Skilling, Lay make their last pitches
Attorneys for the ex-Enron CEOs urge jurors to see through 'smoke' and 'mirrors' of government's case; jury could deliberate Wednesday.
By Shaheen Pasha, CNNMoney.com staff writer

HOUSTON (CNNMoney.com) - The defense teams for Enron founder Kenneth Lay and former chief executive Jeffrey Skilling summed up the prosecution's case against the defendants Tuesday in two words: "smoke" and "mirrors."

With only a prosecution rebuttal remaining early Wednesday, the jury is finally expected to get the case as soon as the afternoon.

Jeffrey Skilling (left) and Kenneth Lay (right).
Jeffrey Skilling (left) and Kenneth Lay (right).
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After an earlier impassioned closing argument by Skilling's lead attorney Daniel Petrocelli, Lay's defense team urged jurors to see through the government's so-called diversionary tactics and not to fall for the lies they claim the government's witnesses told on the stand under duress.

With a revolving door of attorneys speaking for Lay during closing arguments, the defense put together a forceful summation. Attorney Chip Lewis garnered applause from Lay's family in the front row as he angrily pointed towards the prosecution and cried in a booming voice "don't come to Houston, Texas and lie to us!"

Lay's defense team, like Petrocelli before them, accused the government of distorting the facts to make up for a weak indictment.

Defense attorney Bruce Collins said the government's case against Lay is based on the notion that he misled employees and Wall Street in the third quarter of 2001 about the true financial state of Enron. But Collins insisted that Lay truly had faith in his company.

"You saw Ken Lay as a leader... not Chicken Little," Collins told jurors. "(Employees) don't want Chicken Little as a leader (and) he honestly didn't believe at any time that the sky was falling."

He said the proof of Lay's confidence was in the fact that Lay held on to millions of dollars in stock until the end. He added that with Enron's bankruptcy, 90 percent of Lay's wealth evaporated.

"Don't let anyone tell you that Ken Lay did not go down with the ship," he said. "He did."

Deliberate ignorance?

And attorney George "Mac" Secrest tackled the issue of deliberate ignorance, which Judge Sim Lake instructed the jurors was not a plausible defense. Legal experts said that decision could make it easier for jurors to reach a guilty verdict.

Secrest told jurors that "any fair assessment of the evidence shows you that not only was Mr. Lay not trying to hide or run from the facts, he was trying to run to the facts."

Secrest said in the span of only a few months, Lay launched investigations based on then vice-president Sherron Watkins' concerns and met with the heads of the business units, as well as Skilling, only to be assured that, despite some problems, Enron was in sound financial condition in late 2001.

"Mr. Lay can be criticized, he can be second guessed, he can be sued... this man can not be convicted of a crime," Secrest said.

Both defense teams are working hard to recast their clients in a positive light after government prosecutor Kathryn Ruemmler portrayed Lay and Skilling as greedy and arrogant elitists who cared more about their own interests than that of their employees.

Earlier in the day, Petrocelli described the defendant as a "tortured soul" who will be tormented by the demise of his beloved Enron for the rest of his life.

Petrocelli wasted no time mocking the prosecution's presentation of the evidence as "the incredible shrinking case" and said the government was willing to stoop to any level in order to guarantee a conviction.

At the heart of Skilling and Lay's defense is the notion that not only are the two innocent of any crimes but that there were no crimes committed at Enron. Petrocelli dismissed the line of 22 witnesses presented by the government as people "robbed of their free will" who chose to lie in order to avoid government persecution.

Petrocelli appealed to the jury to look at the defendant as he sat in his chair flocked by his attorneys.

"Look him in the eyes, look into his soul," Petrocelli said, his voice softening. "See if you see a criminal, a man with criminal intent."

A virtual autopsy

Throughout his summation, Petrocelli called the government's case "a virtual autopsy," accusing prosecutors of examining the corpse of Enron and manufacturing evidence by bullying witnesses into testifying when they couldn't come up with a solid paper trail implicating Skilling.

He said the government criminalized perfectly legal business transactions. Petrocelli said Enron's Raptors transactions, which were hedging instruments, were vilified by the government as an attempt to hide losses. He added that the decision to shift parts of Enron's retail energy business into its larger wholesale unit was a valid business decision that was supported by accountants and executives at the time.

He said the government's main charge against Skilling was that he masterminded a large-scale conspiracy to mislead Wall Street out of greed and a desire for stature.

"Stature?" Petrocelli asked incredulously. "He's antisocial! He loved building the business. He didn't like running the business and he wasn't very good at it. He made a lot of mistakes (but) a mistake is not a crime."

He went on to chip away at the government's conspiracy theory, saying that there is no money trail leading to Skilling's bank account, unlike documents proving that former financial chief Andrew Fastow and former treasurer Ben Glisan profited from their illegal dealings while at Enron.

Petrocelli ridiculed the basis of the government's case that Skilling entered secret side deals with Fastow that were part of a larger criminal conspiracy. The government contends that Skilling made oral agreements for Fastow to take on poor-performing assets from Enron's balance sheet through the creation of special-purpose entities known as the LJM Partnerships, but wouldn't suffer any losses from the transaction.

These agreements, colorfully known as "bear hugs," would make the transactions improper from an accounting standpoint because there was no transfer of real risk to Fastow. And bear hugs became a central theme of the government's case against Skilling in an attempt to show that he was willing to bend any rule in order to uphold the image of Enron as a solid company and prop up the stock price.

"Bear hugs here, bear hugs there, rejected bear hugs, hug another bear," Petrocelli cried, waving his arms around. "This is not a petting zoo, this is a criminal case!"

He added that the government couldn't pinpoint a time when the conspiracy started or ended and, in fact, tried not to use the word "conspiracy" for most of the trial. Turning to the jury, in a soft voice, Petrocelli asked, "How can we be at closing the case, be sending it to you and nobody knows where the conspiracy is?"

He said the government never asked Skilling on the stand one question about the Global Galactic documents - a photocopy of handwritten documents that Fastow said listed the side agreements he had with Skilling. And yet, he added, the government asked the defendant 162 questions about his participation in Photofete - a startup business started by Skilling's ex-girlfriend that conducted business with Enron.

Skilling failed to disclose to Enron that he invested in the company, and while his involvement with Photofete isn't an issue on the indictment, prosecutors used the transaction as an example of Skilling's poor ethical compass at Enron.

"For a smoking gun document that's supposed to put Jeff in jail, zero questions," Petrocelli said regarding Global Galactic. "162 questions about Photofete. That was a cheap shot and just shows how low they'd go to get a conviction."

Drama to come

Petrocelli's impassioned performance resonated with jurors, who smiled as he thanked them for doing their duty and laughed at some of the animated comments he made ridiculing the prosecution's case.

He also tugged at heartstrings as he confessed he was nervous about delivering his closing argument, knowing that after two years of representing his client, he would soon turn over Skilling's fate to the jury. He added that he didn't expect to sleep until the verdict was in.

"I can't tell you how that feels," he said. "Can you imagine how he feels?"

As his finished his summation, Petrocelli asked the jurors to carefully consider the jury instructions on reasonable doubt.

"If you have any hesitation at all about him... if you do, then he must be acquitted," he said. "Don't compromise in there, don't negotiate in there with his life. Not guilty, not guilty, not guilty, 28 times."

Lay's lead attorney Michael Ramsey was equally passionate as he wrapped up the defense's summation.

"A not guilty verdict is not an innocent verdict," he told jurors. "Innocence is for God and Holy providence. When you say not guilty, you're not saying innocent, you're saying not proven."

With his voice rising, Ramsey invoked the jury's patriotism by saying "speak for the country when you render a verdict, render a true verdict. If there's a moment of hesitation, you will find not guilty."

Ramsey returned for the close after health problems caused him take a backseat midway through the trial.

Skilling faces 28 counts of conspiracy and fraud, including charges of insider trading, while jurors will have to weigh six counts of fraud and conspiracy for Lay. Lay will face another four counts of bank fraud at a separate bench trial before Judge Lake later this week.

Enron's 2001 bankruptcy cost 4,000 employees their jobs and many of them their life savings, and led to billions in losses for investors. If convicted, both Lay and Skilling could face 20 to 30 years in jail.

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Enron prosecutors: Find them guilty. Click here for more.

Lay's double shot at jail. Click hereTop of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.