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HOUSTON � It’s just a white-collar crime trial. But in many ways, the long-awaited trial of former Enron Corp. Chairman Kenneth Lay and Chief Executive Officer Jeffrey Skilling is much more than a routine criminal case important only to the defendants and a handful of lawyers trying it. It may not be the single most important trial to ever take place in the Bob Casey U.S. Courthouse in downtown Houston, but the significance of the big event goes far beyond the future of Lay and Skilling, who face fraud and conspiracy charges. Lawyers are interested in watching the courtroom show. Thousands of Enron employees who lost their jobs and retirement security when the energy company filed for bankruptcy in December 2001 want to know who to blame for their misfortune. Business executives look to the trial as a way to figure out how a company as large and innovative as Enron could sink in a wave of near-worthless stock. And Lay and Skilling’s criminal trial has become a feeding ground for reporters looking for a new angle on the fall of Enron, which was the impetus for national corporate governance reform. “It will be interesting,” says Houston plaintiffs lawyer Tommy Fibich, who has practiced in Houston for more than 30 years. “We’ve had some big trials here, but I don’t think I’ve seen one that’s had this much anticipation nationwide.” “This trial is huge,” says Philip Hilder, a criminal-defense lawyer in Houston. “It’s certainly in our time the most significant white-collar trial. With the Enron collapse, there was much international attention and this is like the culmination. It’s the end of the saga.” Others disagree with the importance of the Lay-Skilling trial. “It will be an extra-ordinary trial, but it won’t be an extraordinary trial. Fatty Arbuckle, O.J. Simpson � it’s always the “Trial of the Century,’ ” says William Rosch III, a partner in Rosch & Ross in Houston. “Enron is a business case. It’s significant, but at the end of the day, I don’t think it will be as long lasting as a Texas murder,” says Joel Androphy, a trial lawyer in Houston. “It will always be secondary to murder cases. Houston is the murder trial capital of the world.” Lay and Skilling may testify during the trial, which is expected to last for four months or more, with dozens of reporters in town for the trial and live trucks for local television outlets and networks assigned permanent spots along Rusk Avenue near the courthouse. Michael Ramsey, a solo practitioner in Houston who is Lay’s lead defense attorney, says his client will testify unless the Enron Task Force “falls flat on its face” and makes his client’s testimony unnecessary. Skilling’s attorney, Daniel Petrocelli, a partner in O’Melveny & Myers in Century City, says his client wants to take the witness stand. “He is one of the only people, from the outset, [who] testified in all investigative proceedings. . . . I doubt he could stop now,” Petrocelli says, in reference to Skilling’s testimony in February 2002 at a congressional hearing on Enron. Voir dire began Monday. U.S. District Judge Sim Lake asked 100 prospective jurors, who have already been prescreened with a jury questionnaire, to report to the courthouse. Lay and Skilling say they can’t get a fair trial in Houston, but in 2005, and again Jan. 23, Lake turned down their requests for a change of venue. “The court is not persuaded that the evidence or arguments urged by defendants in support of the pending motion establish that pretrial publicity and/or community prejudice raise a presumption of inherent jury prejudice in this case,” Lake wrote in an order Jan. 23. So Wednesday Lay and Skilling tried again for a change of venue, this time appealing to the Fifth Circuit U.S. Court of Appeals. They filed a motion seeking a writ of mandamus requiring a change of venue to a location such as Phoenix, Denver or Atlanta. Lay and Skilling allege in the motion that Lake abused his discretion for denying their change of venue motions. The grounds, they claim, are that he disregarded the evidentiary record “which overwhelmingly establishes there is a reasonable likelihood of prejudice to defendants if tried in this venue,” applied an “outdated, overly rigid notion of venue transfer” and failed to hold an evidentiary hearing. They also asked Lake to stay the trial until the Fifth Circuit can consider the writ of mandamus, but Thursday Lake turned down their request for a stay. SETTING THE STAGE The indictment in United States v. Jeffrey K. Skilling, et al. brings 35 counts of conspiracy, wire fraud, securities fraud, insider trading and making false statements to auditors against Skilling, although prosecutors have indicated in court filings that they may drop four of the counts. At trial, Lay will face a total of seven counts of conspiracy, wire fraud and securities fraud. Lake has scheduled a separate trial for Lay on one count of bank fraud and three counts of making false statements to banks. In December 2005, at a public speech to businesspeople in Houston, Lay spent much of his talk criticizing the tactics of the Enron Task Force, and he blamed many of Enron’s problems on what he called the criminal activities of Andrew Fastow, Enron’s former chief financial officer. Fastow has pleaded guilty to one count of conspiracy to commit wire fraud and one count of conspiracy to commit wire and securities fraud and awaits sentencing. Fastow is on the government’s witness list. So is Ben Glisan, the former Enron treasurer who is serving a five-year prison term. In 2003, Glisan pleaded guilty to one count of conspiracy to commit wire and securities fraud, but at the time he did not agree to cooperate with prosecutors. Sherron Watkins, Enron’s vice president for corporate development who famously warned Lay about possible financial problems, is also on the government’s list. Her attorney, Houston’s Philip Hilder, expects Watkins to take the stand. The defendants’ joint witness list is broader and larger, and it includes other Enron employees who struck plea deals with federal prosecutors. Those include Michael Kopper, a former Enron managing director who pleaded guilty in 2002 to two counts of conspiracy to commit wire fraud and money laundering, implicated his ex-boss Fastow and agreed to cooperate with prosecutors. SIMPLICITY IS KEY The federal prosecution will need to “keep it simple” and portray the case as an effort to defraud the investing public, says Hilder. “The defense is going to try to pull this case into the weeds and make this an accounting case and inject as much confusion and technicality into the trial as possible in order to argue later to the jury that, if you don’t understand the transactions, then the government hasn’t proved their case,” says Hilder. He says the defense attorneys will likely point to Fastow as “being the root of evil” at Enron and claim they did not know what was happening at the company and they relied on advice from lawyers and accountants. The prosecutors will need to use testimony and financial statements to show Lay and Skilling knew their statements to the public were misleading, he says. Androphy says the prosecutors must prove Lay and Skilling were “within the culpable range � not that they knew everything, but they were in the zone of culpability.” He says the defense attorneys will likely harp on a theme throughout the trial. “The theme may be, for example, “Why would these gentlemen build such an empire, only to allow it to be destroyed?’ ” says Androphy, a partner in Berg & Androphy. Androphy says jury selection is key. “You can try the best case in the world, do the best cross-examination, have the best witnesses, but if you don’t have a jury that’s going to be open-minded . . . then you are going to fail,” he says. A spokeswoman for the Enron Task Force declines to say whether the government was using jury consultants. Lay’s jury consultant is Robert Hirschhorn of Cathy Bennett & Associates in Lewisville. Skilling’s lawyers are using Reiko Hasuike, of RandD Strategic Solutions in California. Generally speaking, Hirschhorn says, criminal-defense lawyers in business litigation cases want business-savvy, sophisticated jurors, but in the Enron case, those people are the ones who read the news and know more about Enron. “That’s why in my view, it’s going to take true artistry and intuition for picking this jury, especially when the judge says he’s going to do most, if not all, of the questioning,” Hirschhorn says. WAR ROOMS Lawyers on both sides are geared up for battle. Ramsey, Lay’s lead defense attorney, says he will likely deliver opening statements. During the trial, he will question some witnesses, primarily on cross-examination. Petrocelli, Skilling’s lead counsel, says he will handle the opening, and he will question witnesses, along with his partners, M. Randall Oppenheimer of Century City, Calif., and Mark Holscher of Los Angeles, and Ronald Woods, a Houston solo practitioner who is a former U.S. attorney in the Southern District of Texas. The Enron Task Force has an office within the federal courthouse, and the prosecutors � all from out of town � are living in apartments or hotels. Sean Berkowitz, the director of the Enron Task Force, says John Hueston, an assistant U.S. attorney on the task force, will likely give the opening. Berkowitz also says he and Hueston, and Kathryn Ruemmler, the task force’s deputy director, and Cliff Stricklin, another assistant U.S. attorney, will question witnesses. Stricklin is the lone Texan on the government’s trial team. He joined the task force a year ago, after losing a re-election bid in 2004 for judge of Dallas County Criminal Court No. 2. Prior to becoming a judge, Stricklin was an assistant U.S. attorney in the Eastern District of Texas, where he became friends with Matthew Friedrich, a former member of the Enron Task Force. Stricklin says it shouldn’t matter to the jury that he’s from Texas. “I have never thought where the attorneys are from makes a bit of difference with the jury. What matters is how you present the evidence,” he says. But Matt Orwig, the U.S. attorney for the Eastern District who got to know Stricklin when both were prosecutors working in the Plano office, says it helps that Stricklin has “Texas sensibilities.” “Cliff knows juries and he has a good sense of people he got as a prosecutor, running for office as a judge, and he’s got experience,” Orwig says. “He’s been through this before. It’s not his first rodeo.” FAIR LAKE U.S. District Judge David Hittner of the Southern District offers unabashed praise about Lake, who will preside over the Lay-Skilling trial. “He is extremely competent. When he speaks we all listen,” Hittner says. Twelve Texas lawyers interviewed for this article say Lake will give Lay and Skilling an orderly and fair trial. “He is a truly dedicated federal judge that takes his job as seriously as anybody that I’ve ever seen before. He’s just tremendously fair,” says Fibich, a partner in Fibich Hampton & Leebron. Before then-President Ronald Reagan appointed Lake to the bench in 1988, he had been an environmental litigator and partner in the Houston office of Fulbright & Jaworski. According to the Houston Bar Association’s annual judicial preference poll released in May 2005, 250 lawyers gave Lake nearly 70 percent or higher approval ratings for following the law, treating attorneys courteously, fairness, efficiency and hard work and preparedness. Only one of his eight colleagues in Houston, U.S. District Judge Lee Rosenthal, received a higher rating. Even lawyers who don’t approve of every decision Lake has made in the Lay-Skilling case so far maintain he plays it straight from the bench. Charles Blau, a partner in Dallas’ Meadows, Owens, Collier, Reed, Cousins & Blau, represents a client who testified for the defense in the Enron Broadband trial. Blau believes Enron Task Force prosecutors treated his client aggressively, and he expresses support for a motion Lay and Skilling filed in September 2005 seeking to dismiss the charges against them based on prosecutorial misconduct. In that filing, the defendants argued that prosecutors attempted to intimidate witnesses and prevent them from assisting the defendants. But at a hearing on the motion in December 2005, Lake ruled that he heard no evidence of prosecutorial misconduct in the testimony of two Houston lawyers. Lake later denied the motion. While Blau doesn’t agree with Lake’s ruling, he says he accepts it, because the judge always sets a fair tone in his courtroom. “He’s just that kind of judge,” says Blau. But Lake also has built a reputation for handing down tough sentences in white-collar crime cases. In 2004, Lake sentenced former Dynegy Inc. finance executive Jamie Olis to 24 years in prison for his role in an operation in 2001 to disguise debt as cash flow. In 2005, the Fifth Circuit threw out the sentence as unreasonable, but Olis’ re-sentencing before Lake is pending. LAWYERS AS WITNESSES Houston-based Vinson & Elkins was Enron’s go-to outside firm, so it’s not surprising to V&E partner John Murchison that five of his partners, including managing partner Joe Dilg, are on the defense witness list. With 730 lawyers firmwide, V&E gained notoriety in the Enron context for producing a report for Lay in the fall of 2001 that investigated allegations about financial irregularities at Enron raised by Watkins, then Enron’s vice president for corporate development whose supervisor was Fastow. It makes sense, Murchison says, that Lay and Skilling might consider calling V&E lawyers to the stand to demonstrate for the jury that the high-level executives regularly sought advice from lawyers. Murchison, along with outside lawyers from Washington, D.C.’s Williams & Connolly, represents his firm in civil litigation stemming from the collapse of Enron, including the massive shareholder securities class action, Newby, et al. v. Enron Corp. et al. pending in Harmon’s court in Houston. Petrocelli says it’s too early to say if defense lawyers will call V&E lawyers to the stand. “From our standpoint, whatever transactions or statements they [prosecutors] will attack, there will be a large number of people who will have knowledge about the transaction, who may have evidence,” he says. Blau says the subject of whether any testimony on the part of V&E lawyers would violate attorney-client privilege would certainly arise, if the partners took the stand. “It would undergo a subject-by-subject analysis and then a question-by-question analysis,” says Blau. Since Enron, the corporation, was V&E’s client, the company would have to waive its attorney-client privilege, Blau says. If the conversations are covered by attorney-client privilege and the client doesn’t waive the privilege, one way the lawyers could still testify without violating their professional obligations is if the judge found that all the conversations were held in connection with a crime, so they would fall under the crime-fraud exception to the attorney-client privilege. Most likely, Blau believes, the lawyers would be careful about testifying. “If they value their law license, they are never going to testify without some type of permission from their client,” Blau says. V&E lawyers are not the only Enron attorneys on the defense witness list. It also includes at least five of the 250 in-house lawyers who at one time worked for Enron, including James Derrick, the former general counsel. Derrick, who was a partner in V&E before he joined Enron, did not return a telephone call seeking comment. But Derrick and his former V&E partners may never testify. In all the Enron-related criminal trials that have preceded the Lay-Skilling trial, the lawyers have not been called as witnesses. Voir dire began Monday. U.S. District Judge Sim Lake asked 100 prospective jurors, who have already been prescreened with a jury questionnaire, to report to the courthouse. By late afternoon, 10 women and six men had been chosen as jurors and alternates. Brenda Sapino Jeffreys aned Miriam Rozen are reporters with a Recorder affiliate based in Dallas.

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