February 20, 2004
Today Skilling, tomorrow Kenny Boy?

Now that Jeff Skilling has done the perp walk, when will the feds turn their sights on Kenny Boy?

With Jeff Skilling's indictment and Andrew Fastow's plea deal, a key question looms: What's next for Ken Lay?

At this point, no one can say. Prosecutors are still investigating Lay and haven't yet decided whether to bring charges. What's more, that investigation is likely to continue for months.

Lay's lawyers didn't speak Thursday, but they have steadfastly maintained his innocence. A spokeswoman for Lay, 61, said only that his attorneys were reviewing the indictment against Skilling, who served as Enron's chief operating officer and then its chief executive officer.

Some legal experts said if Lay's reputation as a more hands-off CEO turns out to be true, it could make it more difficult to bring criminal charges against him.

But, they also said, prosecutors could consider whether Lay acted in a "willfully blind" manner, that is whether he deliberately chose to ignore obvious signs of wrongdoing.

Skilling, who had been Enron's chief operating officer, took Lay's job as CEO in early 2001. Lay remained chairman and resumed the role of CEO when Skilling unexpectedly resigned in August of that year.

James Comey, U.S. deputy attorney general, spoke to reporters in Washington about Skilling's indictment, but said he couldn't comment specifically on Lay.

"The government is still a long way from bringing an indictment again Ken Lay," said Robert Mintz, a former federal prosecutor in New Jersey.

He added: "The government's approach here is to take these one defendant at a time and I think right now all of their efforts are going to be devoted to making these charges against Jeff Skilling stick and any charges against Ken Lay are very much an open question."

What Robert Mintz says sounds right to me. Skilling followed Andy Fastow so quickly because (I presume) Fastow pleaded out and gave the feds what they needed to bring a case against Skilling. With Skilling and Rick Causey almost certain to go to trial, the feds won't have time to pay much attention to Ken Lay. It's possible, depending on how long it takes for the trial to begin, that Lay won't be in the crosshairs for a few years.

Skilling will also serve as a test of the "it was all those evildoing underlings" defense. With Lay known for his, um, Dubyaesque management style, if the feds can't nail Skilling for complicity in what was going on, they'll never touch him. I'm really interested to see how this trial goes.

Finally, I note that Skilling has pled not guilty to all counts. His mouthpieces then talked trash on the courthouse steps. This will surely be fun.

Posted by Charles Kuffner on February 20, 2004 to Enronarama | TrackBack

From the Chronicle article:

Ramsey has also said that Lay never sold one share of Enron stock that was not a forced sale by banks or creditors.

Umm. There is no exception in insider trading law for forced sales by banks and creditors.

If my creditors were breathing heavily down my neck, could I rob a bank?

Is this a concession that Lay violated insider trading laws? If insider trading violations are the only ones that stick against Skilling and Lay, the government should be widely criticized for letting the kingpin, Fastow, plead to only 10 years. The fraud is a much more serious crime than the insider trading.

Posted by: Greg V. on February 20, 2004 12:07 PM

Now that Jeff Skilling has done the perp walk, when will the feds turn their sights on Kenny Boy?

When George W. Bush is no longer the President of the United States. Assuming (incorrectly) that one of Dubya's last acts won't be pardoning Kenny-boy, that is.

Posted by: the talking dog on February 21, 2004 5:04 PM

Greg V, I'm far from a specialist in this area and haven't cracked a book to refresh what I once knew of it, but the securities laws generally only cover "purchases" or "sales" of securities. That's fairly technical, and its generated lots of litigation about when, for instance, pledges and options have qualified (even though those are voluntary transactions in which cash can change hands). I vaguely recall some caselaw to the effect that a forced liquidation — over which the seller has no control — may not qualify as a "purchase" or "sale," and hence may not be within the technical reach of the federal securities laws. We are indeed into the "angels on the head of a pin" area here. But there's a surprising amount of misconduct, sometimes including potential fraud, that's proscribed solely by state statutory or common law rather than by the federal securities laws.

Mr. Dog: I understand your skepticism. If we look at facts rather than speculate and accuse on the basis thereof, however, do you have any specific fault to find with the convictions that the DOJ has obtained thus far? Or a factual basis — perhaps on the basis of your own personal experience as a career prosecutor of massive white collar criminal conspiracy cases? — to fault their classic "climb the corporate ladder to the big daddies, one rung at a time" prosecution strategy? Can you point us to any pardon decisions by the Bush Administration which suggest the kind of favoritism and conflict of interest his predecessor was accused of?

Just asking, that's all.

Posted by: Beldar on February 21, 2004 10:39 PM