The former Enron chairman Kenneth Lay, who is awaiting the verdict of a Texan jury on charges related to the collapse of the energy company, was back in court yesterday to face a second trial, this time on charges of fraud in his personal financial affairs.
He is accused of lying to three banks and misusing the proceeds of a $75m (£40m) loan, violating a Depression-era banking law in the process. If found guilty of the four charges, he could spend up to 30 years in prison, three times the sentence he faces for his six Enron fraud charges.
Heading into court in Houston yesterday, a defiant Mr Lay said the personal banking case "looks like a last-minute add-on". His legal team has accused federal prosecutors of dredging up a little-known old law in case they fail to secure a conviction on the central Enron charges.
Mr Lay is charged with breaking an agreement not to use the loan to buy or maintain shares on margin. Federal restrictions on buying shares on margin - that is, using an extra loan from a stockbroker to maximise exposure to the stock market - were introduced after the Wall Street crash of 1929 to stop excessive stock market speculation. Mr Lay is the first person to be prosecuted under the law.
"This is a straightforward trial about lying to the banks," the prosecutor Robb Adkins said, promising dozens of documents signed by Mr Lay and showing the restrictions he had agreed to. "Evidence will show Mr Lay repeatedly and falsely executed forms relied on by banks and required by banks."
The court heard Mr Lay had two credit lines, one of which allowed him to buy shares on margin and one which did not. He repaid the loans in full.
This second trial, which is being heard in front of a judge rather than by a jury, piles on the humiliation for Mr Lay. A friend and adviser to the two Presidents George Bush, he was once feted in Houston for his philanthropy and his success in turning Enron into the seventh biggest company in the US.
Its collapse in 2001 shocked the US and turned Mr Lay, and Enron's chief executive Jeff Skilling, into icons of corporate greed. After a 14-week trial, a jury is now considering whether the two men were part of a criminal conspiracy that involved fraud and insider dealing in Enron shares. Mr Skilling faces 28 charges in that case.
The jury has decided to deliberate for eight hours a day, four days a week. The judge's verdict in Mr Lay's second trial is likely to be announced at the same time as the jury's verdict.Reuse content