Some charges dropped, Enron prosecution rests
Government lawyers finish up after eight weeks of testimony and 22 witnesses; defense for Lay, Skilling to start Monday.
NEW YORK (CNNMoney.com) - The judge in the Enron case dismissed three counts against former Enron CEO Jeffrey Skilling and one count against founder Kenneth Lay as the government rested its case against the two former executives Tuesday morning.
Samantha Martin, spokeswoman for the Justice Department's Enron Task Force, said Judge Sim Lake granted a motion by federal prosecutors to dismiss two charges of securities fraud and one charge of lying to auditors against Skilling.
Judge Lake also dismissed one charge of securities fraud against Lay. In a statement, Martin said the government asked for the charges to be dropped "for the purpose of economy," as well as other reasons.
Thomas Ajamie, a securities law expert, said prosecutors ask for a dismissal of certain counts if they believe that they were unable to provide the jury with enough evidence for a conviction.
If the jury were to issue a guilty verdict on a charge that government prosecutors knew they hadn't provided enough substantiating evidence on, that could mean the verdict might get overturned on appeal.
Ajamie said that in the wake of the highly publicized reversal of the Arthur Andersen conviction last year by the Supreme Court, and the overturned conviction in the Frank Quattrone case last week, the government was taking extra care to make sure that it doesn't provide the defense with any cause for appeal.
"It shows good lawyering," Ajamie said. "The government is obviously very confident in their case."
Judge Lake denied the defense's motion for acquittal on the remaining charges. Lay and Skilling still face about three dozen fraud and conspiracy charges accusing them of lying to investors about the company's financial state while they enriched themselves by selling millions of dollars in stock.
In theory, given the number of counts on the indictment, both Lay and Skilling could face decades in jail if found guilty on each charge. But in white-collar crime cases such as this one, the defendants probably face 20 to 30 years behind bars if convicted, legal experts said.
Government prosecutors rested their case after more than eight weeks of testimony. They called 22 witnesses in a bid to portray the former leaders of Enron as the puppeteers of one of the largest corporate frauds in U.S. history.
Among the witnesses were former financial chief Andrew Fastow, who pleaded guilty to two counts of wire and securities fraud in 2004, and former Enron treasurer Ben Glisan, who is currently serving a five-year prison term after pleading guilty to one count of conspiracy in 2001. He is expected to be released this fall.
Both high-ranking executives testified that Lay and Skilling had been aware of the company's disintegrating financial state but continued to mislead investors and Enron's own employees about the company's true financial health.
The defense for Lay and Skilling requested a few days to prepare and are set to begin presenting their case Monday.
The defense presented the court with a list of over 100 potential witnesses that may be called. That's about half the number previously presented, but Judge Lake -- who has assured jurors the court will try to wrap up the case by the end of April -- asked the defense to pare the number further.
Legal experts say the defense has hard work ahead after the prosecution managed to simplify the accounting issues in the case, and provided a stream of corroborating witnesses who fingered both Lay and Skilling as active participants in the corporate fraud that led to Enron's bankruptcy in December 2001. (Full story).
The defense is expected to call both Lay and Skilling to testify on their own behalf -- a move, Ajamie said, that shows that the defense attorneys realize they're in trouble.
"In normal criminal cases, you don't call your client unless you absolutely have to," he said. "Defense lawyers feel that the case has drawn some blood from Skilling and Lay and feel compelled to put them on the stand."
And for Lay, the end of one trial will mark the start of a second criminal trial where he'll face four charges of bank fraud.
Enron, once the nation's seventh largest company, declared bankruptcy in December 2001, a move that cost 4,000 employees their jobs and led to billions of dollars in losses for investors.
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