The Trial of The Century: The Enron Trial

The final episode in The Enron Trial series is here. In part 5, Tom Fox and Loren Steffy take a look at Enron’s legacy, fifteen years after the trial. 

Why Should the Trial Be Remembered? 

“What the trial really brought home for everyone was the human toll that these kinds of corporate malfeasance cases can have,” explains Loren. When companies try to do whatever is necessary to keep their stock prices up at all costs, a lot of long-term harm comes out of it, “Enron wasn't only an accounting failure… above all else, it was a human failure.” 

Enron’s Innovations 

Looking back on Enron’s successes, you begin to wonder, ‘What if?’ Loren highlights how unfortunately it panned out for the corporation, stating that, “They really were out in front of a lot of these trends. Unfortunately they shot themselves in the foot with their accounting.” 

Fifteen Years Later - What Has Changed? 

There’s a lot that can be learned from the fall of Enron; corporate responsibility is viewed differently, now. It’s no longer only about shareholder value, but also an improved focus on corporate governance. “We've realised that our corporations have greater responsibilities in that they have responsibilities to their employees, and they have responsibilities to their communities,” Loren tells Tom.

RESOURCES

Loren Steffy | LinkedIn | Twitter

Loren Steffy and Tom Fox have another conversation as The Enron Trial series nears the end. In episode 4, Loren Steffy recalls the aftermath of the guilty verdict. 

The Verdict and Counts of Conviction 

Jeffrey Skilling was convicted of 19 counts, his sentence totaling 185 years, and Kenneth Lay was looking at 120 years in prison. Skilling was actually sentenced to 17 years, which was then reduced to 12. Kenneth Lay passed away prior to his sentencing, and so, the verdict was vacated. 

The Prosecution and Defence 

“The defense team was stunned,” said Loren, “I think that the attorneys, as well as the defendants, believed that they were going to get a not guilty verdict.” The prosecution, on the other hand, felt a great sense of relief and accomplishment; this was an uphill battle from a prosecution standpoint in many ways. Jeffrey Skilling appeared stoic; though there were stories that indicated he disagreed with the verdict, he seemed to have accepted his fate. 

The Jurors and The Judge 

Loren commends the jurors, believing they deserve a lot of credit for their involvement in the trial. “I think they did a really good job of listening to the arguments and considering them,” he said. What was interesting, to him, was their response to Andrew Fastow’s testimony, one that Loren found to be credible, “It was like that didn't really factor into their decision nearly as much as we thought it would when we were watching all of it unfold.” According to him, the judge certainly understood the magnitude of the case, and tried to be very careful in his administration of the case to avoid mistakes that could have led to a mistrial, “Everyone really understood that this was a big trial, and they were playing on the big stage.”

RESOURCES

Loren Steffy | LinkedIn | Twitter 

Loren Steffy and Tom Fox sit down for part 3 of The Enron Trial series. In this episode, they discuss some of the significant testimonies by witnesses, and the effect they had on the trial. 

The Star Witnesses

Loren names Andrew Fastow, former CFO, and Ben Glisan, former Treasurer, as the star witnesses in the trial. However, the most moving testimony for him, as an observer, was that of Joanne Cortez, Enron’s bookkeeper. “She was a very credible witness,” said Loren, “and to me, it just showed how there were so many innocent people at Enron that didn't want to believe what was happening. And when they finally found it out, there was just no denying it.”

Employee Losses 

The goal of the prosecutors was to emphasize the real-world consequences of Enron’s malfeasance. Many employees were encouraged to invest their entire retirement savings into the company, and ended up paying a significant price. Loren details the heartbreaking story of a pipeline worker by the name of Johnnie Nelson. “He didn't really know anything about the stock market,” Loren tells Tom. “Enron was a good company to work for, and they told him, ‘Take your retirement money, buy the stock. It'll benefit you in the long run.’ He did it because that's what they told him to do. Then, one day he comes into the field office, and everybody's long in the face and looking scared, and he realizes he's basically lost everything he's been working for.”

Executive Testimonies 

The testimonies of Jeffrey Skilling and Kenneth Lay mimicked their personalities; Skilling being very professorial, and Lay acting like he was conducting an investor seminar. “I think they were very convinced that they were going to get off, or at least get a light sentence,” Loren told Tom. Ben Glisan’s testimony was very damaging to Kenneth Lay, revealing that Lay was more aware of what was happening at Enron than he let on. 

RESOURCES

Loren Steffy | LinkedIn | Twitter 

Loren Steffy and Tom Fox are back for another episode in The Enron Trial series. Here, Loren discusses the atmosphere in the courthouse, and what he observed over the course of the five-month-long trial.

The Trial Begins 

“This was a criminal trial, but it was the trial of the century,” Loren believes; not only due to the company’s popularity, but because prosecution of executives was something that was not often seen. They are very difficult cases to prove, and Enron was no different. 

The Prosecutor’s Strategy 

The prosecutor avoided going into too much accounting detail, and instead kept the focus on the emotional aspect of the trial. “Enron was a great company to work for … People wanted to work there; they thought they were doing all these innovative things. Nobody wanted to lose their position in the company. They didn't wanna lose their jobs, and they wound up getting caught up in this,” Loren tells Tom. 

The Defence 

The defence had a really tough time. Loren recounts one moment where Kenneth Lay was on the stand and openly questioned his attorney, “A couple of defence attorneys that were providing perspective said, ‘This is the turning point in the case.’ I mean, that was just so devastating that, you know, you just showed the jury that you don't trust your own lawyer.” Jeffrey Skilling’s legal team employed an unusual tactic of commenting anonymously under Houston Chronicle blogs. In court, screenshots of these comments were actually utilised when the team made a motion to have the trial moved. “It was interesting,” Loren laughs about it. 

The Closing Arguments 

Again, it was less about accounting, and more about the deliberate attempt that was made to bamboozle their shareholders and employees - many people were hurt by it. “It wasn’t just a harmless lie,” said Loren, “there were real world consequences.” 

RESOURCES

Loren Steffy | LinkedIn | Twitter 

The five-part series on the Enron Trial kicks off with Tom Fox and actual trial attendee, Loren Steffy. This first episode highlights the major events that led up to the beginning of the trial, many years ago.

Enron in the Early Years 

Enron was once the seventh biggest publicly traded company in America. When natural gas trading was deregulated, Enron made a name for themselves by creating a platform that allowed for easy trade of natural gas contracts. 

The Downfall of Enron 

As Enron grew, they attempted to expand their trading mentality to other markets. There was intense pressure to prove their successes due to being publicly traded, and eventually, they found a way to hide debt and fabricate numbers. However, in mid 2001, their stock began to fall and the questions flooded in. Enron’s lies quickly unraveled, leaving them bankrupt by early December - they went from being the seventh largest company in America, to being broke.

The Arrest and Key Charges 

One of the stunning things about Enron, as a corporate scandal, was that it was really the first time this sort of widespread fraud was seen. In the case of Enron, there were dozens of indictments, but many unindicted co-conspirators. Most of the executives cut plea deals, agreeing to testify against the chairman, Kenneth Lay, and former CEO, Jeffrey Skilling. Though there had been past cases of corporate malfeasance, there had never before been a corporate culture so focused on malfeasance as Enron Corporation. “Looking back at Enron,” Loren says, “it was a culture that really encouraged people to break the rules.” 

Off-the-books Partnerships 

Enron’s partnerships began with an operation called JEDI, done with a small oil and gas company, CODA Energy. Their debt was placed into this entity, and essentially, hidden. This became the model that they used, eventually being done on a larger scale with more interlocking companies passing debt back and forth. A partnership with LJM was where most of the debt was parked. Conflicting documents related to this partnership are what led to the exposure of Enron’s sharp practice.

Other famous partnerships included Enron Broadband, and the Nigerian barge deal. 

Andrew Fastow’s Role 

Andrew was the CFO at Enron, and quite the unusual one, at that. He was more of a behind-the-scenes guy in the company, but became a critical player in the trial. Agreeing to a plea deal, he testified against Lay and Skilling in exchange for a ten year sentence. As an observer in the trial, Loren stated that, “His testimony was very striking. He seemed very sincere in the fact that he believed that the company had done things wrong, and that he had committed crimes.” 

Join Tom Fox and guest host, Loren Steffy, as they look back on the Enron Trial after 15 years. Loren was there and has a unique insight into the prosecution, defense, and all the players in this Trial of the Century.