HOUSTON (FORTUNE) - Depending on what jury verdict emerges from the Enron trial, the defense of former CEOs Ken Lay and Jeff Skilling will either be viewed as the most brilliant victory in the history of white-collar criminal defense -- or the most expensive bungle ever.

The defense has taken two enormous gambles: first, by insisting that nothing was really wrong with Enron, despite its shocking December 2001 plunge into bankruptcy. Call it the Grand Unified "Shining Star" Theory, which posits that the company's death resulted from a "run on the bank" triggered by short-sellers and critical media coverage.

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The second was putting the defendants on the witness stand.

The final verdict, of course, isn't in. But with the completion of Lay's testimony on Tuesday morning, the impact of the second gamble is now on display. At best, the performance of Lay and Skilling has been a mixed bag for the defense -- and a very unexpected mix at that.

At the beginning of the Enron trial, the conventional wisdom was that Skilling was the former CEO-defendant who might self-destruct on the witness stand, and that Lay might well win an acquittal on the sheer strength of his personal charm. But it's now clear that those expectations couldn't have been more wrong.

Far from suffering self-immolation, Jeff Skilling, especially upon direct examination by his lead attorney, performed well enough to pose peril for the prosecution. On the other hand, Lay's testimony could end up convincing the jury to send him away.

Throughout his time on the stand, Skilling was intent on trying to show that prosecutor Sean Berkowitz and his government colleagues just didn't "get it," to use a favorite Skilling term. He repeatedly argued that they simply didn't understand Enron's business. "This continues to show that Mr. Berkowitz doesn't understand the process that was being used to set these reserves," Skilling said at one point. "The whole concept that this is somehow suggestive of a business that's failing is incorrect and just shows a misunderstanding of how the numbers are put together," he said at another.

This was dangerous stuff for the prosecutors. If Skilling had been able to run rings around Berkowitz, convincing the jury that the government really didn't "get it," it could well have been "game over." But Berkowitz held his own, constantly jabbing back: "....I know that I'm not, in your view, the smartest guy out there, sir, but what I don't understand is..."

On direct, Skilling's personality seemed to strangely morph every few hours, but he avoided a feared fatal blowup. And Skilling's lead defense attorney Dan Petrocelli skillfully led him through a response -- to be sure, not always convincing -- to virtually every government allegation.

At the same time, Skilling's testimony revealed the problem with the "Shining Star" strategy (this is the phrase Petrocelli used in opening arguments to describe Enron). Skilling denied that anything serious was wrong with the company, in the face of too many damning witnesses, too many damning documents, too many damning recounted conversations to easily explain away.

And to be sure, there were serious credibility issues. Petrocelli yelped to the media during a court break about the prosecution's introduction of the now-infamous PhotoFete affair, insisting that the issue was irrelevant. But the protests were a sign that this line of questioning was drawing blood. As Berkowitz used it, PhotoFete also sounded an important note about Skilling's insensitivity to a far bigger conflict of interest that he and Lay foolishly allowed: Andy Fastow's LJM partnerships. Skilling's inability to explain his attempt to unload 200,000 shares of Enron stock prior to 9/11 -- and not long after his surprise resignation -- was also a problem.

There were other, less-noticed problems with Skilling's arguments. For example, after years of insisting that Enron was "a logistics company," not a trading business, he conspicuously edged away from that untenable position, explaining that what he really was trying to get across was that Enron was "more than a trading company." Never mind that this isn't what Skilling told investors.

He justified his repeated public denials that volatile energy prices affected Enron's profits at all -- denials showcased to the jury in tapes -- by rationalizing that he could say whatever he wanted because investors could learn about the company's susceptibility to trading risk by checking the passage in the company's SEC filings on "VAR" -- a metric called "value at risk," which purports to show the potential risk of loss that a trading company has.

There was also the question of Enron's profits, which, as Skilling described it, could be...well, whatever Enron wanted them to be! This, of course, was precisely the problem. Skilling, for example, testified that it was never a struggle for Enron's broadband business to meet its quarterly earnings target because "it's just a management decision as to what extent you want to sell down a portion of the business."

Later, Skilling complained that all the financial records Berkowitz was showing him displaying losses were really meaningless ("...So that $495 million is overstated by $319 million...."). What really mattered, he said, was something called the daily position report, or DPR. This, Skilling insisted, was "the most important financial document that I used" -- the true measure of how Enron's business was really performing.

After explaining this, Skilling then pointed to a number on the DPR showing a loss -- but insisted that was only because there was "an $81 million argument" inside Enron, and that it was really not a loss at all. He then pointed to another number, and said that wasn't right either -- because it reflected a loss that should have been booked elsewhere, but wasn't because of an internal political conflict. His attitude was "let's just keep peace in the family...there are kind of bragging rights that are associated with these line items." In other words, by Skilling's testimony, even Enron's "real" books didn't reflect financial reality.

Lay's testimony, on the other hand, may prove a turning point in the entire trial. If Skilling's appearance turned out to be the moment that could have blown it for the prosecution -- but didn't -- Lay's appearance, just as surprisingly, may have torpedoed his own defense, and perhaps even Skilling's as well. It is a concern in the Skilling camp that if Lay -- who faces far fewer charges -- is convicted, then Skilling surely will be too.

Far from seducing the jury, the man who launched the modern Enron came across as angry, arrogant, and presumptuous. He practically growled at his own lawyer. And on cross-examination, he revealed a penchant for caring about the rules just when it suited him. Prosecutor John Hueston methodically hung Lay by his own words -- and those of his own attorney.

In opening arguments, Lay lead attorney Mike Ramsey (since sidelined with heart problems) flatly declared: "As a matter of fact, one of the strongest parts of our case has to do with the fact that Ken Lay never sold one share of Enron stock that he was not compelled to sell....This case will rise or fall on that."

If that is truly the case, Lay is in deep trouble.

The issue here is that Lay, even while insisting late into 2001 that the company was stronger than ever and Enron shares were "an incredible bargain," was privately dumping almost two-thirds of his own stock during the year, some $70 million worth. And he did it through a method that avoided public disclosure until year-end, by repeatedly drawing down a $4 million company credit line, then repaying it with Enron shares.

By keeping his massive sales private, this backdoor method encouraged the belief that he was actually a "net buyer" (as one analyst wrote) of Enron shares, even as their price plunged. Lay insisted that he had chosen this method -- rather than simply selling stock through his broker (which would have to be disclosed monthly) -- because it was more "convenient."

Even before the trial began, Lay had publicly maintained that he had sold his Enron stock only because he had no choice -- that it was the only way he had to meet repeated margin calls on more than $100 million in personal debt. Opening up some of Lay's financial records, Lay and his attorneys had conspicuously made this very point in a February 2003 New York Times story, headlined: "Company man to the end, after all."

On cross-examination, prosecutor John Hueston methodically eviscerated this claim, showing that Lay repeatedly sold $4 million blocs of Enron shares when he faced margin calls a fraction of that amount -- and, virtually until the end, had millions of other stock holdings and other investments he could have tapped instead. On July 26, for example, Lay responded to a $483,426 margin call by selling $4 million in Enron shares, despite having more than $10 million in liquid non-Enron assets available, as well as $30 million in real estate.

On the stand, Lay testified that the Enron stock sales were "the only form of short-term liquidity I had" to meet the margin calls. He protested lamely that he faced other financial pressures beyond the margin calls and was in desperate need of a liquidity "cushion" and financial "flexibility" to avoid personal bankruptcy.

To illustrate some of those financial "pressures" -- and to demonstrate that Lay hadn't exactly begun pinching his pennies to avoid selling Enron shares -- Hueston also showcased the lavish Lay family lifestyle during 2001. This included $200,000 to lease a "mega-yacht" named, of all things, Amnesia, for his wife's birthday party ("I thought it was appropriate to celebrate it in a meaningful way with friends"); $4700 for two nights on the French Riviera; and $20,000 spent on antiques in Spain ("it could be my wife found something she really liked," mused Lay, continuing to display a stunning obliviousness to how this would strike a jury of average citizens.) "We had realized the American dream," Lay offered. "We were living a very expensive lifestyle, and the sort of lifestyle that's difficult to turn on and off like a spigot."

As for his failure to disclose that he was selling so much Enron stock, here Lay clung to the letter of the law, noting that what he had done was not illegal, and complied with SEC disclosure requirements -- even if it had misled investors. This didn't quite measure up to the standard he had offered on his first day on the stand -- of "having lived my whole life in such a way to make sure that I was doing at least what I thought, according to my moral code of conduct and according to my religious faith, was right or wrong." It seemed a little inconsistent, too, with his earlier testimony -- which Hueston had highlighted -- that "I've always tried to live by all the rules and all of the laws."

Now it will be up to the jury to decide whether Lay's notion of a "moral code" was good enough.