Now that the government has rested its case in the Enron fraud and conspiracy trial, those who lost millions in the company's collapse more than four years ago will finally get to hear from the two men at the topformer Chairman Ken Lay and ex-CEO Jeff Skilling. Although the defense plans to call as many as 113 witnesses over the next four to six weeks, both men must now take the stand to clear themselves after weeks of damaging testimony by ex-employees like whistleblower Sherron Watkins. In fact, several of the government's 22 witnesses testified under oath in U.S. District Court that the two men lied to investors, employees and analysts. Only they can persuasively refute those allegations, saying what they knew, when they knew it, and why they acted as they did. "They're going to have to be very good witnesses or they're history," says Houston attorney Kent Schaffer.
Putting both defendants on the stand risks exacerbating the problem their attorneys have had to deal with from the beginning. The testimony of the two executives will probably not be consistent, says, Houston attorney Joel Androphy, author of a four-volume textbook, White Collar Crime. Although Skilling and Lay probably won't turn against each otherthey haven't so farthey may well contradict one another. "Both defense attorneys came in and cross-examined with one hand tied behind their back," Androphy says. The problem was most obvious during the testimony of former CFO Andrew Fastow, when Lay's attorneys failed to get him to differentiate between the job responsibilities of the two men. Even now, it's unclear to observers who did what at the company. "If there were separate trials and Lay were there by himself, he'd be putting Skilling on trial," Androphy says. "Lay would love to blame Skilling for all the evils that occurred at Enron. Skilling was there. He was hands-on. It's not the same for Lay." Lay, however, may turn out to be a better witness, says Houston attorney David Berg, author of The Trial Lawyer: What It Takes to Win. "You're going to see a charm offensive," Berg says. "Jurors give verdicts to people they like. And I think Ken Lay is an incredibly likable man."
The defense will start arguing its case on Monday, but Skilling's attorney Daniel Petrocelli said the former CEO will not take the stand for at least a week. Petrocelli will probably begin by laying the groundwork for a defense that claims the executives were merely using standard business practices employed by other companies, says Houston attorney and former federal prosecutor Michael Wynne. Most likely, he says, the two executives will argue that they were just trying to save the company and that if Enron had survived, what investors hadn't known wouldn't have hurt them. "That, perhaps, is an explanation, but it's not an excuseand it's not a license to lie," Wynne says.
Trial experts predict that Lay's defense, handled by famed attorney Mike Ramsey (who won an acquittal for accused millionaire murderer Robert Durst), will be that he was not aware that Enron was cooking the books. "The problem is, he's a Ph.D. economist," says Wynne. "It's going to be a very hard sell." Plus, says Wynne, if he wasn't involved in the business, why was he drawing such a large salary? "Lay's basic response is, 'I wasn't there. I wasn't around. And I was kept in the dark about what was going on,'" says Androphy.
The ignorance defense has not worked for other board chairmen in trials this past year, Androphy says. He believes that Skilling's defense will argue that all the deals at Enron started off perfectly legit and legaluntil people like Fastow, the former chief financial officer, committed crimesbut that all along he believed the company was following the letter of the law.
When the government rested its case on Tuesday, prosecutors dropped three of the 31 charges against Skilling and one of the securities fraud charges against Lay. While the defense trumpeted the dismissals, Wynne, a former prosecutor, notes that charges are often dropped to speed up jury deliberation and help jurors to focus on the crucial charges at the heart of the case. Overall, the government's case crushed the defense, Berg believes. "It was deeper and wider than anyone in that courtroom expected," he says.