The Chronicle’s Mary Flood reports on one of the final pre-trial hearings before the commencement of the January 30 criminal trial against former key Enron executives Ken Lay and Jeff Skilling, and while it looks as if U.S. District Judge Sim Lake is going to let the parties put on their respective cases, he left little doubt that monkey business will not be tolerated. Thus, the Task Force won’t be able to use tape recordings Enron traders joking about stealing money from grandmothers during the California energy crisis while the defense won’t be able to bring up key prosecution witness Andrew Fastow’s apparent penchant for viewing pornography on his company computer.
However, the most important ruling that Judge Lake made was denying most of the Task Force’s motion to exclude an impressive group of expert witnesses that the Lay-Skilling defense team has assembled to assist the defense in explaining to the jury their version of what happened to Enron. Given the bias of most mainstream media accounts of what occurred at Enron, Lay and Skilling have already been indicted, tried and convicted by the media outlets that have generated those one-sided accounts. Accordingly, it is vitally important for the Lay-Skilling defense to be able to present independent experts to explain objectively to the jury that there is a far more nuanced story about what happened to Enron than most of the mainstream media accounts provide.
Speaking of which, it’s a bit hard to get a handle on the Task Force’s theory about what happened at Enron at this point. There is little doubt that the Task Force is going to present the case against Lay and Skilling as a material non-disclosure case, but the Task Force appears to be having a bit of a problem getting the rest of its story straight on what went wrong at Enron.
Initially, the prosecution alleged that Lay and Skilling presided over a house of cards at the company that was hidden from the investing public by the fraudulent behavior of Enron management and its auditor, Arthur Andersen. Then, after putting Andersen out of business with an over-the-top prosecution that was later rebuked by a unanimous Supreme Court, the Task Force modified that story to allege that Lay and Skilling had also fooled Andersen about the company’s true nature. More recently, the Task Force’s story has evolved into allegations that Enron was in fact a highly-profitable trading company, but that Lay and particularly Skilling hid the company’s enormous trading profits to fool the investing public into thinking that the company was a stable “logistics” company rather than a volatile trading company.
The Task Force is required to file with the Court today its final statement before trial explaining what charges it actually intends to pursue against Lay and Skilling. One can only wonder at this point which of the above stories about Enron that the Task Force will choose to use. So it goes in the wacky world of criminalizing agency costs.