The effort to salvage plea-bargain deals with key figures in the Enron case is providing the latest glimpse into just how hard it can be to build a case against the leadership of the fallen energy giant.
It's been more than two years since Enron collapsed under a cloud of hidden debt and alleged deception. But so far the indicted company officials don't include former CEOs Jeffrey Skilling and Kenneth Lay.
Investigators appeared close to getting a key break, as former chief financial officer Andrew Fastow agreed to plead guilty and serve 10 years in prison in exchange for expected testimony against co-workers above and below. That agreement is now in doubt after a judge last week rejected a related plea bargain for his wife.
The fall of Enron, one of the most successful companies of the 1990s, kicked off a series of corporate scandals that led Congress to enact major accounting reforms. In addition to massive losses by investors, thousands of workers for the Houston-based company lost jobs and retirement money. So for many, it seems as if indictments against Messrs. Skilling and Lay are long overdue.
"The two big fish are still out there. And in the public's mind, if Skilling and Lay did anything wrong, they should be sent up the river as soon as possible," says Henry T.C. Hu, a corporate and securities law professor at the University of Texas in Austin. "Fastow appears to be at the center of a lot of these complicated transactions.... If he were to cooperate, the government would have a much easier time understanding and explaining them to a jury."
Fastow had made his plea bargain contingent on his wife getting a plea deal to serve five months in prison for filing a false tax return. Lea Fastow's deal fell through when the judge wouldn't commit to that short a sentence. But lawyers for Mrs. Fastow continued to negotiate this weekend, with a Feb. 10 trial poised to go forward.
With 180 adversary proceedings, six dozen civil lawsuits, and almost 30 people charged with crimes, the case against Enron is enormous - and enormously difficult.
Still, those who've prosecuted similar cases say the government is making good strides.
Christopher Bebel, a former SEC enforcement lawyer and securities-fraud expert, says the government is "light years ahead of where it was a year ago," judging by recent pleadings filed by the US Justice Department and the Securities and Exchange Commission (SEC).
The Justice Department added six more lawyers to the Enron case in June and has begun picking up speed on several fronts. "Government attorneys have made considerable progress dissecting numerous transactions, and are focusing on those transactions which are easiest to comprehend and most egregious," says Mr. Bebel.
The next big test for the government is the Enron Broadband Services case, which is scheduled for trial this year. Already, seven former executives have been charged in that case, which alleges that they knowingly made false statements about the technological capabilities of the division. Some believe this is where Mr. Skilling will be most vulnerable.
Mr. Lay, on the other hand, is going to be a little bit harder for the government to attack because he played the role of civic leader whose position within the company was somewhat ceremonial in nature, says Bebel. "But he's vulnerable, especially when it comes to insider trading."
It's important to understand that the number of documents to sift through is mind-boggling: more than 100 million overall, 20 million in the Fastow case alone. Getting his help in sorting them out will be critical to building other cases.
"Just working through who knew what and what their intent was is going to take a very long time," says Nancy Rapoport, dean of the University of Houston Law Center.