Ex-Enron chiefs guilty of cooking the books

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May 26, 2006/Reuters

 

 

 

Houston - Former Enron chief executives Kenneth Lay and Jeffrey Skilling were found guilty yesterday of lying about their company\'s crumbling finances in one of the biggest US business scandals. They could now face years in prison.


The jury verdict, in a trial that began on January 30, capped a four-year government effort to punish those responsible for a corporate collapse that cost investors billions of dollars, wiped out thousands of jobs and sent shock waves through Wall Street and Washington.


Lay and Skilling, who were once lauded as two of the world\'s top business leaders, but later became poster boys for corporate deception, looked shaken when 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 on 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 carry a combined maximum sentence of 185 years. He was not convicted on nine other criminal counts.


In a separate trial, Lake found Lay guilty of all four bank fraud charges for illegally using $75 million (R498 million) in personal loans to buy stock.


Each of these four charges carries a maximum of 30 years, but experts said he was unlikely to get a sentence more than six months for each because he had paid off the loans and the lenders suffered no economic damage.


Skilling will remain free on bail of $5 million, while Lake said Lay must post $5 million bail and give up his passport to stay out of jail until sentencing, which is set for September 11. \"I\'m not going to let him leave this building until his passport is surrendered,\" Lake said.



Skilling\'s attorney, Daniel Petrocelli, promised to challenge the convictions. \"We will have a full and vigorous appeal,\" he said.

Enron, which at its height was the nation\'s seventh-largest company, collapsed in December 2001 in 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. He was the prosecution\'s key witness after pleading guilty to conspiracy in exchange for a 10-year sentence.

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 towards its demise.

Lay and Skilling said they had painted a rosy picture of the company because they believed it was in great shape, not because they wanted to cover up problems.

Lay took home $220 million in compensation from the sale of Enron shares from 1999 through to 2001, while Skilling got $150 million, said assistant US attorney John Hueston.

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.

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