Lay has rockier ride than Skilling

Enron trial reveals ire of affable Kenny Boy

Analysis

April 29, 2006|By THOMAS S. MULLIGAN | THOMAS S. MULLIGAN,LOS ANGELES TIMES

HOUSTON -- Who would have guessed that Kenny Boy could be a tougher sell to a jury than Capt. Queeg?

Enron Corp. founder Kenneth L. Lay - Kenny Boy to his friend George W. Bush - is renowned for his courtliness, his philanthropy, his rise from a dirt-poor boyhood in the Missouri Ozarks to a nine-digit fortune.

Co-defendant Jeffrey K. Skilling, who invented Enron's most profitable business and actually ran the company during most of its heyday, is also known for getting in a bar fight while under indictment and for publicly calling an investment analyst by another name for a sphincter.

At the start of their federal fraud and conspiracy trial three months ago, the betting was that the volatile Skilling's performance on the witness stand might drag Lay down, not the other way around.

Skilling, 52, shares some of the obsessiveness of Queeg, the Navy skipper of The Caine Mutiny. But unlike Queeg, Skilling didn't unravel on the stand. Where mastery of Enron's finances was at issue, he overpowered co-lead prosecutor Sean M. Berkowitz. When the nimble Berkowitz pushed certain buttons, Skilling showed flashes of anger and arrogance, but he generally kept his head.

For Lay, however, it's been a rockier ride. While nobody knows what the 12 Texans in the jury box are thinking, during his first four days on the stand, Lay, 64, has shown some attributes that clash with his reputation as affable, open-handed and shrewd.

Lay's worst moment came Wednesday, when prosecutor John C. Hueston rocked him with questions about his attempts to reach actual or potential witnesses in the case - efforts that persisted even after Lay's lawyers told him to stop.

"You've got to question the judgment of the person," said Mark C. Zauderer of the Manhattan law firm of Flemming Zulack Williamson Zauderer. "No lawyer would have his client in the dock calling potential witnesses. It could be very suspect in the minds of the jury."

Lay probably didn't help matters by responding to Hueston's blitz with sarcasm. The jury of eight women and four men has hardly been immune to humor during the trial - even Skilling's mordant wit sometimes connected - but nobody cracked a smile at Lay's comebacks.

Noting Lay's $120,000 investment in a company whose main customer was Enron, Hueston asked whether he had made the conflict-of-interest filings required by Enron's code of conduct.

"I don't know," Lay shot back. "Have you checked it? I imagine you have. You guys are pretty thorough."

After describing himself in early testimony as "more of a delegator" than a micro manager, Lay quickly proved adept at delegating blame. If something worked out, it was his idea. If it blew up, it was somebody else's.

Asked to name his biggest mistakes at Enron, Lay unhesitatingly listed "hiring Andy Fastow" and promoting him to chief financial officer.

Andrew S. Fastow, of course, turned out to be a crook who secretly stole millions from Enron and allegedly helped cook the books. Lay didn't mention it, but he knew the jury would recall that hiring and promoting Fastow was entirely Skilling's doing.

It wasn't the only time Lay subtly undercut his co-defendant. He noted Skilling's surprise resignation in August 2001 as a source of "uncertainty" in the financial markets that set the stage for the investor and creditor panic that Lay contends ultimately brought Enron down.

Moreover, by praising Skilling as an executive who "really gets into the details, the guts of how things work," Lay may have signaled that Skilling, far more than Lay, would have grasped the intricacies of Enron's accounting and financial reporting - the things at the heart of the criminal case.

Lay blamed two aides for what turned out to be one of the PR gaffes of the century: rebuffing The Wall Street Journal in the fall of 2001 when the newspaper had questions about Fastow and his mysterious "LJM" partnerships - complex financial structures that the government says let Enron hide problem assets and falsely pump up profit.

With Enron offering only a brief statement written by its lawyers, the company lost any control over the debate and was powerless when the resulting stories eviscerated its stock.

A livid Skilling even called from retirement to ask why Enron wasn't defending itself. In Lay's view, his own instincts had been right all along. Stonewalling the Journal, he testified, went "against every bone in my body."

Lay also seemed to claw back some lost ground with the jury on Thursday, if only because of Hueston's insistence on spending three hours browbeating him over an accounting issue - better left unexplained - known as the "Wessex goodwill impairment."

Lay showed impatience at repeated variations of the same questions, and finally burst out: "Mr. Hueston, ... I think this is a real waste of the jury's time."

Had Lay been running for mayor at that point, he'd have had at least 12 votes.

Thomas S. Mulligan writes for the Los Angeles Times.

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