Recap of the Enron Debacle

By: Tom Tessin
Submitted: 2007-01-17 16:16:37
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It has been over four years since Arthur Anderson was indicted for destroying Enron-related documents in order to deter investigators. Anderson’s indictment on March 14th, 2003 set off a string of events that would forever change the face of corporate America. Once Anderson was convicted on June 15th, 2002, the indictments and convictions in the Enron case quickly grew. Between October 2002 and April 2003, seven individuals were indicted for various crimes relating to the Enron scandal, including Andrew Fastow, Ben Glisan and Dan Boyle. On January 14th, 2004, Andrew Fastow plead guilty to two counts of conspiracy in exchange for no more than ten years in prison. On July 9th, Kenneth Lay surrendered to the FBI and was indicted on accusations of being a participant in a conspiracy to manipulate Enron's quarterly financial results, making public statements about the company's financial performance that were false and misleading and omitting facts that were necessary to make financial statements fair and accurate. Although Lay surrendered to the FBI, he maintained his innocence on all counts.

On October 19th, a federal judge granted Lay a separate trial from Skilling and Causey on the charges of bank fraud and deceiving banks about using loans to buy Enron stock on margin. However, the judge ruled that the they would be tried together on the other charges. Before the trio could be tried together, Richard Causey plead guilty to securities fraud three days after Christmas in 2005. Causey entered a plea deal which called for a reduced prison sentence of five years in exchange for full government cooperation and forfeiture of over million dollars. If Causey had not entered the plea bargain, he could have faced ten years in prison.

The much awaited trial of Kenneth Lay and Jeffery Skilling began on January 30th, 2006 in Houston, Texas. During the trial, the defense argued that there was never any wrong committed, but that the collapse of Enron was caused by a failure of market confidence. The defense also stated that thirteen of the sixteen Enron executive who pleaded guilty to crimes were actually innocent, but confessed because of the pressure exerted by federal prosecutors. On the other side of the spectrum, the prosecution argued that Enron’s leaders lied to investors and Wall Street about the true state of their financial affairs. During the course of the trial, eight former Enron executives testified against the Lay and Skilling, including the prosecution’s star witness Andrew Fastow. After almost a four month trial, the jury reached a verdict on May 25, 2006.

The jury found Jeffery Skilling guilty on nineteen of the twenty-eight counts of securities fraud and wire fraud, while acquitting him of an additional nine counts. Kenneth Lay was found guilty on all six counts of securities and wire fraud. Lay was also found guilty on four counts of fraud and false statements in a separate bench trial which began on May 18th. Skilling and Lay will be sentenced during the week of September 11th, 2006. Skilling faces up to one hundred and eighty-five years in prison, while Lay faces a total prison sentence of forty-five years.

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