Former Enron Corp. chiefs Kenneth Lay and Jeffrey Skilling were convicted Thursday of conspiracy to commit securities and wire fraud in one of the biggest business scandals in U.S. history.
The verdict put the blame for the 2001 demise of the high-profile energy trader, once the nation's seventh-largest company, squarely on its top two executives. It came in the sixth day of deliberations following a federal criminal trial that lasted nearly four months.
Lay was also convicted of bank fraud and making false statements to banks in a separate, non-jury trial before U.S. District Judge Sim Lake related to Lay's personal banking.
The conviction was a major win for the government, serving almost as a bookend to an era that has seen prosecutors win convictions against executives from WorldCom Inc. to Adelphia Communications Corp. and homemaking maven Martha Stewart. The public outrage over the string of corporate scandals led Congress to pass the Sarbanes-Oxley act, designed to make company executives more accountable.
Enron's demise alone took with it more than $60 billion in market value, almost $2.1 billion in pension plans and 5,600 jobs.
Enron founder Lay was convicted Thursday on all six counts against him in the corporate trial. Former Chief Executive Skilling was convicted on 19 of the 28 counts, including one count of insider trading, and acquitted on the remaining nine.
"Obviously, I'm disappointed," Skilling told reporters outside the courthouse. "But that's the way the system works."
Skilling's lawyer, Dan Petrocelli, said the verdict "doesn't change our view of what happened at Enron ... or Jeffrey Skilling's innocence."
Lake ordered Lay to stay in the courthouse until his passport was surrendered and until the conclusion of a 2 p.m. bond hearing.
Lake told jurors, "you have reflected on this evidence for the last few days and reached a very thorough verdict, and I thank you."
He set sentencing for Sept. 11. The charges for which Lay was convicted carry a maximum penalty in prison of 45 years in the corporate trial and 120 years in the personal banking trial. The charges for which Skilling was convicted carry a maximum penalty of 185 years in prison.
Jurors found through their verdict that both men had repeatedly lied to cover a vast web of unsustainable accounting tricks and failing ventures at Enron.
The panel rejected Skilling's insistence that no fraud occurred at Enron other than that committed by a few executives skimming millions in secret side deals, and that bad press and poor market confidence combined to sink the company.
"I wanted very, very badly to believe what they were saying, very much so, and there were pieces in the testimony where i felt their character was questioned," juror Wendy Vaughan said after the verdict was announced.
Both men testified in their own defense. Skilling is expected to appeal.
The government's victory caps a 4 1/2 year investigation that garnered 16 guilty pleas from ex-Enron executives, including former Chief Financial Officer Andrew Fastow and former Chief Accounting Officer Richard Causey.
All are awaiting sentencing later this year except for two, who either finished or are still serving prison terms.
The Lay-Skilling case tested the federal government's ability to prove complicated corporate skullduggery.
Enron's implosion and the subsequent scandals scared off investors, increased regulatory scrutiny over publicly traded companies and prompted Congress to stiffen white collar penalties.
Former WorldCom head Bernard Ebbers awaits a 25-year prison term for orchestrating the $11 billion accounting fraud that bankrupted the company. Stewart did five months in prison and more time confined to work and home for lying about a stock sale. Adelphia Communications founder John Rigas and his son got double-digit prison terms for looting their company.
HealthSouth Corp. founder Richard Scrushy bucked the trend with his acquittal last year of fraud charges despite five former finance chiefs pointing the finger at him in a $2.7 billion scheme to inflate earnings. He dropped in on the Lay-Skilling case during Fastow's lengthy testimony in March, saying the ex-CFO couldn't be believed.
But those cases were much simpler than that against Lay and Skilling.
The government's vast investigation seemed to stall until Fastow pleaded guilty in January 2004 to two counts of conspiracy and paved the way for prosecutors to secure indictments against his bosses. Fastow also led investigators to Causey, who was bound for trial alongside Lay and Skilling until he broke ranks with their unified defense and pleaded guilty to securities fraud just weeks before the trial began.