The fraud and conspiracy trial of Enron Corp. founder Kenneth Lay and former Chief Executive Jeffrey Skilling is winding down, with one more week of testimony on the horizon.
The defense teams aim to rest their case Monday or Tuesday, followed by what prosecutors said would be up to 10 rebuttal witnesses. Then jurors are to begin deliberations May 17 after hearing a dozen hours of closing arguments.
Jurors who haven’t missed a day in the marathon trial that began when the panel was chosen Jan. 30 uttered a collective “Awwwww” in sarcastic disappointment when U.S. District Judge Sim Lake told them scheduling problems prevented other witnesses from testifying Thursday afternoon.
“I am confident that we will conclude next Thursday,” he told the panel regarding the testimony phase, and then released jurors early.
Former Enron Chief Accounting Officer Richard Causey, who was bound for trial alongside Lay and Skilling until he broke ranks and pleaded guilty to securities fraud three days after Christmas, will not testify for either the government or the defense, lawyers on both sides said Thursday.
The government wasn’t expected to call Causey to testify. Given his plea on the eve of trial, prosecutors didn’t have years to meet repeatedly with him to find out what he knew about goings-on at Enron like they did with the eight ex-Enron executives who testified against Lay and Skilling as part of plea deals.
But Causey was on the defense witness list, and remained a possible witness for Lay and Skilling until the defense confirmed Thursday he was off its radar as well.
Causey is slated to be sentenced in August.
Lay's other trial
Lake denied Thursday a request from Lay’s legal team to delay starting the ex-chairman’s bank fraud bench trial until May 22 — the week after deliberations in the conspiracy case are expected to begin.
Lake was unsympathetic to the Lay team’s request for more time to prepare, noting that they have known for months that the non-jury bank fraud case was to begin quickly after jurors in the conspiracy case began deliberations.
“These are not complicated charges,” the judge said.
Lay’s bank fraud case involves his personal banking. Prosecutors in that case allege he obtained $75 million in loans from three banks and then reneged on an agreement with the lenders that he wouldn’t use the money to carry or buy margin stock.
The banking case was originally part of the conspiracy indictment, but Lake in 2004 answered Lay’s request to be tried entirely separately from Skilling by severing only the banking charges from the conspiracy case. The banking case’s Enron connection is that the $75 million in loans were collateralized by Lay’s company stock. Those lenders issued the margin calls he said prompted him to tap the company for cash and repay the energy giant with Enron shares.
In testimony Thursday, an economics expert testified that Lay’s nearly exclusive reliance on Enron in his stock portfolio reflected his confidence in the company he founded.
“He had an extreme lack of diversity,” said Christopher Barry, chairman of the finance department at Texas Christian University in Fort Worth, describing Lay’s portfolio that by early 2001 was 90 percent Enron.
Prosecutor Robb Adkins suggested that Barry’s information came only from documents provided by Lay’s defense team and that the professor also should have consulted Enron’s “former employee victims” who relied on Lay’s guidance and information. At an employee meeting in late October 2001, Lay insisted the company was strong. Two months later, it filed for bankruptcy protection.
Barry bristled at the “employee victims” characterization.
“I have talked with former Enron employees, at least one, but not specifics about employee meetings,” he said under cross-examination.
Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces six counts of fraud and conspiracy.