Wednesday, July 07, 2004

Kenny, how do you look in stripes?

More from WSJ:

The indictment is likely to include a raft of charges, especially in the wake of instructions issued last week by Deputy Attorney General James Comey urging prosecutors to obtain indictments that include various factors that could be used to boost a defendant's sentence. Traditionally, these factors, such as the size of losses suffered by investors in alleged white-collar-crime cases, have been considered by judges at the time of sentencing. However, a recent Supreme Court ruling involving state sentencing guidelines stated that judges can't act alone to increase prison sentences based on facts that juries never consider or that defendants don't plead to. Judges say this could affect the federal system as well. In accordance with Mr. Comey's directive, prosecutors are now instructed to include several factors to a jury and include them in an indictment.

The Securities and Exchange Commission also is expected to file civil charges against Mr. Lay, accusing him of various securities law violations, including financial fraud and insider-trading stemming from stock-related transactions he engaged in months before Enron's bankruptcy filing. In past indictments against Enron executives, the SEC has also filed separate civil charges.

The indictments signal that Mr. Lay's rags-to-riches story, which transported him from a small Missouri town to the company of presidents and princes, may culminate in a federal prison sentence. That certainly never seemed like a possibility during the go-go 1990s, when Mr. Lay was a leading spokesman for a heady era in U.S. business. Enron embodied the drive by America business interests to deregulate vast swaths of the marketplace, and the company profited greatly from the loosening of rules in such areas as natural gas and electricity marketing.

Under the leadership of Mr. Lay and his principal protege, Mr. Skilling, Enron transformed itself from a relatively stodgy natural-gas pipeline company into a global trader that dealt in everything from megawatts of power to space on the information superhighway. The company became a Wall Street darling and saw its stock price zoom. It reported revenue of more than $100 billion in 2000.

But Enron came unglued in late 2001 amid rising investor concerns over its use of off-balance-sheet entities, some of them run and partly owned by company executives, to hide losses and debt. Enron's collapse produced a raft of private lawsuits and government investigations. Mr. Lay became a symbol for all that was suddenly perceived to have been wrong with the very era he had helped construct. His wealthy lifestyle -- including corporate jets, a luxury condominium in Houston and homes in Aspen -- helped make him a lightning rod for critics of corporate greed and corner-cutting.

The earth beneath the feet of some people must be very unstable right about now.