The jury in the trial of Enron CEOs Jeff Skilling, 52 and Ken Lay, 64 came back with with a total of 25 guilty verdicts against the two men in Houston today after less than six days of deliberation. The charges included bank fraud, insider trading and securities fraud. Both men could be facing 25 years in prison and fines that are sure to be in the tens of millions of dollars. The Washington Post reports:
Enron's implosion in late 2001 put substantial pressure on the Bush administration, which had developed close ties to Lay, to distance itself from business malfeasance. Within months, President Bush mobilized federal agencies and launched a corporate fraud task force that has convicted more than 900 people, including 92 corporate presidents, 82 chief executive officers, 40 chief financial officers, 14 chief operating officers, and 17 corporate counsel or attorneys.
The behavior and eventual collapse of Enron has had many far reaching effects. The California energy crisis of 2001, which was proven to be a deliberate market manipulation by Enron to increase profits, cost the consumers and government of the state of California literally billions of dollars. Additionally, it was a contributing factor in the recall of governor Gray Davis and election of Arnold Schwarzenegger. The eventual collapse of Enron destroyed the retirement account of thousands of its employees, who were encouraged to invest their 401k accounts in Enron stock right up until the bankruptcy. Finally, beyond this, Enron's collapse sent major shockwaves throughout the business economy, resulting in the downfall of their auditing firm, Arthur Anderson and involving many other large banks and investment banking firms.
There was nervousness from many ex-Enron employees that both men may have been exonerated, due the trial being in Houston and the precedence of the innocent verdict in the recent trial of HealthSouth CEO Richard Scrushy. Though these guilty verdicts are a great first step, Ken and Jeff won't be fitted for their orange jumpsuits yet. There is a probable years long appeal process soon the be underway:
Daniel M. Petrocelli, the charismatic defense lawyer for Skilling, and Michael W. Ramsey, the lead lawyer for Lay, vowed to mount years-long appeals that they claimed would exonerate their clients. Both defendants have yet to resolve civil lawsuits filed by former shareholders who seek billions of dollars. But they may have to stand in line behind the federal government, which has sought the forfeiture of Lay's $4 million penthouse apartment and Skilling's $5 million Mediterranean-style mansion, among other assets. (from The Washington Times)
For those of you who haven't seen the film "Enron: The Smartest Guys in The Room", it provides very good background to the events that precipitated this trial. It also has interviews with many of the insiders from Enron including Sherron Watkins, the whistle blower who set the investigations into motion. She in my opinion, is nothing less than an American heroine. As someone who works in a corporate environment, I know that the courage it took to do what she did, at that level and in that kind of corporate environment, is nothing less than amazing. Now, if the government could only listen to the whistleblowers within in it's own ranks.