Government built strong Enron case, say analysts

HOUSTON - Federal prosecutors wove a strong, coherent case against Ken Lay and Jeffrey Skilling, legal experts said on Wednesday, avoiding complex financial details while placing the former Enron Corp CEOs at the crux of crimes at the company.

The government rested its case on Tuesday after two months of testimony from former Enron executives, accountants and employees whose accounts of a company on the rocks stood in stark contrast to the glowing portrayals Lay and Skilling presented about Enron in the months before it collapsed.

"They stated a theme at the outset and they stuck to it," said Samuel Buell, a former member of the US Justice Department's Enron Task Force and current visiting professor at the University of Texas School of Law in Austin.

Prosecutors contended Skilling and Lay presided over a corporate conspiracy that shuffled accounts, buried debts and tricked auditors in order to artificially inflate profits and pump up Enron's stock price.

"As much as the government was able to simplify things, it is complicated. This is Enron, after all," Buell said.

Skilling, 52, faces 28 counts of conspiracy, fraud and insider trading and Lay, 63, faces six counts of conspiracy and fraud linked to the company's descent into the then-largest-ever US bankruptcy in December 2001.

Both men have pleaded not guilty to any crimes at Enron and could face decades in prison if found guilty. Defence lawyers will begin presenting their case on Monday.

They have contended Enron's downfall was a classic "run on the bank" caused by news that chief financial officer Andrew Fastow had skimmed money through partnerships he managed.

Prosecutors brought a string of cooperating ex-Enron executives to the witness stand, including Fastow, former head of two Enron business units David Delainey, and former internet business chief executive Ken Rice.

Those three and several other witnesses have struck deals with the government and pleaded guilty to crimes that will put them in prison for far less time than they faced had they been convicted at trial.

Defence lawyers sought to convince the jury those witnesses lacked credibility since they had traded their testimony for softer sentences.

But legal observers said witnesses' accounts appeared to corroborate each other and the sheer volume of the testimony would create problems for the defence.

"There are so many insiders from the top and bottom who have pleaded guilty. I'm not sure as a juror I'd be too suspicious of them," said Chip Babcock, partner at law firm Jackson Walker LLP in Houston.

The defence lawyers have complained many witnesses who could help their clients would not testify at the trial for fear they too would become prosecution targets.

"The problem with all these witnesses is if they get up there and they tell Skilling's version or Lay's version they may end up indicted. Nobody in their right mind would go up there," said Joel Androphy, partner at the Houston law firm Berg & Androphy.

That will put even more pressure on Lay and Skilling to be their own best advocates when they take the stand in their own defence, as their lawyers have promised they would do.

"Frankly, their demeanor is going to mean more than what they say," said Babcock.

One witness who has yet to be seen in the case is Richard Causey, Enron's former chief accounting officer. He struck a plea deal with prosecutors just days before he was due to go on trial with his former bosses.

Speculation among trial observers is that the government could be holding Causey back to present him as rebuttal witness to the defence case. That could be a wise strategy, since it will force Lay and Skilling to carefully consider their own testimony.

"The only thing that as a defence lawyer I would be worried about out hanging out there is Causey.... I would try not to give an opening that would allow him to come in to contradict (defence testimony)," Babcock said.

- REUTERS