A bid to tie Enron duo to deceit

Days before Enron was to release its fourth-quarter 1999 financial statement, Mark Koenig learned that the energy giant had missed earnings projections by 1 cent per share.

He was "sick about it" because, as Enron's chief of investor relations, he knew the news would hurt the company's stock price. But to his surprise, a day later, he saw an internal draft of the financial statement showing that Enron had met the projected earnings of 31 cents a share.

It was not the last time Enron executives would manipulate financial statements and lie to investors about the company's health, Mr. Koenig testified in court last week. And to keep his job, he played along.

Koenig is the federal government's first witness in the long-awaited criminal trial against Enron founder Kenneth Lay and former CEO Jeffrey Skilling. Already, his testimony has provided a glimpse into the government's legal strategy and revealed how the parties expect to proceed in coming months.

Even after one week, experts agree, both sides are making compelling cases - indicating that the jury's task is going to be a difficult one.

As the trial enters its second week Monday, it appears that many at the top of the company intentionally broke the law. Indeed, Koenig is one of 16 executives who pleaded guilty to wrongdoing and can be called to testify.

And while Mr. Lay and Mr. Skilling were "very involved in the daily running of the business," including all the financial matters, according to Koenig, the government has a long way to go in proving that they were knowingly part of a conspiracy.

With more than 4,000 documents, the case is expected to last four months.

"The government is building this wall of evidence one brick at a time, and each of the bricks is intended to show the involvement of Skilling and Lay in the criminal conspiracy," says Gerald Treece, assistant dean at the South Texas College of Law in Houston. "It's tedious. But in the real world, this is what government lawyers do. This ain't 'Law and Order.' "

Lay is charged with seven counts, including conspiracy and fraud. Skilling is charged with 31 counts, including conspiracy, fraud, and insider trading.

Both say they are innocent. Lay's lawyer, in his opening statements, told the jury that Enron was a victim of its own tremendous growth and success, and that it went bankrupt because the market panicked and creditors pulled out.

"In a bear market, the company lost the trust of [Wall] Street and its trading partners, and the machine froze up," said Michael Ramsey. "It is Greek-like in its tragedy."

Skilling's lawyer, Daniel Petrocelli, went even further when he told jurors that the two men were not simply sitting up in their offices while a massive conspiracy was swirling around them. There was no conspiracy, he said.

"This is not a case of hear no evil, see no evil. In this case, there was no evil."

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