Prosecutor sums up 'flat lies' in Enron collapse

HOUSTON, TEXAS - A prosecutor accused two former Enron chief executives of "extraordinary arrogance" and called them "masters of the cover story" who pushed the rules and crossed the line into illegality in their quest to portray Enron as a success.

As the government began closing arguments in the Enron fraud trial, a prosecutor, Kathryn Ruemmler, portrayed Jeffrey Skilling and Kenneth Lay as image-obsessed chief executives who time and again put their own interests first while defrauding the company's investors.

"Every step of the way Mr. Skilling and Mr. Lay had choices," she told the 12 jurors and 3 alternates. "They had choices to tell the truth. Hold them accountable for the choices they made and the lies they told."

The prosecutor said Skilling and Lay "pushed the rules, they bent the rules and went right up to the line of legality and went over that line." She contended that the two men knew the company was hobbled from within by early 2001 but misled employees and investors through "accounting tricks, fiction, hocus-pocus" and "outright lies."

But Ruemmler stopped short of blaming Lay and Skilling for the company's bankruptcy in December 2001.

"This case is not about what caused the bankruptcy," she said. "You don't need to worry about that." Still, she said the defense's argument that The Wall Street Journal and short-sellers in the stock market were in a conspiracy to take down Enron was "nonsensical, it's absurd, don't buy it."

Judge Simeon Lake 3rd, speaking slowly and clearly pronouncing every syllable of every word, read his instructions to the jury, going over the 28 counts of fraud, conspiracy and insider trading against Skilling and the six charges of fraud and conspiracy against Lay. The jury charge includes an "ostrich" instruction that says the jurors can find the defendants guilty for deliberately avoiding learning about wrongdoing at the company. If convicted on all charges, they could face decades in prison.

The courtroom was packed almost to capacity with family members, reporters and curious citizens who came to witness the conclusion of the emotionally charged corporate fraud trial. Lay showed little emotion, occasionally fidgeting in his chair. But Skilling clearly looked pained at times, tilting his head from side to side and sometimes turning to scan the audience's faces. He smiled dismissively during a discussion of accusations made in the trial made by the former chief financial officer, Andrew Fastow. Sitting in the first row, Lay's wife, Linda, struggled to contain her frustration; her daughter, Robin, put an arm around her to comfort her.

For more than three hours, Ruemmler argued that the 54-day trial had demonstrated that Skilling and Lay had tried to shift responsibility to others for any mismanagement of the company, which descended rapidly from an energy-trading colossus into one of the biggest bankruptcies in U.S. history. Their own appearances on the stand, Ruemmler said, ultimately mirrored the way in which they managed Enron.

While a parade of witnesses cooperating with the government took responsibility for fraud at Enron, Skilling and Lay "talked very little about what they did," she said. To them, she said, "Nobody else is smart enough. Ladies and gentlemen, that is extraordinary arrogance. That is exactly the same tactic they used at Enron ridicule, condescend, call someone a profane name."

Skilling and Lay, who on the stand were indignant and openly bitter about the government's Enron investigation, tried to deceive the jurors as they had tried to deceive Enron's investors, Ruemmler said.

"All the righteous indignation in the world does not change the fact that in this courtroom their cover stories have been blown," she said.

Ruemmler was indignant herself about Lay's actions in the five months after he took over as chief executive again in August 2001, when Skilling abruptly resigned. In the opening minutes of her presentation, she posted on the screen for jurors words Lay said during cross-examination: "Rules are important, but they should not you should not be a slave to rules, either." Lay said the words in response to questions about why he had violated Enron's code of ethics through a personal investment in an outside photo-sharing company that had done business with Enron.

She noted how Lay had withheld information about some $20 million in sales of Enron stock back to the company in late summer 2001, after Skilling's departure, even as he was telling employees that he was buying Enron stock, which he had portrayed as a "bargain" at its falling price.

"He withheld information with half-truths, all the while taking care of himself," Ruemmler said of Lay. "Those were flat lies," she said, hitting her hand on a wooden table and raising her voice in anger for the first time. "He had no right to do that."