After years of being painted as Enron’s “Mr. Outside,” a founding visionary and later glad-handing chairman with little involvement in day-to-day operations, Kenneth Lay will have to face the contention by federal prosecutors in criminal court that the buck stops at the top. “We now have under indictment all the top brass at Enron,” crowed Deputy Attorney General James Comey as the charges against Lay were unsealed on July 8.
The government’s case alleges that Lay conspired with former Enron CEO Jeffrey Skilling, Chief Accounting Officer Richard Causey, and others in “a wide-ranging scheme to deceive the investing public,” ending with Enron’s precipitous 2001 collapse. The 11 counts against Lay include securities and wire fraud, conspiracy to commit securities and wire fraud, and bank fraud. He could face a maximum sentence of 175 years in prison and millions of dollars in fines.
Unlike Causey and Skilling, Lay isn’t charged with insider trading. Still, prosecutors contend that the scheme to cook the books helped him net more than $217 million in profits from 1998 to 2001 from the sale of Enron stock options and restricted stock. An additional complaint filed against Lay by the Securities & Exchange Commission mirrors the Justice Dept.’s charges but does include insider-trading charges.
By sweeping Lay into the criminal case against Skilling and Causey, the U.S. Attorney’s Office can focus its resources on a single trial and present a “fuller picture of what was happening at Enron,” says Philip Hilder, a lawyer representing some witnesses in the case. He figures the three won’t face trial in this “mother of all white-collar criminal cases” until the middle of next year at the earliest. And Lay, who continues to profess his innocence, could move to have his case separated from that against Skilling and Causey, both of whom also deny the charges against them.