Enron trial to air notorious US scandal
Fraud, greed, enrichment, Enron: For most Americans, these words go together in recalling one of the worst corporate collapses in US history.india Updated: Jan 30, 2006 12:43 IST
Fraud, greed, enrichment, Enron: For most Americans, these words go together in recalling one of the worst corporate collapses in US history as its two former chiefs go on trial in Houston on Monday.
The two - ex-chairman Kenneth Lay and former chief executive Jeffrey Skilling - go on trial for their alleged role in the energy company's 2001 bankruptcy, which wiped out about $70 billion of the company's market value, shook the stock market and cost nearly 5,000 jobs at Texas-based Enron alone.
Enron collapsed less than three months after the Sep 11, 2001, terrorist attacks, jolting already shaken US financial markets and fuelling a government push to clean up corporate accounting practices.
For a while, the bankruptcy - the United States' biggest ever when it happened in December 2001 - symbolised everything that went wrong behind the scenes during the 1990s economic boom.
"The collapse of Enron was devastating to tens of thousands of people and shook the public's confidence in corporate America," the head of the Federal Bureau of Investigation, Robert Mueller, said later.
Stiff sentences handed down last year for other disgraced bosses like WorldCom Inc's Bernard Ebbers and Tyco International Ltd's Dennis Kozlowski suggested that Enron's former chiefs can expect little sympathy from jurors.
Prosecutors are expected to portray Lay and Skilling as ruthless schemers who lied to investors, shareholders and staff out of lust for money and power.
Both face conspiracy and securities fraud charges for allegedly swindling the energy firm of hundreds of millions of dollars and hiding huge debts by manipulating its books. The trial is expected to take several months.
If convicted on all counts, Skilling could face a theoretical 325 years in prison and Lay 175 years. Both have pleaded not guilty, maintaining that the murky partnerships they used to stem the company's financial problems were legal.
But 16 other former Enron employees have made plea deals with the government that prosecutors hope will help convict the two, including former chief accountant Richard Causey last month. He reported directly to Skilling and took part in conference calls with him and Lay.
A key witness could be former chief financial officer Andrew Fastow, whom Lay sought to blame for the shady practices. Cooperating with prosecutors, he was expected to testify against his former bosses.
Damning evidence also came in company e-mails exposed in the criminal investigation. "I am incredibly nervous that we will implode in a wave of accounting scandals," then-Enron executive Sherron Watkins - credited as being the chief whistleblower- wrote in August 2001.
The grandfatherly Lay, 63, gave generously to private causes in Houston - and to US President George W. Bush's Republican Party. After Enron's collapse, Lay claimed he had no clue that anything was wrong with the energy-trading firm's finances.
Skilling, 52, a Harvard Business School graduate, was credited with turning the former pipeline company into an energy-trading giant and the seventh-largest US corporation.
Lay's deputy for 11 years, he took over in February 2001, only to quit abruptly six months later for "personal reasons".
Then, in October 2001, Enron shocked markets with a third-quarter loss. On Dec 2, 2001, its stock price shrivelled from more than $80 per share to virtually nothing, and Enron declared bankruptcy.
First Published: Jan 30, 2006 12:43 IST