Closing arguments start at Enron trial

05/15/2006

HOUSTON (Reuters) - Former Enron Corp. Chief Executives Ken Lay and Jeffrey Skilling believed they were above the law as they directed the fraud at the now-ruined energy company, a prosecutor told the jury at their criminal trial.

“There can be no doubt that there was a conspiracy to mislead the public at Enron, and that these two men led it,” prosecutor Kathryn Ruemmler said in her closing argument in the federal court.

Ruemmler mocked Lay and Skilling’s claims that Enron was a healthy company brought down by biased media coverage and a conspiracy of predatory investors.

“It’s nonsensical; it’s absurd; it’s ridiculous. Don’t buy it,” she said.

After fifteen weeks of testimony, prosecutors and defense lawyers began the closing arguments that will run into Wednesday, when the jury is expected to start deliberating whether Lay and Skilling are guilty of fraud and conspiracy at the company that was once the seventh largest in the United States.

Lay, 64, Enron’s former chairman and CEO, faces six counts of fraud and conspiracy; and Skilling, 52, faces 28 counts of fraud, conspiracy and insider trading.

The two men, each of whom faces decades in prison if convicted, listened intently to Ruemmler’s argument but showed no emotion.

Prosecutors have brought a parade of former Enron executives and employees to the witness stand to bolster their case that the company hid losses, shuffled money from profitable businesses to unprofitable ones and inflated earnings to impress Wall Street.

Both Lay and Skilling have denied any wrongdoing at the company that collapsed in December 2001 into the then-largest U.S. bankruptcy after its use of off-balance-sheet partnerships to hide debt was revealed.

“They argued things like losses are not really losses, and stock sales are really not stock sales, and incriminating conversations were just misunderstandings,” Ruemmler said.

“You cannot stretch common sense that far.”

Ruemmler listed several of the former Enron executives who appeared at the trial, including Dave Delainey, who testified that Skilling approved an illicit accounting move to hide hundreds of millions of losses at the company’s retail business in its profitable wholesale trading operation.

Former investor relations executives Paula Rieker and Mark Koenig both testified the company inflated its earnings while hiding bad news from investors, Ruemmler said.

“Mr. Lay and Mr. Skilling were so arrogant, they didn’t think that the rules applied to them,” she said.

In fact, Ruemmler said, Lay himself admitted that on the witness stand when he said: “Rules are important, but you shouldn’t be a slave to the rules” in describing an investment he made that had breached Enron’s ethics code.

The defendants have argued that many of the government’s witnesses, including former Chief Financial Officer Andrew Fastow, are cooperating with the government and have lied on the witness stand to secure light prison sentences.

Among those witness was Andrew Fastow, Enron’s former chief financial officer, who admitted to skimming tens of millions of dollars from the deals his off-balance-sheet partnerships conducted with Enron.

Fastow, who testified that he made the deals with Skilling’s blessing, will serve a 10-year sentence in prison under his deal with the government.