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Skilling, Lay Cases Build on Plea Deals

At least a few jurors said after the Andersen trial that they discounted Duncan's testimony even though he had pleaded guilty to one count of obstructing justice. Prosecutors ultimately won a conviction in the case, which was upheld by an appeals court earlier this year.

If defense lawyers get their way, Andersen will play a central role in the upcoming trial of Skilling and Lay. Lawyers for both men have said their clients relied heavily on advice from lawyers and auditors to vet many of the deals and accounting maneuvers the government has cited in the indictment. Executives caught up in corporate fraud cases can cite reliance on auditors and lawyers as a way to show they did not intend to break the law.

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"It would be impossible to have committed a fraud when thousands of people knew about it, including accountants, lawyers, employees, analysts and investment bankers, as well as the general public," Skilling lawyer Petrocelli said.

What's more, observers said, no one has yet tested the government's evidence in a case directly tied to Enron executives. The first Enron trial is set to begin Monday in Houston. Several former Enron and Merrill Lynch executives are accused of entering into an improper energy deal to help Enron meet earnings targets in late 1999.

Defense lawyers in that case are contesting the allegations, and in a series of motions zeroed in on statements made by Andrew S. Fastow, Enron's former chief financial officer. Fastow, who pleaded guilty to wire and securities fraud in January, allegedly told law enforcement officials that he never explicitly guaranteed that Merrill Lynch would not lose money in the deal -- which would have made the transaction illegal on its face. Instead Fastow said he left that impression with the Merrill executives without putting it in writing or making concrete verbal promises. That undercuts the premise of the case, the defense attorneys argue.

Investigators say Fastow siphoned off more than $60 million for his own use without the knowledge of the company's board of directors. Lawyers for Skilling and Lay said the men were kept in the dark about Fastow's activities and have called him a thief.

The recent guilty pleas help the government overcome Fastow's potential credibility problems, said lawyers following the case. They also put pressure on other indicted former Enron executives to plead guilty and help the government, rather than face costly trials and potentially decades-long prison sentences, they said.

Meanwhile, the Justice Department's Enron Task Force is moving ahead on several fronts. One set of prosecutors is preparing for a trial next March in the case against several former Enron broadband employees.

And the federal criminal investigation, which began in January 2002, shows no sign of ending. The grand jury has entered into its third year of work and its term will not expire until March.

"All indications are the grand jury is still investigating other activity that has not yet been brought to the forefront," said Philip H. Hilder, a Houston lawyer who represents several Enron witnesses.


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