U.S. District Judge Sim Lake ruled Thursday afternoon that bank-fraud charges against Enron former chairman and CEO Ken Lay would be tried to him without a jury early next year immediately following the multi-defendant conspiracy jury trial against Mr. Lay, which is scheduled to begin in mid-January, 2006. Judge Lake had previously severed the bank-fraud charges against Mr. Lay from the conspiracy and securities fraud case against Mr. Lay and co-defendants Jeff Skilling, Enron’s former CEO and COO, and Richard Causey, Enron’s former chief accounting officer. The government had been seeking to try Mr. Lay on the bank-fraud charges — which will not take as long to try as the larger multi-defendant case — later this summer. Earlier posts on this particular issue relating to Mr. Lay’s case can be reviewed here, here, here and here.
Although Judge Lake indicated during the hearing that he preferred to go ahead and get the bank fraud trial out of the way, he decided that such an early trial could cause a flurry of publicity that could negatively affect the jury pool for the trial of the larger conspiracy and securities fraud case that will begin in January.
Meanwhile, Banjo Jones speculates on what Tony Curtis and Mr. Lay talked about at a recent party.

The gamesmanship continues in the battle between the Enron Task Force and former Enron chairman and CEO Ken Lay over when and how to handle the trial of the government’s bank fraud charges against Mr. Lay. Prior posts on this flanking action in the war between the Task Force and Mr. Lay can be reviewed here, here, and here.
In response to the government’s request for a trial within the next two months on the severed bank fraud charges, Mr. Lay not surprisingly has asked U.S. District Judge Sim Lake to include the bank fraud charges in the January 2006 trial of the larger conspiracy-securities fraud charges in which Mr. Lay is a defendant along with former Enron CEO Jeff Skilling and fomer Enron chief accountant Richard Causey. However, in an interesting twist, Mr. Lay has requested that Judge Lake adjudicate the bank fraud charges himself rather than allowing those charges to be considered by the jury that will hear the conspiracy-securities fraud charges. Thus, Mr. Lay’s attorneys are attempting to hedge the substantial risk that a jury might be inclined simply to throw the book at Mr. Lay and convict him on all counts whereas he might stand a better chance of acquittal on the bank fraud charges in front of Judge Lake.
Although an interesting strategy, my sense is that Mr. Lay’s approach will not work because the Task Force will want to try the bank fraud charges to a jury, which the government figures will be more sympathetic to its case than Judge Lake. A hearing is scheduled on the matter on April 21. The Chronicle’s Mary Flood’s report on the skirmish is here.

Coming on the heels of this earlier post on the Enron Task Force’s use of Ken Lay’s prior public statements to move for an early trial on the pending bank fraud charges pending against him, Mary Flood of the Chronicle reports that U.S. District Judge Sim Lake (picture on the left) has called a hearing in the case for next Friday to discuss scheduling matters in regard to the bank fraud charges against Mr. Lay.
Contrary to my earlier speculation, Ms. Flood speculates that Judge Lake — who does run an efficient docket — will schedule the bank fraud trial against Lay this summer before the bigger January 17, 2006 trial of the securities fraud charges against Mr. Lay and his co-defendants Jeff Skilling and Richard Causey.
This is a horrifying development not only for Mr. Lay, but also for Messrs. Skilling and Causey. The adverse publicity that will result from a trial of Mr. Lay six months before the trial of the multi-defendant case will be hard for the defendants to deal with in an environment that is already hostile to anyone associated with Enron.
Meanwhile, Ms. Flood also reports that there will be a panel discussion about the Enron scandal before the Houston premiere of Alex Gibney’s documentary, Enron: The Smartest Guys in the Room on April 19, which was the subject of this earlier post.
By the way, I have not been asked to participate on the panel. ;^)

Remember that motion that former Enron chairman and CEO Ken Lay filed last fall in which he requested a separate trial from his Enron co-defendants Jeff Skilling and Richard Causey?
You know, the one in which U.S. District Judge Sim Lake delivered a body blow to the Lay defense team when he granted Mr. Lay a separate trial on the bank fraud counts that are specific toward him, but ruled that he would also have to stand trial with Messrs. Skilling and Causey in regard to the securities fraud and related criminal counts that are common to all three of the former Enron executives.
Well, the effect of that ruling is reverberating through Houston’s Federal Courthouse today. The Chronicle’s Mary Flood is reporting that the Enron Task Force has filed a motion in which it requests that Judge Lake schedule the trial of Mr. Lay’s bank fraud charges in May or June of this year before the trial of the larger case against Messrs. Lay, Skilling, and Causey that is currently scheduled to begin on January 17, 2006. Apparently, in support of its motion, the Task Force is relying upon Mr. Lay’s prior pleadings and public statements to the effect he wanted a speedy trial of all criminal charges against him.
Of course, Mr. Lay made those statements in the context of seeking a separate trial altogether from Messrs. Skilling and Lay, and quickly waived his speedy trial right when Judge Lake ruled that he would be tried with Messrs. Skilling and Causey on the common charges relating to all three. Thus, the Task Force is taking Mr. Lay’s request for a speedy trial out of context in using those statements to support its request for a quick trial on the bank fraud charges. Mr. Lay has suggested that the separate bank fraud trial commence within 60 days after the conclusion of the multi-defendant trial.
Judge Lake probably will not want to risk the prejudicial publicity of having Mr. Lay tried on the smaller bank fraud case before the larger multi-party case, so my sense is that he will deny the Task Force’s request for an earlier trial of the bank fraud charges against him. But the results of Mr. Lay’s seemingly innocuous motion seeking a separate trial in this case will prompt defense attorneys to think twice (and maybe three times) before filing such a motion in future multi-defendant cases.

Mary Flood of the Houston Chronicle is reporting that U.S. District Judge Sim Lake has scheduled the criminal trial of former Enron chairman Ken Lay, former CEO Jeff Skilling, and former head accountant Richard Causey to begin on January 17, 2006.

U.S. District Court Sim Lake (picture here) today issued an order denying former Enron Corp. CEO and COO Jeffrey Skilling, former Enron Chairman Kenneth Lay and former Enron Chief Accounting Officer Richard Causey‘s motion to transfer venue of their upcoming criminal trial out of Houston. That motion was the subject of this earlier post. Here is Judge Lake’s opinion.

The Houston Chronicle’s main Enron reporter — Mary Flood — weighs in today with this piece on how former Enron chairman and CEO Kenneth Lay is using sponsored links to direct websurfers to his website. Sponsored links appear prominently in searches for a word or name in an Internet search engine. They serve the dual purpose of making websites more noticeable and being a revenue source for search engines.
What are the chances that any prospective juror at Mr. Lay’s criminal trial who admits to reading Mr. Lay’s website will make in on the jury? Slim and none, in my view.

This John R. Emshwiller and Rebecca Smith Wall Street Journal ($) article provides an overview of the Justice Department’s criminal case against former Enron chairman and CEO, Ken Lay.
Mr. Emshwiller and Ms. Smith have been covering the Enron scandal from the beginning and have written a book on the subject — 24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America (HarperBusiness 2003) — that certainly would prompt one to question their objectivity in writing about the issues covered in the article. As noted several times in this blog, the best book on the Enron affair to date has been the one written by Fortune reporters Bethany McLean and Peter Elkind, Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron (Portfolio 2003). So, if you want to read just one book on the Enron scandal, read the latter.
Nevertheless, Mr. Emshwiller and Ms. Smith at least acknowledge in the article that the government’s case against Mr. Lay is difficult because it largely relies on public statements that he made in support of Enron as the company was spiraling downward during the latter stages of 2001. What you will not find in the article is any meaningful analysis of the policy implications of the government prosecuting a businessman for the “crime” of making public statements about a troubled company that were clearly intended to try and save the company for the benefit of its shareholders and employees. Apparently, the government prefers that Mr. Lay not have said anything and ensured that Enron went down in flames?
This previous blog post provides a more objective analysis of the policy implications of the government’s case against Mr. Lay. The demise of Enron effectively marked the end of a speculative stock market bubble that was the result of many bad decisions by businesspersons and investors alike. There was even criminal behavior involved in some instances. However, to paint the entire management team involved in a business failure such as Enron as criminals is akin to using a sledgehammer where surgical precision is needed. The results of such an approach are hopelessly arbitrary and capricious, as we have already seen with cases such as those involving Jamie Olis , Sheila Kahanek, and Global Crossing, Ltd. Indeed, such questionable prosecutions are how someone such as Mr. Olis ends up serving a longer prison sentence than a true business criminal such as Martin Frankel.
Mr. Emshwiller and Ms. Smith do not have much interest in exploring this angle of the Enron case. That’s a shame, because it may just be the most important policy issue arising from the scandal.

The Enron-related criminal cases just seem to get more bizarre by the day.

This Chronicle article reports that the Enron Task Force has named 114 unindicted co-conspirators in the Task Force’s criminal case against former Enron executives Ken Lay, Jeffrey Skilling and Richard Causey.

The Task Force has apparently set a record with the number of its named co-conspirators. The next largest number of co-conspirators named in a case that anyone can recall is the one involving former Louisiana governor, Edwin Edwards, where the government named 61 co-conspirators.

Messrs. Lay and Skilling are requesting that the Court require the Enron Task Force to disclose the identities of the alleged co-conspirators so that their counsel can talk with them in preparation of their defense. However, the purpose of the Task Force’s abuse of naming such a large number of co-conspirators is transparent — they want to chill any potential witness for Messrs. Lay, Skilling and Causey from testifying during their upcoming trial.

The tactic worked like a charm for the Task Force in the recently completed Nigerian Barge trial, in which none of the two dozen or so co-conspirators who had not already copped a plea deal with the government testified during the trial. All of those alleged co-conspirators asserted their Fifth Amendment privilege.

However, that the tactic works does not make it right. Given the apparent lack of adult supervision in the Enron Task Force in making these types of decisions, here’s hoping that the federal judges involved will provide it for them.

If not, one has to wonder how Messrs. Lay, Skilling and Causey are supposed to mount an effective defense when the 100 or so people who worked most closely with them are effectively precluded from testifying on their behalf?

The public relations contest that the Enron case has become continued today. In this Chronicle op-ed, Mike Ramsey — former Enron chairman and CEO Kenneth Lay’s criminal defense attorney — levels a blast at the Chronicle for adhering to the government’s witch hunt theme in regard to a recent Chronicle editorial critical of Linda Lay’s involvement in the sale of a Lay Family charity’s Enron stock days before the filing of Enron’s bankruptcy case:

As the tabloids demonstrate, there is money to be made by jumping onto the popular side of a public frenzy. However, one can still hope that major newspapers will refuse to become mouthpieces for those who prefer strong-arm tactics to public trials.
Just maybe it is time to get to the truth by a public trial instead of in the backrooms of the Enron Task Force and Houston Chronicle. (One might even wonder if those backrooms have adjoining doors.)

Then, Mr. Ramsey gives the Lay side of the story regarding the stock sale:

Linda Lay sold Enron shares as president of the family’s charitable foundation. They were shares that Ken and Linda had given to that foundation prior to the end of 2000 and every penny of the money from the sale went to such charities as United Way, YMCA, DePelchin Children’s Center, Star of Hope, Holocaust Museum Houston, and Open Door Mission, among many others.
The sale was made on the day, Nov. 28, 2001, when the share price was in free-fall. Linda salvaged what she could, as was her duty as president of a charitable foundation. (The sale price was $2.37, off from a high near $85 earlier that year and a closing price the day before of $4.01.) More remarkable, during that market panic neither Ken nor Linda sold any of their personal shares.
Indeed, after Ken’s return as CEO in August 2001 they held all their shares as the market plunged from near $40 per share to near $0.
The only shares that Ken and Linda ever sold during that tragic three and one-half months were sold to prevent margin calls from triggering a forced sale of all their shares. They never voluntarily sold a dime’s worth after Ken’s return. In fact, at bankruptcy they still held more than 1 million shares and more than 4 million vested stock options.

The dubious nature of the government’s insider trading case against Mr. Lay has been examined in many previous posts here, including this one and this one. But Mr. Ramsey sees something far more sinister than a government investigation:

While it is true that Andrew Weissmann and his Enron Task Force have chosen not to comment publicly [on the investigation of Linda Lay’s stock sale], I cannot accept that after nearly three years of investigation, the press and a secret grand jury happened, by coincidence, upon this particular event at the same time.
Perhaps I am cynical, but this is not exactly my first rodeo.
No, there was a calculated leak done to produce an unfavorable story in aid of a shamefully false accusation.

Mr. Ramsey is undoubtedly correct that the Linda Lay story was a calculated leak by the government, and I am sympathetic to the argument that the prosecution has no business engaging in this type of public relations. However, the fact remains that Linda Lay’s sale of this stock days before Enron’s bankruptcy was a stupid move. Here’s hoping that no lawyer advised her to do it.