ATLANTA, Jan. 27, 2006 (PRIMEZONE) -- Published reports indicate that attorneys for Enron founder and former Chairman and CEO, Kenneth Lay, and former CEO and President, Jeffrey Skilling, will try to convince a jury that the financial maneuverings that led to Enron's collapse were, in fact, legitimate business practices, which were perfectly legal. A securities litigator who worked at both the U.S. Department of Justice and the U.S. Securities and Exchange Commission says this tactic could well prove to be both risky and fascinating.
"The Enron defense team may be thinking that desperate times demand desperate measures; a 'Hail Mary' pass is never a high percentage play, but when it succeeds, it is spectacular," says Ross Albert, who has been both Senior Special Counsel with the U.S. Securities and Exchange Commission's Division of Enforcement and a federal prosecutor. Albert is now a Partner at Morris, Manning & Martin, LLP. "It appears that Lay and Skilling are going to contend that Enron's now-notorious accounting was not only permissible but correct; that Enron was NOT a 'house of cards,' but rather a solid company that could have and would have survived had it not been brought down by a 'run on the bank,'" he adds.
"From its very founding, Enron was always known as a company that encouraged and rewarded gamblers and risk-takers," says Albert. "This defense seems to be a continuation and further manifestation of that corporate culture." In addition, Albert adds, "This defense seems very different -- more unconventional and more risky -- than the so-called 'idiot' defense, under which a senior executive acknowledges that wrong-doing occurred, but claims that he never knew about it."
The anticipated defense by Lay and Skilling differs significantly from that offered by former HealthSouth CEO Richard Scrushy, who was acquitted of corruption charges last year.
"Scrushy admitted that there was widespread fraud and illegality at HealthSouth, but claimed that he didn't know about it, and that none of the company's highly paid accountants and lawyers told him otherwise," Albert recalls. "Skilling and Lay apparently are now prepared to deny the existence of widespread fraud and illegality at Enron, just some fairly small-scale greediness and personal thievery going on around the edges, perpetrated by others and unknown to them."
Much of the success of the defense, Albert says, may well depend on the effectiveness of the experts retained to testify on behalf of Lay and Skilling.
"All the defense has to do is put on a sincere expert, or several sincere experts, that the jury likes," Albert says. "The government always has the burden of proof, and confusion and lack of clarity will only aid the defense."
Even so, he says the unusual defense carries no guarantees.
"This promises to be an interesting trial," he concludes.
Morris, Manning & Martin, LLP, (www.mmmlaw.com) enjoys national prominence for its corporate finance, securities, litigation, technology, telecommunications, insurance, healthcare, environmental and real estate practices. The firm has offices in Atlanta, Washington, D.C., Charlotte, Raleigh-Durham, and Princeton.