lauded as two of the world's top business leaders but later became poster boys for corporate deception, looked shaken when US District Judge Sim Lake read the decision to a packed courtroom.
Skilling looked down as the verdict was read. Lay sighed heavily, as his wife Linda grabbed his arm.
Lay was convicted of all six counts of conspiracy and fraud and faces a maximum of 45 years in prison.
Skilling was found guilty of 19 counts of conspiracy, fraud, insider trading and making false statements which, combined, carry a maximum sentence of 185 years. He was not convicted on nine criminal counts.
In a separate trial for Lay, Judge Lake found Lay guilty of all four bank fraud charges for illegally using money from $75 million in personal loans to buy stock.
Each of those four charges carries a maximum of 30 years, but experts say he is unlikely to get a sentence more than six months for each because he paid off the loans and the lenders suffered no economic damage.
Skilling will remain free on a $5 million bond, while Lake said Lay must post a $5 million bond and give up his passport to stay out of jail until sentencing, set for September 11th.
"I'm not going to let him leave this building until his passport is surrendered," Judge Lake said.
Skilling attorney Daniel Petrocelli promised to fight the convictions.
"We will have a full and vigorous appeal," he told reporters.
Enron, which at its height was the nation's seventh-largest company, collapsed in December 2001 into the biggest US bankruptcy at the time amid disclosures it used off-the-books deals to hide billions of dollars in debt and inflate profits.
It also turned out that chief financial officer Andy Fastow had looted the company of $60 million while running the side deals.
Prosecutors charged that Lay and Skilling knew Enron's reports of booming profits were just financial trickery, but told the world all was well to keep the stock price up even as the Houston-based power trader slid toward its demise.
In testimony, Lay and Skilling said they painted a rosy picture of the company because they believed it was in great shape, not because they wanted to cover up problems.
Skilling suddenly resigned in August 2001 after just six months as chief executive officer and was replaced by board chairman Lay, who had been CEO before Skilling.
But the two men testified that Skilling left because he was burned out, not because of Enron's growing financial problems.
They blamed media coverage and Fastow's thievery for a financial crisis that sank the firm they built from a quiet pipeline business into an international trading powerhouse.
Prosecutors said the two men milked Enron for hundreds of million of dollars and lived lives of luxury while driving the company into a bankruptcy.
Lay took home $220 million in compensation from the sale of Enron shares from 1999 through 2001, while Skilling got $150 million, Assistant US Attorney John Hueston said in opening arguments.
Lay used his and the company's money to gain political power by donating heavily to candidates, particularly Republicans and especially the Bush family.
He was the biggest donor to President George W. Bush, who before the Enron scandal referred to him warmly as "Kenny Boy."
Their convictions bring to 19 the number of Enron executives who pleaded guilty or have been found guilty of crimes.
Prosecutors built their case by slowly going up the chain of command to secure guilty pleas and cooperation from key players, several whom testified that Lay and Skilling knowingly led Enron's giant scam.
The key witness was Fastow, who tearfully told the jury of his misdeeds and said Skilling and Lay were deeply involved in what he described as a massive cover-up of Enron's troubled finances.
He has pleaded guilty to conspiracy in exchange for a 10-year jail sentence which he likely will begin serving soon.
Enron's demise raised questions about the quality of corporate oversight and was quickly followed by similar scandals at firms such as HealthSouth, WorldCom, Global Crossing and Adelphia.
Enron auditor Arthur Andersen was convicted of June 2002 of obstruction of justice for its role in the Enron saga. The US Supreme Court overturned the conviction a year ago, but Anderson is now virtually out of business.
After Enron, The US Congress scrambled to pass the Sarbanes-Oxley Act in 2002 toughening financial and auditing requirements for publicly-owned companies.