HOUSTON — The trial of former Enron Chairman Ken Lay began at the federal courthouse here Jan. 30. Lay, affectionately dubbed “Kenny Boy” by his longtime pal President George W. Bush, faces 11 conspiracy and fraud charges.
Former Enron CEO Jeff Skilling is being tried on 31 charges, including conspiracy, fraud, insider trading and making false statements to auditors.
Twenty-three former Enron executives and employees have been the focus of legal proceedings so far.
Enron Corp., which collapsed in 2001, is widely seen as symbolizing corporate greed, corruption and “crony” capitalism. Both Enron and Lay were major contributors to Bush’s election campaigns. Enron also contributed heavily to former House Republican leader Tom DeLay, who is under indictment for money laundering.
Enron played a leading role in creating phantom shortages in California’s unregulated electricity market to fleece ratepayers of an estimated $30 billion during the state’s 2001 energy crisis. But that crime will not be part of the Lay trial.
Some 11,000 Enron employees lost hundreds of millions in their 401(k) retirement accounts when the company collapsed. But Enron executives cashed out their stock options for a whopping $1.1 billion. Lay started selling off his stock options in early 1999, making $101.3 million for himself.
Several former Enron employees believe Lay and Skilling are guilty and should serve time. Tracey Michel, who spent six years working in Enron’s information technology department, told the Houston Chronicle, “If they do find them guilty, I hope they serve time.” Among former employees, he said, “the majority feeling is they’re guilty.”
David Tonsall, who worked for five years in Enron’s pipeline division, lost $200,000 in retirement savings and other investments as a result of the company declaring bankruptcy. “I hope they’re convicted, and some of my friends and Enron employees and anyone else who lost their retirement get some satisfaction,” he said.
The prosecution’s first witness, Mark Koenig, former head of investor relations for Enron, said both Lay and Skilling were active in day-to-day financial management. He testified that keeping the stock price up was a higher priority than operating the company, and that executives authorized manipulation of figures to artificially maintain or increase the company’s stock price. Koenig has pleaded guilty to aiding securities fraud.
Koenig testified that Lay and Skilling openly manipulated stock analysts such as John Olson of Merrill Lynch, who reportedly asked too many tough questions. Olson was eventually fired, and blamed Lay for putting pressure on his boss to get rid of him. Koenig also testified that Skilling failed to report $230 million in first-quarter retail division losses and omitted Enron’s $726 million debt for the half year in 2001. Investors were told the division was doing “great,” and these lies also extended to outsiders.
Enron’s political donations favored Republicans, with their pro-deregulation agenda, over Democrats by a ratio of roughly $3 to $1.
The Center for Responsive Politics web site opensecrets.org reports, “Enron’s PAC and its employees contributed $114,000 to Bush during the 2000 campaign, while former Enron CEO Kenneth Lay served as one of Bush’s Pioneers, individuals who raised at least $100,000 for the campaign. Since 1989, the Lays have contributed almost $883,000, 90 percent of which went to the GOP.”
“Enron also donated $100,000 to the Bush/Cheney inaugural gala,” the web site notes, “a contribution that was matched by Enron’s chairman.” Lay, a longtime friend of the president, “was one of Bush’s top contributors during the  presidential election and two gubernatorial campaigns in Texas.” Lay was also reportedly one of the administration’s closest advisers on energy policy.
The scandal that engulfed Enron was not an isolated event among U.S. corporations in recent years. Other scandals include Qwest Communications International, Adelphia Communications, HealthSouth, WorldCom, Tyco International and Cendant.
As the trial progresses, more details are sure to emerge. This trial and the others preceding it are instructive of the workings of crony capitalism and the Bush administration.