By Carrie Johnson
Washington Post Staff Writer
Tuesday, May 9, 2006
HOUSTON, May 8 -- After presenting nearly three dozen witnesses and hundreds of documents over six weeks, lawyers for former Enron Corp. chief executive Jeffrey K. Skilling and chairman Kenneth L. Lay rested their defense against fraud charges Monday.
To rebut the prosecution's allegations, Skilling and Lay turned to accounting and finance experts, low-level Enron workers, and glowing character witnesses. But only a handful of them are likely to prove memorable when jurors begin to deliberate next week.
In the end, the only thing that matters to the jury will probably be the testimony of the defendants themselves.
"The credibility of the two defendants is the turning point in the case," said Ellen S. Podgor, a law professor at Stetson University and the author of a popular blog on white-collar crime. "That's where it all comes out."
The defendants' testimony provided the most intense moments of the trial. Skilling spent eight difficult days on the witness stand fighting charges that he led a conspiracy to inflate Enron's earnings and boost its stock price. Lay was on the stand for six days, often growing testy as he tried to explain why he made optimistic statements to employees in the weeks before the energy trader collapsed into bankruptcy protection.
Under friendly questioning from defense lawyer Daniel M. Petrocelli, Skilling offered alternate explanations for Enron's business prospects and displayed some of the emotions that have tortured him since the company's misfortune. Vilified for years as the mastermind of the era's biggest business scandal, Skilling presented a more nuanced portrait of himself, talking about his drinking and depression. And the sometimes-volatile Skilling kept the full force of his temper in check.
But he failed to address seemingly simple issues, including a questionable personal stock trade he attempted in the fall of 2001. There, Skilling said he didn't remember a Sept. 6, 2001, call to his broker -- despite contrary government audiotapes heard by the jury. Skilling had told federal regulators he attempted to sell Enron stock only after Sept. 11, 2001. And he got caught flat-footed when talking about conflicts of interest he failed to disclose regarding an investment in an ex-girlfriend's business that was doing business with Enron.
When Skilling lashed out at lead prosecutor Sean M. Berkowitz for delving into areas not covered by his 28-count indictment, the government lawyer reminded him sternly that the issue on the table was Skilling's credibility.
Lay, who for years portrayed himself as so concerned with politics and energy policy that he left the details to others, frequently bucked under questions from his defense lawyer. He took responsibility for Enron's troubles but in the next breath blamed a multitude of external forces for its demise. Prosecutors seized on Lay's $77.5 million in stock sales back to Enron in its final months as evidence of self-interest, not unwavering optimism. Lay maintained the sales were "forced" by margin calls -- brokers' demands for more cash to secure a loan.
But under cross-examination from prosecutor John C. Hueston, Lay conceded that he did not try to liquidate Aspen, Colo., real estate or use other loans to cover the banks' demands.
Lay's demeanor on the witness stand, where he interrupted his lawyer and more than once advised the prosecutor to move on, contrasted starkly with the heart of his argument, lawyers following the case said.
"Overcontrolling others is the last thing you would have wanted to see in this defense," said Houston lawyer Dan Cogdell, who represents a former Enron executive who pleaded guilty and testified against Skilling.
Both defendants set a high bar when they unveiled their ambitious strategy in opening statements four months ago. Skilling and Lay said that they not only followed the law but that they also ran a vibrant company that unraveled because of market panic -- not widespread accounting fraud. Rather than blame 16 corporate insiders who pleaded guilty, both defendants instead chose to argue that most of their former subordinates committed no crimes but buckled under intense government pressure.
The first defense witness was perhaps its most powerful. Former Enron administrative assistant Joannie Williamson bolstered a point made by Skilling and Lay when she testified that a former employee cooperating with the prosecution told her he did not believe he had engaged in wrongdoing despite his guilty plea. Her brief April 3 turn on the witness stand, however, may have been lost in the accounts of 30 others who followed her.
The defense also met with some success in leading jurors through the nuts and bolts of business practices, using such experts as former Securities and Exchange Commission accountant Walter K. Rush to support defense claims that both Skilling and Lay did not improperly boost earnings. Rush said they relied on countless others when making such important business judgments.
Yet it remains unclear whether the jury will choose to wade through such things as Enron's trading volumes, its accounting treatment for international assets and the measures analysts used to assess the health of its retail unit -- all the subject of discourse by defense experts last week.
Instead, jurors could just as easily base their decision on what Lay defense lawyer Michael W. Ramsey, who returned the courtroom Monday after missing about half of the trial because of a heart ailment, once called the "feel of the thing" rather than the "think of the thing."
In that case, gut feelings the jurors developed about Skilling and Lay over 14 days of testimony could prove to be the key in a case considered the biggest and most important in an era of financial scandals.