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Federal prosecutor Sean Berkowitz told the jury in former Enron Corp. Chairman Kenneth Lay and Chief Executive Officer Jeffrey Skilling’s criminal trial that it has an opportunity to decide which witnesses told the truth, and their only option is to find the defendants lied. “When you consider the evidence, you will conclude beyond a reasonable doubt, these men lied,” Berkowitz said on May 17 in wrapping up the prosecution’s rebuttal argument in the 16-week trial. He said Lay and Skilling lied on the witness stand and lied repeatedly to investors about Enron’s financial condition. “You can’t buy justice, you have to earn it,” Berkowitz said in apparent reference to the millions of dollars each defendant spent on legal representation for the trial. “This is not brain surgery for your child . . . ladies and gentlemen, this is a criminal case,” Berkowitz, director of the Enron Task Force, said. “You will find these men committed the crimes they are accused of.” Lay, 64, and Skilling, 52, are on trial in U.S. District Judge Sim Lake’s court in Houston. Skilling faces 28 criminal charges of fraud, conspiracy, making false statements and insider trading. Lay faces six conspiracy and fraud charges in the trial in United States v. Jeffrey K. Skilling, et al. Lay and Skilling have pleaded not guilty. Prosecutors allege Lay and Skilling participated in a conspiracy to misrepresent the true financial condition of Enron, but the defendants have blamed Enron’s problems on criminal acts by former Enron Chief Financial Officer Andrew Fastow, who pleaded guilty to two criminal charges and agreed to a 10-year prison sentence. Berkowitz told jurors the case against the former Enron executives is a case of “truth and lies” and the evidence proves the defendants lied. “You have heard two vastly different stories about what happened at Enron. The defendants and lawyers would have you believe it’s business as usual in corporate America. If what you heard is business in corporate America . . . I suggest we all take our money out of the stock market,” he said. “It is a crime to fudge your numbers. It’s a crime to lie to your investors. . . . It’s a crime to portray your company as something it isn’t.” But on May 16, during defense closing arguments, Lay attorney Michael Ramsey, a solo practitioner in Houston, asked jurors to find the defendants not guilty. “You speak for the country when you render a verdict and render a true verdict. If there is a moment of hesitation in your heart when it comes time to vote, you will vote not guilty, not guilty, not guilty across the board.” The panel of eight women and four men retired to the jury room at about 10:40 a.m. on May 17, and deliberations were continuing as of presstime. Closing arguments in the trial began on May 15, when prosecutor Kathryn Ruemmler told jurors Lay and Skilling used accounting tricks, fiction, trickery, half truths, omissions and outright lies to paint a dramatically distorted picture of Enron’s true financial condition. Ruemmler, deputy director of the Enron Task Force, told jurors Lay and Skilling repeatedly lied to investors and employees of the once high-flying Houston energy company. That conduct is criminal, she told jurors during her closing argument on May 15. “Why did the defendants lie?” Ruemmler asked rhetorically. “It’s a simple story, ladies and gentlemen. The deception kept the story alive and the stock price up. You have heard from both Mr. Lay and Mr. Skilling that the stock price was critical.” Ruemmler argued for nearly four hours on May 15, after Lake spent one-and-a-half hours reading the jury instructions and the charge to the jury. During her closing, Ruemmler told jurors they will not have to figure out what caused Enron to file for bankruptcy in December 2001, even though the defense hammered on that theme during the trial. Lay and Skilling aren’t charged with causing the bankruptcy of Enron, she said. “What they are charged with is misleading and lying to the investing public for the two years leading up to Enron’s collapse,” she said. Ruemmler told jurors to keep three things in mind when engaged in deliberations. She said to look at all of the evidence together and decide how particular pieces of testimony fit in with other pieces of testimony. She also told jurors to use common sense and avoid getting distracted by reported short-selling conspiracies and passion and outrage. “Focus on the key issue in the case, which is whether or not Mr. Lay and Mr. Skilling deceived investors,” Ruemmler said. Aug. 14, 2001, the day Enron announced Skilling’s resignation as CEO, was a critical day, Ruemmler told jurors. She described it as a day when the chickens were coming home to roost. “On that day, Jeff Skilling and Ken Lay told investors the company was in the strongest shape it had ever been in. It wasn’t. That wasn’t the truth and they knew it,” Ruemmler said. Ruemmler said Lay and Skilling knew on that day that Enron Energy Services and Enron Broadband Services were struggling, Enron Corp.’s wholesale business was taking on increased risk by making bigger trading bets to meet earnings targets, the company was unable to sell international assets that were then worth only about half of what they were listed at on the company’s books, and the company’s water business was a “colossal disaster.” In the few weeks after that, Ruemmler argued, Lay, who had returned to the CEO job after Skilling’s departure, began to receive disturbing news about Enron, including a warning from former Enron vice president Sherron Watkins. Watkins told Lay she feared the company might collapse in a wave of accounting irregularities. Shortly after that, Lay “quietly” began to sell millions of dollars of stock back to the company � he testified last month it was because he needed cash to meet margin calls � and on Sept. 15, 2001, Skilling sold 500,000 shares of stock, making a profit of $15 million. “When the chickens were coming home to roost, Mr. Lay and Mr. Skilling chose to put themselves above Enron’s investors and employees. They chose to cover their own interests and not reveal any of these issues,” Ruemmler told jurors. Ruemmler talked about Fastow’s credibility, saying that he clearly “did bad stuff” and lined his own pockets. But she told jurors that his so-called “global galactic agreement,” which was Fastow’s handwritten list of side deals between Enron and the LJM off-balance-sheet entities, is legitimate despite defense attempts to discredit it. Ruemmler warned jurors that defense attorneys would try to convince them otherwise. “The global galactic [agreement] makes LJM a total sham,” Ruemmler told the jury. Fastow testified last month that the agreement detailed guarantees from Enron that LJM would not lose money on particular transactions. He testified that former Enron Chief Accounting Officer Richard Causey initialed the agreement and told him that Skilling had approved it. Causey, who was indicted along with Lay and Skilling, pleaded guilty on Dec. 28, 2005, to securities fraud. His plea bargain calls for an 84-month sentence. Neither side called him to testify during the Lay-Skilling trial. Defense lawyers painted a different picture of the global galactic agreement, and most of the other testimony in the case during closing arguments on May 16. In a high-volume, passionate argument, defense attorney Daniel Petrocelli implored jurors to find his client, Skilling, not guilty of criminal charges pending against him, and argued federal prosecutors failed to prove Skilling participated in a conspiracy to engage in fraud. Petrocelli told the jury the federal prosecutors on the Enron Task Force relied on suspect testimony from cooperating witnesses during the trial, and failed to present documentary evidence to prove their case against Skilling. He told jurors they need more than the word of prosecutors to find Skilling guilty of the criminal charges against him. “No matter how many times you say fraud, it doesn’t make it true. There has to be facts. It’s not about argument,” Petrocelli, a partner in O’Melveny & Myers in Century City, Calif., said during more than three hours of argument. Petrocelli told jurors to look into Skilling’s soul to see if the former Enron CEO is a criminal. “See if you see a criminal. See if you see a man with criminal intent. See if you see a man who has been accused of spearheading a massive criminal conspiracy, the likes of which has never been seen before, involving countless people, billions of dollars, and he’s supposedly the mastermind,” Petrocelli said. Petrocelli told jurors on May 16 that if they can’t, without hesitation, pinpoint the beginning of a conspiracy at Enron, they must acquit Skilling. “If you hesitated, that’s reasonable doubt. We own that. We win. That’s acquittal right there if you hesitated,” he said. Petrocelli suggested that many of the witnesses who testified during the trial, who had cooperation agreements with the government, may not have been entirely truthful on the witness stand because prosecutors pressured them to take plea deals. Petrocelli poked fun at the concept of “bear hugs,” a term former CFO Fastow used last month in testimony describing the side deals he had with Enron in connection to the LJM partnerships, the off-balance-sheet partnerships he ran. Fastow, who was a government witness with a cooperation agreement, testified that Skilling gave him oral assurance that the LJM partnerships would not lose money on some of their investments with Enron. “You heard that. A bear hug here. A bear hug there. A rejected bear hug,” Petrocelli said. “This is not a petting zoo. This is a criminal case.” Petrocelli said the government is trying to put Skilling in jail based on these so-called bear hugs Fastow described during his testimony, but prosecutors came up with no documentary proof. “There is not a single piece of paper on the planet . . . that says Jeff Skilling gave any kind of guarantee, let alone a bear hug. What they want you to do is assume there was a guarantee,” Petrocelli said. The defense attorney told jurors the government could have bolstered its case by putting Causey on the witness stand to corroborate Fastow’s testimony that the side deals with Enron were memorialized in the global galactic agreement. However, Petrocelli pointed out, the government failed to call Causey as a witness. Although Fastow testified Causey initialed the handwritten global galactic agreement and got it approved by Skilling, Petrocelli told jurors he has no clue if the global galactic agreement is legitimate: “Jeff never saw it. His initials aren’t on it. I don’t know if Rick Causey signed that thing or not, but I tell you one thing, they could have easily put that thing to rest by bringing him to testify.” Petrocelli told jurors the prosecutors failed to prove with documents that Skilling told anyone at Enron to adjust earnings reports to meet or exceed earnings targets. He also said they didn’t prove Skilling engaged in insider trading. The indictment brings 10 insider-trading charges against Skilling in connection with Enron stock he sold in 2000 and 2001, including the sale of 500,000 shares of stock on Sept. 17, 2001, at a profit of nearly $16 million. Petrocelli pointed out that Skilling had been gone from the company for a month before he sold that stock, and said it’s not unusual for executives to sell stock holdings after they leave a corporation. In wrapping up his closing argument, Petrocelli asked jurors to read the jury instruction on reasonable doubt. “This is a criminal trial and a man’s life is on the line. Don’t compromise in there. Don’t negotiate with his life. Not guilty. Not guilty. Twenty-eight times,” he said. Bruce Collins, a defense lawyer for Lay, echoed Petrocelli’s theme, telling jurors the government failed to prove a conspiracy involving Lay. The first count in the indictment against the two high-profile executives charges Lay and Skilling with conspiring to commit wire and securities fraud at Enron. “There was no conspiracy. There was no effort to hide problems. This was business as usual,” Collins, a partner in Carrington, Coleman, Sloman & Blumenthal in Dallas, argued the afternoon of May 16. Collins cautioned jurors against assuming Enron filed bankruptcy in December 2001 because of fraud. He also told jurors that to find Lay guilty of the criminal charges against him, they must be convinced Lay abandoned all the principles he lived by during a long, successful business career and “and in three months � less than you’ve spent in this jury box � he became a greedy conniving liar.” Collins was referring to the time period between Aug. 14, 2001, when Lay stepped back into the CEO job after Skilling resigned, and December 2001 when Enron filed for bankruptcy. Collins, who began his arguments after the lunch break on May 16, was the first of four defense lawyers for Lay who participated in the closing arguments. Collins left jurors with the argument that Enron failed because of a “crisis of confidence” in the market. “Do not assume that the collapse means fraud. The collapse of Enron is zero evidence of fraud,” he said. “Put the government to the burden of proving the allegations they actually make in the indictment.” Lawyers on both sides gave jurors their view of one of Lake’s jury instruction, which says the jury can find the defendants guilty of the charges if it finds they were deliberately ignorant of bad things at Enron. Berkowitz, for instance, said Lay deliberately did not ask Fastow questions about aggressive accounting at Enron. “He chose to stick his head in the sand and not ask these questions. Why? Because he hoped it would all go away.” But on May 16, Lay defense attorney George “Mac” Secrest, a partner in Bennett & Secrest in Houston, told jurors that they need to find the defendants acted willfully � and they won’t be able to do that. “Mr. Lay can be criticized, he can be second-guessed, he can be sued, because reasonable men and women can differ . . . but under the court’s charge to you, when you get into willfully, this man cannot be convicted.” On May 16, defense lawyers raised doubt about the credibility of the government witnesses who struck plea deals with the government and testified under cooperation agreements. They suggested the witnesses were pressured to plead guilty to crimes they didn’t commit. But Berkowitz told jurors on May 17 that those witnesses would have no reason to plead guilty to something they didn’t do, and there was no conspiracy among the eight or nine cooperating witnesses, their lawyers and prosecutors to come up with false testimony. “What possible motive could they have to plead guilty to something they didn’t do?” Berkowitz asked. Plea agreements are “perfectly legal,” he said. “You may not like them, but that’s the way justice works. Don’t think for a minute that if they were caught lying on the stand, that we wouldn’t do something about it.” During their closing arguments, defense lawyers Petrocelli and Collins told jurors that prosecutors failed to prove their clients participated in a conspiracy to commit wire or securities fraud at Enron. That’s alleged in the first count in the indictment. But Berkowitz said the government did indeed prove a conspiracy. “Conspiracy is a fancy legal word for doing something illegal,” he said. “You do not need to prove every piece of the indictment. You do not have to prove each paragraph.” Berkowitz devoted much of his argument on May 17 to the case against Lay, who moved back into the chief executive officer job at Enron on Aug. 14, 2001, after Skilling resigned. Lay was under severe financial pressure at that time, Berkowitz said, and that prompted him to lie about Enron’s financial condition. “He had mortgaged his financial future,” Berkowitz said. “In the third quarter of 2001, each time the stock went down, he was feeling crunched.” Berkowitz told jurors that in September 2001 when Lay told Enron employees that he was buying Enron stock, he failed to inform them that he had been selling much more. “On the same day he is publicly buying stock, he is quietly selling twice as much back to the company,” Berkowitz told jurors. And at an Oct. 23, 2001, all-employee meeting, Lay described Enron as “fundamentally strong” when he knew otherwise, Berkowitz said. During his trial testimony, Lay blamed the collapse of Enron on crimes committed by former CFO Fastow, a conspiracy among short sellers trying to make money on a decline in Enron’s stock price and negative reporting in the fall of 2001 by The Wall Street Journal. But Berkowitz told jurors Enron wasn’t forced to file for bankruptcy in December 2001 because of those factors alone. He said negative reporting is common in the corporate world, short sellers are a part of the investment market and many companies deal with employees who steal from the till. Berkowitz said, “Why couldn’t they [Enron] handle it, ladies and gentlemen? Why did they lose their credibility? Because senior management had been lying to the public for a year and the truth was coming out.” Berkowitz asked the jurors to find the defendants guilty. Brenda Sapino Jeffreys is a senior reporter with Texas Lawyer.

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