Trial of Kenneth Lay and Jeffrey Skilling
Encyclopedia
The trial of Kenneth Lay
, former chairman and CEO
of Enron
,
and Jeffrey Skilling
, former CEO and COO
, was presided over by federal district court Judge Sim Lake
in 2006 in response to the Enron scandal
.
In order of appearance:
Prosecution
In a separate bench trial, Judge Sim Lake
ruled that Lay was guilty of four counts of fraud and false statements. These counts were also vacated because of Lay's death.
Kenneth Lay
Kenneth Lee "Ken" Lay was an American businessman, best known for his role in the widely reported corruption scandal that led to the downfall of Enron Corporation. Lay and Enron became synonymous with corporate abuse and accounting fraud when the scandal broke in 2001...
, former chairman and CEO
Chief executive officer
A chief executive officer , managing director , Executive Director for non-profit organizations, or chief executive is the highest-ranking corporate officer or administrator in charge of total management of an organization...
of Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
,
and Jeffrey Skilling
Jeffrey Skilling
Jeffrey Keith "Jeff" Skilling is the former president of Enron Corporation, headquartered in Houston, Texas. In 2006 he was convicted of multiple federal felony charges relating to Enron's financial collapse, and is currently serving a 24-year, four-month prison sentence at the Federal...
, former CEO and COO
Chief operating officer
A Chief Operating Officer or Director of Operations can be one of the highest-ranking executives in an organization and comprises part of the "C-Suite"...
, was presided over by federal district court Judge Sim Lake
Sim Lake
Simeon Timothy "Sim" Lake III is an American judge and attorney who has served on the United States District Court for the Southern District of Texas since 1988...
in 2006 in response to the Enron scandal
Enron scandal
The Enron scandal, revealed in October 2001, eventually led to the bankruptcy of the Enron Corporation, an American energy company based in Houston, Texas, and the dissolution of Arthur Andersen, which was one of the five largest audit and accountancy partnerships in the world...
.
Timeline
- The trial began January 30, 2006.
- Opening arguments
- The defense argued there was much "wickedness", and pressure led to confessions by company leaders, and failure of "market confidence" led to the financial crisis: "13 of the 16 Enron executives who have pleaded guilty to federal crimes were innocent but caved in to intense pressure from federal prosecutors".
- Prosecution argues that leaders lied to Wall StreetWall StreetWall Street refers to the financial district of New York City, named after and centered on the eight-block-long street running from Broadway to South Street on the East River in Lower Manhattan. Over time, the term has become a metonym for the financial markets of the United States as a whole, or...
and investors about "crumbling finances".
- Eight former Enron executives testified, the star witness being Andrew FastowAndrew FastowAndrew Stuart Fastow was the chief financial officer of Enron Corporation that was based in Houston, Texas until the U.S. Securities and Exchange Commission opened an investigation into his and the company's conduct in 2001...
, against Lay and Skilling, their former employers. - The jury reached its verdict on May 25, 2006, convicting both Lay and Skilling. Lay was also convicted by Sim Lake of charges in a separate bench trial.
- Lay died on July 5, 2006, and his convictions were "vacated" on October 17, 2006.
- Sentencing of Skilling took place on October 23, 2006.
Witnesses
(see U.S. DOJ list)In order of appearance:
- Ken Rice
- Wesley Colwell - Former Enron North America chief accountant
- "illegally" moved money out of company reserves to cover internal estimates
- Wanda Curry - chief accounting officer of Enron North America prior to Wesley Colwell
- displaced by Colwell, "not capable of making aggressive accounting decisions"
- U.S. District Judge Sim LakeSim LakeSimeon Timothy "Sim" Lake III is an American judge and attorney who has served on the United States District Court for the Southern District of Texas since 1988...
did not allow prosecutors to get into details about the transaction -- year-end 1999 electricity trading deal with Merrill LynchMerrill LynchMerrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
— that prompted J. Clifford BaxterJ. Clifford BaxterJohn Clifford "Cliff" Baxter was a former Enron Corporation executive who resigned in May 2001. He sold $30 million worth of Enron stock during the months prior to Enron's bankruptcy. Reportedly, Baxter clashed with CEO Jeffrey Skilling over questionable Enron business practices...
(Enron's single suicide) to displace Curry for Colwell
- Timothy BeldenTimothy BeldenTimothy Norris Belden is the former head of trading in Enron Energy Services. He is considered the mastermind of Enron's scheme to drive up California's energy prices, by developing many of the trading strategies that resulted in the California electricity crisis...
- West Coast energy trading profits
- David Delainey - ex-CEO of Enron's trading unit, Enron North America
- Skilling coached for big meeting with analysts on Jan. 25, 2001
- Raptor accounts
- Enron Energy ServicesEnron Energy ServicesEnron Energy Services was a business unit of Enron Corporation, whose purpose was to provide gas, electricity, and energy management directly to businesses and homes. Enron compared the service to choosing a telecommunications company to provide your house with a phone line. Consumers would be...
(EES), February 2001, chaotic, disarray, gushing red ink - lost receivables moved from EES to Enron North America trading division
- folding EES losses into Enron Wholesale Services
- EES never profitable
- Kevin Hannon
Lawyers
Defense- Michael Ramsey
- Bruce Collins
- Chip Lewis
- George McCall 'Mac' Secrest
- Mark Holscher
- Daniel Petrocelli
- Jason Oppenheim
- Randy Oppenheimer
- Ron Woods
Prosecution
- Sean Berkowitz
- Kathryn RuemmlerKathryn RuemmlerKathryn Ruemmler is an attorney who currently serves as White House Counsel to President Barack Obama. She previously worked as Principal Deputy White House Counsel.-Early life and education:...
- John Hueston
- Cliff Stricklin
- Robb Adkins
- Andrew Stolper
Outcome
The jury rendered its verdict on May 25, 2006. Sentencing took place on October 23, 2006.- Skilling was convicted on 19 of 28 counts of securities fraudSecurities fraudSecurities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
and wire fraudWire fraudMail and wire fraud is a federal crime in the United States. Together, 18 U.S.C. §§ 1341, 1343, and 1346 reach any fraudulent scheme or artifice to intentionally deprive another of property or honest services with a nexus to mail or wire communication....
and acquitted on the remaining nine, including charges of insider tradingInsider tradingInsider trading is the trading of a corporation's stock or other securities by individuals with potential access to non-public information about the company...
. He was sentenced to 24 years, 4 months in prison, and cannot be released before serving less than 20 years, 4 months. In addition, he must pay $630 million to the government, which includes a $180 million fine.- In January 2009, the sentence was vacated by Judge Simeon Lake; Skilling will be re-sentenced later in the year. Any time already served will count towards the new sentence.
- In June 2010, the U.S. Supreme Court threw out the honest services fraudHonest services fraudHonest services fraud refers to a 28-word sentence of , added by the United States Congress in 1988, which states: "For the purposes of this chapter, the term, scheme or artifice to defraud includes a scheme or artifice to deprive another of the intangible right of honest services."The statute...
statute in a unanimous decisionSkilling v. United StatesSkilling v. United States, 561 U.S. ___ , is a United States Supreme Court case interpreting the honest services fraud statute, . The court held, in the case involving former Enron CEO Jeffrey Skilling, that the honest services fraud statute, which prohibits "a scheme or artifice to deprive another...
; the case is currently before Lake again, who must sort out which counts must be dismissed in light of the Supreme Court ruling and then re-sentence Skilling again. - In April 2011 the 5th Circuit Court of Appeals upheld Skilling's convictions, stating that the evidence to convict for conspiracy fraud was overwhelming, regardless of whether the honest services fraud theory had been raised or not.
- Lay was convicted of all six counts of securities and wire fraud for which he had been tried, and could have faced a total sentence of up to 45 years in prison; however, he died of a heart attack on July 5, 2006, prior to sentencing. Accordingly, the judge vacatedVacated judgmentA vacated judgment makes a previous legal judgment legally void. A vacated judgment is usually the result of the judgment of an appellate court which overturns, reverses, or sets aside the judgment of a lower court....
Lay's conviction on October 17, 2006, since he died before he was sentenced and before all appeals could be exhausted - Sixteen people pleaded guilty for crimes committed at the company, and five others, including four former Merrill LynchMerrill LynchMerrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
employees, were found guilty at trial.
In a separate bench trial, Judge Sim Lake
Sim Lake
Simeon Timothy "Sim" Lake III is an American judge and attorney who has served on the United States District Court for the Southern District of Texas since 1988...
ruled that Lay was guilty of four counts of fraud and false statements. These counts were also vacated because of Lay's death.
External links
- Enron: Trial Watch - comments by observing lawyers
- chronological bottom to top
- archived dates in right-hand navigation of page
- Enron Trial Exhibits and Releases
- Skilling indictment
- Lessons from the Enron Verdict?, JURISTJURISTJURIST is an online legal news service hosted by the University of Pittsburgh School of Law, powered by a staff of more than 40 law students working in Pittsburgh and other US locations under the direction of founding Publisher & Editor-in-Chief Professor Bernard Hibbitts, Research Director Jaclyn...
- http://blogs.chron.com/enrontrialwatch/archives/2006/05/