Former Enron investor relations chief Mark Koenig led off the prosecution’s presentation of evidence yesterday in the criminal trial of his former bosses, Ken Lay and Jeff Skilling, and it quickly became clear that the Enron Task Force’s boring approach to putting on a case that almost caused a jury uprising in the earlier Enron Broadband trial may also be a problem for the prosecution in the Lay-Skilling trial.
As the Mary Flood/Chronicle, Carrie Johnson/WaPo, and Alexei Barrionuevo/NY Times articles all report, Koenig testified about several instances in which he allegedly prepared reports and presentations at the direction of Skilling and Lay that misled investors and analysts about the performance of Enron’s Broadband unit and Energy Services units.
However, to get to the nuggets of relatively exciting testimony, the jury had to endure hours of mind-numbing and largely irrelevant testimony regarding Enron’s structure, the company’s bankruptcy and related matters.
As a result, the prosecution could not finish its direct examination in an entire day of testimony and apparently is going to use a good part of today for further direct examination.
If that schedule holds, cross-examination of Koenig will almost certainly take a couple of days, which means that the second witness in the case — former Enron Broadband executive Ken Rice — may not begin until Tuesday afternoon or Wednesday of next week.
So much for the prosecution’s earlier prediction that it will take nine weeks to put on its case.
At any rate, one of the problems with Koenig’s testimony — which is being given under a plea deal with the government — is that it is not based on any meaningful involvement in the mechanics of how Enron’s executives evaluated its financial affairs and earnings.
Stated another way, Koenig was involved in how Enron’s financial matters were presented, but not in how they were determined.
As a result, his knowledge of the company’s financial affairs is a mile wide and an inch deep, a point that will almost certainly be hammered home by the defense on cross.
Meanwhile, the fact that the prosecution is relying so heavily on witnesses such as Koenig who have copped plea deals in return for favorable prosecution testimony will become an increasingly important issue as the the trial proceeds.
Houston criminal defense attorney Kent Schaffer — one of the half-dozen attorneys providing legal analysis for the Chronicle on the trial — noted in a blog post in the Chron on why people such as Koenig enter into plea bargains. The sad fact is that people often do plead guilty to crimes that they do not think that they really committed, particularly when the defendant sees the draconian sentence that can result from protesting one’s innocence. As Schaffer notes:
“Get ready to see grown men in Oxford suits and wingtip shoes rolling over, playing dead, and barking while on their hind legs; trying to earn a few extra biscuits.”
One comment on the blog was an argument that should really backfire against the defense.
It was claimed that all the government’s witnesses hired former AUSA’s or lawyers from Main Justice and then made deals.
Since the defense team wouldn’t know the difference between a debenture and a share of common stock, the gov’t could win simply by convincing the jury that these lawyers understood matters like the SEC and conference calls and earnings management.
Why did you leave out the wonderful story that Ken Lay went to bed one night with earnings below expectations and woke up the next morning in a new world?
Are you engaging in more than a little spin?
Moe, I didn’t leave anything out — each of the stories that I linked talk about the story of Lay awaking to better earnings estimate. I simply chose to focus on other aspects of the testimony than those that are readily available in the mainstream media.
Does Koenig have an empirical basis for believing that Enron’s reported earnings were wrong? If so, then what should the reported earnings should have been? The Task Force does not want the jury to understand that reported earnings of a large company are, by definition, estimates and are not exact. I suspect we’ll hear about that issue as the trial proceeds.
reported earnings of a large company are, by definition, estimates and are not exact
TK,
I completely agree with you which is why were are where we are today in corporate goverance. No one tells the fundamental truth, especially stock sales people (how they do to be called professionals is beyond me; most lack the integrity to be used car sales people)
Once the world understood what you said, back when “Adam Smith,” a nom de plume, wrote several books and numerous articles about the stock market, explaining such.
But you know the saw, life by the sword, die by the sword.
Lay and Skilling used this to every advantage. Arrogance poured our their pores, when on a conference call they were exact specific putting down any who questioned, what was a house of cards.
Does Koenig have an empirical basis for believing that Enron’s reported earnings were wrong?
I suspect that, if asked, he will spit out that piece of the victim’s ear.
For those who don’t understand, all he needs to say is that Skilling and Lay told me, “we just make it up was we go along.”
I have read your article updating the Enron trial of the moment with interest. Even in far away from anything Port Angeles, Washington, our interest is deep.
I have attempted to follow your link to Kent Schaffer’s “excellent overview”, but I reach only a site indentifying the defense attorneys and their connection to the Enron case.
Since I do need an good overview of why people plea bargain, can you fix this link? Or is it worth it?
Good site and good work. Thank you.
Marti, thanks for the note. The link to the Schaffer overview is corrected.
Enron trial: One thing to keep in mind
We’re on day two of the prosecution’s case, and if we’ve learned anything from yesterday’s testimony by Mark Koenig, it’s…