Enron pair spun 'lie after lie' as they sold shares worth millions

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The Independent Online

The two men who led Enron in the months before its spectacular collapse were accused yesterday of spinning one lie after another to conceal the dire financial health of the Texan energy trading giant, and to buy themselves time to cash out tens of millions of dollars in personal stockholdings.

On the first full day of their keenly anticipated trial in Houston, Ken Lay, Enron's founder, and Jeff Skilling, his chief executive for six tumultuous months over the spring and summer of 2001, listened in silence as the federal prosecutor John Hueston gave a painstaking, point-by-point rundown of what the two men knew, when they knew it, what they chose to tell their employees and shareholders, and what undeclared trades in Enron stock they were making at the same time.

"This is a simple case," Mr Hueston told the court at the start of his opening statement. "It's not about accounting. It's about lies, and choices."

He used audio and videotapes to demonstrate instances where the defendants appeared to acknowledge the gravity of Enron's finances one day, only to turn around and assure investors and employees soon afterwards that everything was fine - "nothing but good news and sunshine", in Mr Hueston's words.

"These two men told lie after lie about the true financial condition of Enron," Mr Hueston said, "lies that propped up the value of their stockholdings and deprived common investors of information they needed to make fully informed decisions about their own Enron stock."

Mr Hueston delved into the intricacies of Enron's broadband and energy services, laid out what he alleged were abuses of the company's reserve accounts and likened the company's off-the-books accounting practices to a leaking barrel of nuclear waste.

The prosecution had previously indicated it wanted to avoid bogging down the jury in technical detail and focus instead on the documented statements of the two defendants to demonstrate fraud and abandonment of their fiduciary duties. That strategy came under attack by Daniel Petrocelli, a corporate lawyer from California who made the opening statement for the defence.

He said Mr Hueston's presentation did not reflect the substance of the charges. Mr Petrocelli said: "This man Jeffrey Skilling, the government has accused him of spearheading or leading a massive criminal conspiracy.... I don't think I heard the word conspiracy mentioned [by Hueston]. We are going to show you the actual charging cycle. This man - he never, ever led any criminal conspiracy... and the same is true of that man, Mr Lay."

Mr Petrocelli appeared to be taking a risk by venting such indignation against an accusation the prosecutor had not actually made. And he appeared to take a second risk by rejecting the notion that Enron was in trouble months before its bankruptcy declaration in December 2001. He even called the company "one of the greatest success stories in American history".

He said: "It's a tragedy what happened. But it wasn't a crooked company."

Mr Petrocelli pinned much blame for the collapse on Andrew Fastow, the chief financial officer serving 10 years in jail, and two of his underlings, Ben Glisan and Michael Kopper, who have also pleaded guilty to fraud. But he denied there was anything untoward about Enron's accounting practices, and said the reason the prosecution wanted the jury to believe the case was not about accounting was because the nitty gritty of the company's bookkeeping did stand up to close scrutiny.

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