Focus Kept Narrow in Indictment Of Lay

Attention Will Be Paid To Alleged Lies, Not Complex Accounting

In their case against former Enron Corp. chairman Kenneth L. Lay, federal prosecutors are alleging that he was part of a broad conspiracy to defraud investors while charging him mostly with discrete, easier-to-prove crimes such as lying to company employees and to his personal bankers.

The strategy, a classic use of the powerful federal conspiracy statute, allows prosecutors to blame Lay for Enron's dramatic slide into bankruptcy in December 2001 without having to explain every accounting trick, legal analysts say. Instead, the prosecutors can focus on Lay's signature on loan agreements and his words in tape-recorded conference calls to analysts.

But the fact that Lay is charged with far fewer and, on the surface, less serious offenses than the two other former Enron officials indicted with him may be viewed by jurors as a weakness in the government's case, some analysts say. Lay pleaded not guilty Thursday.

The 53-count indictment charges former Enron chief executive Jeffrey K. Skilling and former chief accountant Richard A. Causey with making false SEC filings dating back to 1999, engaging in insider trading and playing a role in the off-the-books partnerships that hid Enron's staggering debt for years. Lay is charged with 11 of the counts -- the overarching conspiracy and 10 wire fraud, securities fraud, bank fraud and false statements counts tied specifically to lies he allegedly told to company employees, analysts and his personal bankers, most in the fall of 2001. Skilling is charged in 35 counts; Causey in 33. Skilling and Causey have also pleaded not guilty.

"There's nothing about this indicating that Ken Lay was a kingpin," said former federal prosecutor Jacob S. Frenkel. "Even though Lay is higher up in the hierarchy, the indictment suggests that the fraudulent activity centered around Skilling. To the extent that Ken Lay was the ultimate target, the fact that they couldn't say more about him is as telling as the charges they brought."

The indictment contends that Skilling, who was running day-to-day operations at Enron long before he took over as chief executive, stood at the center of a wide-ranging conspiracy to inflate Enron's stock price and hide debt by using secret agreements, accounting gimmicks and business partnerships carried off the company's balance sheet starting in 1999.

Causey, the chief accounting officer during that period, furthered the scheme by conducting meetings at which Enron's financial targets were discussed and by entering into a secret deal with Enron finance chief Andrew S. Fastow to guarantee Fastow would never lose money in his personal dealings with the company in exchange for his helping disguise its debt, prosecutors claim.

Lay played a more narrow role, according to the indictment, "taking control" of the conspiracy after Skilling abruptly departed Enron in mid-August 2001 and making optimistic public statements to investors, analysts and employees at a time when he knew Enron's finances were headed toward collapse.

Lay is cited in seven of the 22 "overt acts" in support of the alleged conspiracy -- all of them from September through November 2001. (Causey is cited in 16 and Skilling in 13.) Lay's attorney Michael Ramsey says Lay is being blamed unfairly for the company's collapse and the actions of a few greedy underlings.

"The case against Lay seems to pale in comparison with Skilling and Causey," said Duke University law professor James D. Cox. "If they try all these guys at the same time, they run the risk of the baby, Ken Lay, being thrown out with the bathwater."