Enron executives go on trial, facing 175 years behind bars
The trial of the former Enron executives, including the former Chief Executive, Kenneth Lay, has begun in Houston, Texas where the company was based before it went bankrupt in 2001. Enron employed more than 21,000 staff in 40 countries, and within just 15 years became America's seventh largest company. In 2001 it was revealed that the company had been over-stating profits and concealing debts of $40bn (£23bn). Enron was forced into bankruptcy as its creditors and shareholders retreated, in what has become arguably the biggest corporate scandal ever.
The Enron scandal had far-reaching consequences, including a new set of rules governing corporate America, and the near bankruptcy of one of the largest accountancy firms in the world.
Jury selection for the trial of the 30 defendants, accused of crimes ranging from fraud to insider share dealing, took several weeks because of concerns that potential jurors from the Houston area would have been affected in some way by the collapse of the company, and that the defendants would not receive a fair trial. Lawyers for the defendants had requested that the trial be moved from Houston for this reason.
If convicted the Kenneth Lay and the former Chairman, Jeffery Skilling, face the rest of their lives in prison. Kenneth Lay would face up to 175 years in prison if found guilty of the seven charges of fraud and conspiracy that he faces. Both the defence and the prosecution agree that the company went bust because it ran out of cash to fund its business, but the defence claim that the senior executives, Lay and Skilling, had no knowledge of the scandal, which they say was orchestrated by the Finance Chief, Andrew Fastow, and other junior members of the company conspiring with the firm's auditors. The then auditors Arthur Andersen received the largest possible fine for their part in the collapse of Enron, and for destroying documents related to the company's collapse. As clients fled, Arthur Andersen were forced to reduce their work force from 85,000 to less than 3,000.
Enron still exists, albeit in a much smaller form than it did in its prime before the company went bankrupt, but is being liquidated to recover the $50bn owed to the company's creditors. Enron is in the process of selling off its last remaining assets which include its US gas pipeline business and South America's Prisma Energy the later is expected to attract bids of around $2bn (£1.2bn). The interim Chief Executive of the company an external candidate installed after the scandal broke the news had wanted to keep the company intact, arguing that with a reduced 12,000 employees it could generate $1.3bn of revenues, and that it would be worth more to the creditors than if the company was liquidated.
Former employees of Enron and company shareholders including pension funds will receive nothing from the liquidation process. Many people lost their jobs and life savings if they had shares in Enron, and are angered by the fact that Lay and Skilling sold $300m and $200m worth of Enron shares just before the company announced its problems. Enron shares dived from $90 to less than $1 in weeks as the scale of the scandal became clear, and 11,000 lost their jobs and $1bn worth of company pensions as a result of the Enron collapse.
The defence team has spent $30m on the trial, which is expected to last four months, and see the former Finance Chief testify against his former bosses, Lay and Skilling, in return for a lower sentence.
