Tuesday, May 2, 2006
The testimony of Ken Lay ended and it is interesting to read the reports of what occurred. (here- Wall Street Jrl; here - Houston Chronicle). One has to remember that those judging this case do not read the press and were not attuned to what happened at Enron. They were picked for this jury because they had not formed an opinion.
How will this play out in the result? Will they believe Ken Lay when he says he made a mistake in trusting Andrew Fastow and places the blames for Enron's problems upon this manager? Or will they believe that Ken Lay knew and participated in wrongdoing at Enron? Certainly the defense raises issues that hurt the government's case. For example, Lay's personal losses resulting from his holding onto stock and vested options plays against the government's case. The witnesses following Lay also assist in building his credibility, as character witnesses usually can assist when credibility is the theme of the case.
Like so many of the recent CEO prosecutions, we are seeing here a test of how much does a CEO have to do to stop and root out criminal liability from their company. One has to wonder to what extent these cases will have on employing better controls within a company. On the other side, one can't help but see the government working against better corporate culture by instituting practices like having corporations implicate employees who may have confided in corporate counsel. Will employees continue to come forward and assist in stopping criminal activity within a corporation knowing that the corporation may use this information against them?
This case has unique qualities given the extent of criminal activity within the company and the huge fall that it suffered. It also has enormous social consequences to so many who lost so much as result of practices at Enron. The extent that the jury will be able to factor this into its deliberation may also play a part in the verdict.