The founder and former chief executive of the collapsed energy firm Enron have today both been found guilty of fraud and conspiracy and could face imprisonment for the rest of their lives.
Kenneth Lay, the founder of Enron and once a personal friend of President Bush, was convicted on all six charges of fraud and conspiracy that he faced in connection with the company's spectacular $40 billion collapse, one of the biggest scandals in US business history.
Jeffrey Skilling, the former chief executive officer of Enron, was found guilty on 19 of the 28 charges he faced of fraud, conspiracy, insider trading and lying to auditors.
Skilling will remain free on a $5 million bond, while US District Judge Sim Lake said that Lay must post a $5 million bond and give up his passport to stay out of jail until sentencing, which will take place on September 11.
"I’m not going to let him leave this building until his passport is surrendered," the judge said.
Outside the court room after the verdict, Skilling told reporters that he would never be able to accept that he had committed crimes.
"I would like to thank my family for sticking by me. We fought a good fight and - well, some things work, some things don't," said Skilling.
"We have to go back and think things through. Obviously, I'm disappointed, but - that's just the way the system works."
Dan Petrocelli, Skilling's chief defence lawyer, promised a very full and vigorous appeal against conviction. "We have just begun the fight," he said.
Both defendants had awaited the outcome away from the federal courthouse in Houston - Lay at his office about two blocks away, and Skilling in his legal team’s "war room" in an office building across the street.
Enron, which at its height was the nation’s seventh-largest company, collapsed in December 2001 into the biggest US bankruptcy at the time amid disclosures it used off-the-books deals to hide billions of dollars in debt and inflate profits. It also turned out that Andy Fastow, its chief financial officer, had looted the company of $60 million while running the side deals.
Lay and Skilling men were accused of repeatedly lying to US investors, auditors and employees that the massive company was financially healthy, while secretly sanctioning the accounting tricks to mask its losses and failing ventures.
Skilling, 52, had faced counts of fraud, conspiracy, insider trading and lying to auditors, and a maximum of 275 years in prison if convicted on all counts. He was convicted on one count of conspiracy, 17 counts of fraud and making false statement, and one charge of insider trading, which would together add up to a maximum of 185 years in prison.
The six counts of fraud and conspiracy of which Lay, 64, was convicted carry a combined maximum punishment of 45 years. In addition, Lay was also found guilty in a separate bank fraud case that was tried without a jury before the same judge during the first three full days of deliberations in the conspiracy case.
He was convicted one count of bank fraud and three counts of making false statements to banks for illegally using money from $75 million in personal loans to buy stock. Each of the charges carries a maximum of 30 years, but experts say he is unlikely to get a sentence more than six months for each because he paid off the loans and the lenders suffered no economic damage.
Lay and Skilling denied any wrongdoing and attributed Enron’s failure to bad publicity and lost market confidence. In testimony, they said they painted a rosy picture of the company because they believed it was in great shape, not because they wanted to cover up problems.
Skilling suddenly resigned in August 2001 after just six months as chief executive officer and was replaced by board chairman Lay, who had been CEO before Skilling. But the two men testified that Skilling left because he was burnt out, not because of Enron’s growing financial problems.
They blamed media coverage and Fastow’s thievery for a financial crisis that sank the firm they built from a quiet pipeline business into an international trading powerhouse.
Prosecutors said the two men milked Enron for hundreds of million of dollars and lived lives of luxury while driving the company into a bankruptcy.
Lay took home $220 million in compensation from the sale of Enron shares between 1999 and 2001, while Skilling got $150 million, said John Hueston, an Assistant US Attorney, in opening arguments.
Lay used his and the company’s money to gain political power by donating heavily to candidates, particularly Republicans and especially the Bush family. He was the biggest donor to President Bush, who before the Enron scandal referred to him warmly as "Kenny Boy".
The key prosecution witness was Fastow, who tearfully told the jury of his misdeeds and said Skilling and Lay were deeply involved in what he described as a massive coverup of Enron’s troubled finances.
Fastow pleaded guilty to conspiracy in exchange for a 10-year jail sentence which he is expected to begin serving soon.
Former Enron shareholders have claimed in a series of separate, civil cases that they lost $40 billion in the spectacular business collapse.
Testimony from other Enron executives was crucial in reaching today's convictions. The first to be convicted over the debacle was Michael Kopper, a medium level executive who pleaded guilty to money laundering and wire fraud in August 2002.
The Government's case against Lay and Skilling was hugely strengthened when Fastow, who was charged with 78 counts of fraud, money laundering, insider trading and other charges in October 2002, pleaded guilty in January 2004. He was the highest-ranked Enron employee to admit to wrongdoing.
Fastow agreed to help the government's prosecution of other Enron executives. A month later on February 20 Skilling handed himself in. He was charged with counts of fraud, conspiracy and insider trading. He pleaded not guilty and was released on a $5 million bond, which he paid on the spot, in cash.
It was July that year before Lay, the former Enron chairman and Chief Executive Officer, was charged.
The jury hearing the case began announcing their verdicts in the epic four-month trial at noon Eastern time (1700 BST) after deliberating for 31 hours over six days.
