While jurors in former Enron Corp. Chairman Kenneth Lay’s criminal trial sit in a jury room deciding if he is guilty or not of six counts of conspiracy and fraud, U.S. District Judge Sim Lake of Houston started hearing evidence on May 18 on four bank fraud criminal charges against Lay that carry far more serious penalties. Lay faces 30 years in prison, plus a $1 million fine, on each of the four bank fraud charges against him.
After 16 weeks in the courtroom, the jury in the Lay-Skilling criminal trial began deliberations on May 17. Lay faces a total of 45 years in prison if the jury convicts him of the wire and securities charges, and Lay’s co-defendant in the jury trial, former Enron Chief Executive Officer Jeffrey Skilling, faces up to 275 years in prison on 28 charges of conspiracy, fraud, making false statements and insider trading.
In 2004, Lay had asked for a separate trial from Skilling, but Lake only granted a separate trial on the bank fraud charges. With his courtroom free and lawyers on both sides waiting for the jury’s verdict, on May 18 Lake began a bench trial on the bank fraud charges against Lay, who is accused of violating a federal banking regulatory rule by using up to $75 million in loans from Bank of America, Chase Bank of Texas and Compass Bank, from 1999 to 2001, to buy stock.
According to the indictment, Lay signed loan forms known as Form U-1, which would require him to state that he will not use loan proceeds to buy stock on margin. But the indictment in United States v. Jeffrey K. Skilling, et al., alleges he did so.
“This is a straightforward case of lying to banks,” federal prosecutor Robb Adkins told Lake in a brief opening statement in the bench trial.
On May 18, James Shelton, a banker who handled Lay’s loan accounts at Bank of America beginning in 1993, testified that he explained the Regulation U limitation to Lay and set up two lines of credit for Lay — one that could be used in full for stock purchases and one that couldn’t.
But under cross-examination from defense lawyer Ken Carroll, a partner in Carrington, Coleman, Sloman & Blumenthal in Dallas, Shelton testified that he does not know if Lay actually signed all of the documents in connection with the loans over the years. Carroll suggested that some of the loan documents may have been signed by an automatic signature machine instead of Lay.
Testimony was continuing as of presstime on May 18 in the bank fraud trial as were jury deliberations in the Lay-Skilling criminal trial. Lake announced that the jury would deliberate from 8 a.m. to 4 p.m. Monday through Thursday.