(FORTUNE Magazine) - Back in late January, when we arrived in Houston for the start of the epic Enron trial, we were sure that greed, arrogance, and deceit had helped destroy America's seventh-largest company. But even after years of thinking and writing about Enron (including a book, The Smartest Guys in the Room), we were unsure whether the company's two fallen CEOs--Ken Lay and Jeff Skilling--deserved time in the slammer.

Perhaps Skilling, known for being "sometimes wrong but never in doubt," was merely delusional. Maybe Lay had been floating above the fray for so long that he really was oblivious to the rot consuming his company.

The CEOs had boldly vowed to take the witness stand--and we were eager to hear their story in the courtroom, looking forward to a credible alternative narrative about what really happened. But after three weeks of listening to testimony from the defendants--testimony that was deeply cynical, at odds with knowable facts, and palpably discordant with how the world of business actually operates--we're angry all over again.

To be sure, the 12 jurors sitting in judgment on Lay and Skilling may be coming to very different conclusions--and theirs, of course, are the only votes that count. They were selected for their ability to set aside what they had read about America's biggest business scandal, right there in their hometown, and will base their verdict only on what they've heard in this windowless courtroom. Their judgment will depend largely on an appraisal of the two defendants, and on that front, too, what we've seen was unexpected--most recently from Ken Lay.

In the months leading up to his testimony, Lay--in contrast to Skilling--was personally gracious and charming to everyone inside the courthouse, even reporters and Enron prosecutors. The hard wooden bench reserved for family and friends of the defendants is almost always filled with well-dressed members of the Lay clan, serving as a conspicuous reminder that this man is a husband, a father, a brother, a grandfather.

We all thought that Lay would be charming on the stand--certainly on direct examination. But he seemed unable to get past his indignant self-righteousness, his sense that he was simply too good a man to ever have to answer questions about his role in Enron's bankruptcy. After all, a central theme of the defense has been that Enron was a healthy company, a "shining star." Lay's few attempts at jokes mostly fell flat, and the only times his expression changed from glowering was when his wife, Linda, mouthing words of support from her seat, would catch his eye.

Lay even seemed openly contemptuous of his own lawyer, George McCall "Mac" Secrest--"Where are you going with this, Mr. Secrest?" he snapped at one point. His attitude only got worse when prosecutor John Hueston took charge. Lay immediately made things personal. When Hueston asked whether Lay had engaged in "character assassination" of government witnesses, Lay shot back, "Are you considering yourself?"

"Mr. Lay, I'm an assistant United States attorney," Hueston responded. "This is my job. You may call me anything you want."

At that point the unthinkable happened: The crisp, meticulous government prosecutor had claimed the moral high ground from the family man who is calling two Baptist ministers to testify on his behalf.

Hueston drove home the point by noting that as the defendant stood by, another of Lay's lawyers, Mike Ramsey, had told reporters that former Enron treasurer Ben Glisan--whose testimony had been damning--was a "monkey" and "contradicted the theory of intelligent design." Yet Lay privately wished Glisan and his family well in the men's room. "So one message for the outside world, one message ... on the inside?" asked Hueston.

That very notion encapsulates the case against Lay and Skilling. And their testimony over three weeks made it almost impossible for us to believe the former CEOs didn't know precisely what they were doing.

Lay justified his innumerable rosy public statements about Enron's condition --statements that continued even into late October 2001, barely a month before Enron declared bankruptcy--by testifying that he is an optimist. "Most leaders are optimistic," said Lay. "Most people don't like to follow pessimistic leaders." Before the trial, we might have believed that Lay's major problem was an extreme case of optimism bordering on denial--that he was a true believer in all the absurdly upbeat things he was saying, that he was, in effect, the naked emperor in his new clothes.

But over the course of his testimony, Lay undermined his own credibility. For example, there was a letter from Lay's chief of staff, Steve Kean, telling him, "We are faced with too many bad but true (or at least plausible) allegations that we have to deal with," which "no amount of spin" could overcome. The problems, Kean added, include "creative or aggressive accounting"; overhyping of the stock or the prospects for unproven businesses"; and "a near- mercenary culture, which encourages organizations to hide problems." Despite documents like that, Lay insisted the company's problems were never serious.

Before he came to the stand, Lay (and the rest of us) had watched while Skilling's credibility was damaged by testimony about his personal stock sales in 2001. For Skilling, the sales go to the heart of the question: Did he really believe Enron was in "great shape" when he abruptly quit as CEO?

About a month later he sold 500,000 shares of Enron on the day the market opened after the attacks of 9/11. That December he told the SEC that the only reason he sold was his worry about the market in the aftermath of 9/11. But the prosecution later unearthed a tape of Skilling attempting to sell 200,000 shares of Enron stock on Sept. 6. During testimony, Skilling never devised a persuasive explanation for this attempted sale or his omission of it to the SEC.

Given that example, you'd think Lay might come up with something more convincing about his own investing activities. But no. During 2001 he repeatedly drew down an Enron line of credit in order to answer margin calls from banks and repaid it by selling almost $80 million of stock back to the company.

Yet because such sales don't technically have to be disclosed until year-end, anyone looking at publicly available information would have thought that Lay's stock ownership was slightly increasing (as a compelling slide put up by Hueston showed), when in fact he was unloading almost two-thirds of his Enron shares. During this same period Lay told employees that Enron stock was an "incredible bargain" and did nothing to correct an analyst's report that he was a "net buyer" of Enron shares.

When confronted about the discrepancy on the stand, he began by obfuscating: "I suppose it depends on how you define 'net buyer'." Then he said he didn't feel compelled to mention it to employees because he distinguished between "forced sales" and "discretionary" purchases. While Lay's actions were legal, his explanations hardly reinforced his assertions on his first day of testimony that "I have principles in my life, I have convictions, I have faith."

Lay got skewered by a second personal investing imbroglio--one that also first reared its head when Skilling was on the stand. Skilling testified that he'd invested $180,000 in a tiny Internet startup called Photofete, run by a girlfriend, which counted Enron as by far its biggest customer. While company policy dictated that corporate officers were required to report such potential conflicts of interest in writing, Skilling never did. As it turned out, Lay invested in the same firm--some $120,000. ("Skilling really put the pressure on," Lay's stepson advised him in an e-mail.) What's more, Lay failed to report the conflict. On the stand he reluctantly acknowledged that he'd "probably" violated Enron's ethics code.

The defense has repeatedly ridiculed the prosecution's contention that there was a conspiracy to inflate profits at Enron, instead presenting its own conspiracy theory: that a cabal of short-sellers and a compliant press were to blame for the company's demise. "There were short-sellers that were organized and working together and conspiring together," Lay testified. He cited the "cooperation" of the Wall Street Journal, as did Skilling, who said about a string of critical stories that the Journal ran in the fall of 2001, "I believed they had ten or 15 of them in the can ready to go, and it was going to be one after the other after the other after the other."

As the details of this supposed conspiracy were fleshed out during the defendants' time on the stand, it seemed increasingly absurd. Both defendants testified that the conspiracy began at a 2001 conference called Bears in Hibernation, held by well-known short-seller Jim Chanos in Florida. This was where shorts "got together to pick their No. 1 target," Lay told the courtroom. Skilling said it was where the "organized attack" began. It is true that Chanos discussed Enron at the event. But it is also true that plenty of other sophisticated investors who were nowhere near Florida in 2001 were already short Enron's stock--they'd done their own homework and come to the same conclusion as Chanos.

The notion that short-sellers are "vultures ... people who are trying to kill a company," as Lay's lawyer, Ramsey, said in his opening statement, has been one of the trial's richest sources of irony--the prosecution showed that Skilling himself made $15 million shorting a company called AES. During Lay's testimony, in one of the trial's most amusing interludes, prosecutor Hueston showed a brokerage statement demonstrating that Lay's son, Mark, had sold short shares of Enron in the spring of 2001. "He wasn't a vulture, was he?" asked Hueston. "I don't think he's a vulture, no," said a red-faced and obviously chagrined Lay.

As for the Wall Street Journal side of the conspiracy, even Skilling seemed to back away from it at one point. Prosecutor Sean Berkowitz asked him on the stand about "Wall Street Journal risk," which Enron cited in documents as one potential drawback of its convoluted financial structures. "That's not risk that somehow short-sellers are going to plant stories in the Wall Street Journal, is it?" Berkowitz asked. No, Skilling admitted, actually it meant that "you would have to explain" to the public what you had been doing. That's a lesson Skilling and Lay have learned the hard way.