Former Enron Corp. chairman Kenneth L. Lay, who for weeks had been pressing to be tried on his own on criminal charges related to the company's demise, yesterday got more than he bargained for.
A federal judge granted Lay a trial by himself on four charges stemming from personal bank loans. But the judge also ordered Lay to face a second fraud and conspiracy trial alongside two subordinates in what may become the era's biggest corporate crime prosecution.
Legal experts said that means Lay's desire for a quick resolution will be thwarted by the protracted mega-trial, where he will share a defendant's table with protege Jeffrey K. Skilling and former Enron chief accountant Richard A. Causey. That highly publicized case will put on display allegations of widespread fraud that notoriously felled the Houston energy company in late 2001.
Lay is charged with 11 counts of bank fraud, conspiracy, securities fraud and wire fraud, mostly covering activity between August and December 2001, when he resumed day-to-day control of Enron following Skilling's abrupt departure. Skilling and Causey face more than 30 counts of fraud and insider trading dating to 1999.
"The court is not persuaded either that there is a serious risk that a joint trial would prevent the jury from making a reliable judgment about Lay's guilt or innocence, or that limiting instructions will not be sufficient to protect Lay from evidence that is admitted solely against his codefendants," wrote U.S. District Judge Simeon T. Lake III in a 28-page ruling.
Skilling and Causey, who face many more criminal charges than Lay, are sparring with prosecutors over access to documents. Defense lawyers say they will need months to prepare, and they have asked the judge to set a trial date in late 2005 or early 2006.
Michael Ramsey, the lead defense attorney for Lay, said he and his colleagues intend to meet soon and decide how to proceed.
"Two trials is frustrating from Ken's point of view," Ramsey said. "It's disconcerting. It's a more difficult case to try that way."
Houston lawyer David H. Berg, who has been following the Enron prosecution, said, "On balance, it's a bad day for Mr. Lay."
Daniel M. Petrocelli, the lead trial counsel for Skilling, said, "Whether tried alone or with Mr. Lay and Mr. Causey, we are looking forward to our day in court, when we expect Mr. Skilling to be completely exonerated of these wrongful charges against him."
Mark J. Hulkower, a lawyer for Causey, declined to comment, as did Andrew Weissmann, director of the Justice Department's Enron Task Force.
The judge has yet to set trial dates in the case, and defense lawyers for Skilling and Causey have said they may seek to transfer the trial out of Houston, where thousands of residents lost jobs and pensions when Enron collapsed.
Legal experts said it is too soon to tell whether the three defendants will blame one another for the company's demise. So far, all three men have pointed the finger at former chief financial officer Andrew S. Fastow, who pleaded guilty to two conspiracy charges and agreed to cooperate with prosecutors.
In recent months, prosecutors also have secured guilty pleas from Enron's investor relations chief and the top two executives in its highly touted Internet broadband division.
That may complicate efforts by Lay, Skilling and Causey to convince a jury that they didn't know about what prosecutors call a wide-ranging scheme to bury debt and inflate earnings.
"The hardest thing for a defendant to do, given an educational and business background, is prove how it is they didn't know about issues at the heart of their business," Berg said.