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In the end, it came down to two things: simplicity and credibility. After 16 weeks of trial and more than 50 witnesses, the Enron jury spoke clearly and unequivocally. Their guilty verdicts will mean long prison terms for Kenneth Lay and Jeffrey Skilling. For prosecutors and defense lawyers across the country, they deliver important lessons. No question about it, this was the big one. Enron’s 2001 collapse from high-flying Wall Street darling to the nation’s biggest bankruptcy wiped out more than $60 billion in market value, almost $2.1 billion in pension plans and 5,600 jobs. It also headlined a string of corporate scandals that created enormous public outrage and cynicism, pushing Congress to pass the Sarbanes-Oxley Act to make corporate executives more accountable. By the time this trial started in January, 16 former Enron executives, including its chief financial officer and chief administrative officer, had pleaded guilty to serious crimes. But Lay and Skilling seemed above it all: They operated up in the stratosphere as corporate titans and high-society heroes. President Bush nicknamed his friend Lay “Kenny Boy.” Their success had made them fabulously wealthy: Lay’s real estate holdings included a $10 million vacation home in Aspen. Surely, the argument went, they were high above the nitty-gritty of accounting fraud. A focus on lies, not accounting It’s called the “ostrich defense,” for those strange-looking birds who bury their heads in the sand. It has worked before: Prosecutors have made the mistake of presenting cases that are so mind-numbingly complex that jurors figure that if they can’t follow it, they can’t blame these busy executives for not doing so either. So the lesson is simplicity, and the prosecutors in this trial took it to heart. They focused on the defendants’ lies, not on the accounting. In their rebuttal closing argument, they pulled out a big chart with only two words on it: “Truth” and “Lies.” The jury got the message. Simplicity triumphed. For the defense, the lessons of credibility are more complex, and more painful. First are the damages of overselling your case. In their opening statement, they argued that there was no fraud at Enron: It was the press’s fault or the analysts’ fault. That was an unnecessary and disastrous mistake. Witness after witness gave compelling evidence about the fraud. As one convicted former executive testified about a meeting to approve one of the scams, “I wish on my kids’ lives I had stepped away from that table.” By overselling their case at the outset, the defense lost credibility with the jury, and that is a tough hole to dig your way out of. The other lessons revolve around the dangers of being a witness. In the face of all the testimony about their knowledge of the fraud, both men probably had to take the stand in their own defense. But with all the legal talent money could buy, they were not adequately prepared for the extraordinary challenges of communicating effectively in a courtroom, in the unnatural language of “question and answer.” These Masters of the Universe found themselves claiming that they couldn’t find the executive washroom without someone else pointing the way. It was the hardest sell of their long careers as marketers. If the jury doesn’t believe a defendant’s own testimony, nothing else can save him. Every word mattered: not just what was said, but how it was said. Preparation was the key. As often happens, expectations got turned upside down. Skilling, who was known as difficult and abrasive, did a better job of adapting. Mr. Arrogant became Mr. Smooth. Unfortunately for the defense, Mr. Smooth became Mr. Arrogant: Ken Lay, the ultimate salesman, friend of kings and princes, came across as combative. As one juror commented, he tried to take command of the room, and was clearly used to being in control. He was, in short, no ostrich. Their testimony, intended to save them, instead sealed their fate. Top executive defendants have taken the stand in a number of corporate fraud trials recently. These are people who are used to wowing the crowd, commanding respect and gaining credibility from success itself. In a court of law, none of that works. Credibility comes-or goes-one question and answer at a time. Outside the courthouse, Lay and Skilling seemed genuinely stunned that such a thing could happen to them. Lay said, “This is not the outcome we expected.” Most people following the trial closely were not as surprised. Simplicity won and credibility lost. Those were the keys. One convicted former Enron executive testified that in early 2001, when an analyst first expressed concern about the scams that eventually brought Enron down, Skilling told a group of cohorts, “they’re on to us.” Sadly for Skilling and Lay, so was the jury. Dan Small is a partner in the Miami office of Duane Morris. A former federal prosecutor, he wrote the American Bar Association manual Preparing Witnesses (2d edition, 2004). Small presents CLE programs around the country on this subject, and is a frequent media commentator.

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