The first criminal trial of former Enron Corp. executives, scheduled to start in a Houston courtroom in a week and a half, will test jurors' reactions to more than two years of nonstop negative publicity about the demise of the hometown corporate giant.
Lawyers inside and out of the case are fretting about whether Houston-area jurors can hear the evidence with an open mind when the company's bankruptcy in late 2001 cost thousands of area residents their jobs and their retirement savings. Along the way, Enron became a favorite punch line of late-night-television comedians, a rich subject for political campaign attacks and a one-word shorthand for an era of corporate greed.
The defendants, Daniel O. Boyle and Sheila K. Kahanek, were not senior executives, and their case involves byzantine interactions with four former Merrill Lynch & Co. officials in what prosecutors say were bogus deals hatched to help Enron meet profit targets in 1999. The trial, with jury selection scheduled to begin June 7, may be most intriguing as a precursor for the prosecutions of Enron's top leaders in the coming months.
"Getting a jury to give these guys a presumption of innocence is going to be a herculean task," said lawyer Rusty Hardin, who defended accounting firm Arthur Andersen LLP on obstruction-of-justice charges related to its work for Enron in a 2002 trial in Houston. "I've never seen jurors as aware and possessed of opinions as in the Andersen case. People would stand up and express their opinions about Enron and they would be literally shaking."
Since that time, Hardin pointed out, even more damaging information about Enron's operations has been disclosed. The company's former chief financial officer, Andrew S. Fastow, has pleaded guilty to conspiracy, and its onetime chief executive, Jeffrey K. Skilling, has been indicted on 35 fraud and insider-trading charges.
Attorneys for Boyle and Kahanek and the four former Merrill executives declined to speak at length about the upcoming case. But defense lawyers and jury experts said the most crucial factor in the trial may be persuading potential jurors to be candid about their attitudes toward corporate America and their feelings about Enron in particular.
Enron's reach was so pervasive in Houston that the local U.S. attorney's office recused itself from the case because several lawyers had family and investment ties to the company. A handful of local federal judges have disclosed that they owned Enron stock.
Enron is the most prominent of the corporate scandals of the past few years, inducing strong opinions in many people who could possess hidden motives for getting on the jury, said Jeffrey T. Frederick, director of jury research for the National Legal Research Group in Charlottesville.
"In this particular case, you have to watch out for what's commonly called a stealth juror . . . someone who's going in there with an agenda," Frederick said.
History doesn't provide much of a guide for how jurors have handled notorious cases of alleged corporate crime in the past. Both Michael R. Milken and Ivan F. Boesky, major figures of the 1980s Wall Street insider trading era, pleaded guilty before their trials were set to begin. Savings and loan magnate Charles H. Keating Jr. was charged and tried in California, not his home base of Phoenix.
The fair-trial issue has come up before in the Enron saga. The wife of Enron's former finance chief asked for her trial to be moved out of Houston because of extensive "soap opera" type publicity, in the words of one lawyer in the case. The judge in that case ruled the trial would take place in Brownsville, 350 miles away from Houston. The trial was averted after Lea W. Fastow pleaded guilty this month to filing a false tax return.
Defendants in the Enron-Merrill case have not yet filed a request to move the trial out of Houston, and at least one defense attorney said he opposes the idea because he believes a local jury will decide in favor of his client after hearing all the evidence.
The trial centers on an allegedly improper deal in which Enron sold Merrill energy-generating barges in exchange for a promise that Enron would later find another buyer for the barges. It helped Enron generate profit and bonuses for executives.
Boyle is a former mid-level global finance executive at Enron who worked closely with investment banks. Kahanek was an Enron accountant who helped with the barge transaction and allegedly chastised an employee for setting down the terms of the deal on paper. Both are accused of conspiracy and other crimes.
The Merrill defendants face a series of charges including conspiracy in connection with their knowledge of the secret deal.
Federal jurors in Houston are culled from voter registration records in 13 surrounding counties. Court official David J. Bradley said the court may have to call "a few more jurors than we normally would" to go through jury selection in the Enron case because of the company's notoriety. The energy trader eventually rose to become the seventh-largest public company in the nation, according to Fortune magazine, before a disastrous fall from grace that inspired several books and a television movie.
Jurors are not barred from knowing anything about a case beforehand, but they must not have developed firm convictions and must be able to keep an open mind when hearing evidence, legal experts said.
Both prosecutors and defense attorneys in the Enron case are preparing a special questionnaire to help root out bias among potential jurors. Judge Ewing Werlein Jr. has said he will allow the lawyers to put a total of 10 extra questions on the questionnaire. Analysts said the questions would likely focus on jurors' general attitudes about corporate crime and executive pay, as well as whether they or their friends had lost jobs or money as Enron's stock price plummeted.
Lately, juries in business fraud cases have been the subject of intense news coverage. Defense attorneys for Martha Stewart, in an unsuccessful bid to throw out the verdict, recently attacked the honesty of a juror who voted to convict her. And a judge last month declared a mistrial in the case of two former Tyco International Ltd. officials because a holdout juror received a disturbing letter after the New York Post and the Wall Street Journal published her name.
Hardin, the Houston lawyer, said the Enron cases are so unusual that the only way to ensure that jurors are free from bias is to give both sides time to ask detailed, probing questions of prospective jurors.
He said that in 2002, he was allowed to ask whether potential jurors had heard about Andersen's troubles. But he wasn't allowed to follow up with jurors to learn what they knew. After the case ended, Hardin said, he appeared at a talk with the jury foreman, who told him -- mistakenly -- that an Andersen lawyer had taken the Fifth Amendment rather than testify before Congress.
"Those are things you would explore if you knew about them," Hardin said.
Giving free rein to lawyers to pose questions directly to individual jurors is unusual in the federal court system, in which judges usually handle the questioning, lawyers said.
Nancy J. King, a law professor at Vanderbilt University who has studied jury behavior, said most judges prefer to give the jury selection process a chance to work. In the event that enough unbiased panelists cannot be found, King said, the trial could be postponed or jurors could be brought in from other areas.
"It's going to be a difficult task," jury expert Frederick said of the upcoming Enron jury selection. "I'm not saying it will be impossible."