HOUSTON – Former Enron Corp. executives Kenneth Lay and Jeffrey Skilling were convicted of conspiracy and fraud on Thursday as one of the largest business scandals in U.S. history came full circle.
The jury came to the decision during their sixth day of deliberations, following the nearly four-month trial. As U.S. District Judge Sim Lake read the verdict from the bench, Lay tossed his head at hearing the first "guilty" on the conspiracy count. He clutched his wife's hand as he heard that word over and over again.
Lay sat with his wife, Linda; his daughter, Elizabeth Vittor, a member of his defense team; and Linda Lay's daughter, Robyn. As Lay clutched Linda Lay's hand, the three women leaned forward and began to sob quietly.
After Lake left the courtroom, Lay's family and some friends gathered around him as the ex-chairman, red-faced and fighting back tears, hugged them and thanked them for their support.
Skilling, sitting with his brother, Mark, showed no emotion when the verdict was read.
The verdict places the blame for the demise of the energy giant and Wall Street darling on the shoulders of the two former CEOs, both of whom took the stand in their own defense and sought to convince the jury that they had no knowledge of any illicit actions at the firm.
Lay, who also founded the company, was convicted of all six counts of conspiracy and fraud and faces a maximum of 45 years in prison. Lay was also convicted on Thursday of bank fraud and making false statements to banks in a separate trial related to his personal banking.
As he left the courthouse Thursday afternoon Lay continued to claim his innocence, telling reporters "we're shocked" at the outcome. He also insisted that "despite what happened today, I'm still a very blessed man."
Skilling was found guilty of 19 counts of conspiracy, fraud, insider trading and making false statements which, combined, carry a maximum sentence of 185 years. He was found not guilty on nine criminal counts. Skilling's attorney vowed a "full and vigorous appeal."
U.S. District Judge Sim Lake told jurors, "you have reflected on this evidence for the last few days and reached a very thorough verdict, and I thank you."
He set sentencing for Sept. 11.
The decision is just the latest event in Enron's stunning rise and scandalous fall. The company's collapse from the seventh-largest company in the U.S. to bankruptcy in 2001 cost Americans billions of dollars in retirement savings, led to the downfall of major accounting firm Arthur Anderson, and spurred a flurry of corporate accounting scandals and investigations.
Prior to the scandal Enron was widely admired as a leader of innovation in the energy business and was widely embraced by Wall Street as a corporate model. Both Lay and Skilling were regarded as two of the world's top businessmen.
Since the company's demise it also turned out that chief financial officer Andy Fastow had looted the company of $60 million while running the side deals.
Click here to read the criminal charges in the Enron Trial (FindLaw PDF)
Skilling's $5 million bond, which restricts him to the continental U.S., remains in effect. Lay, who surrendered his passport, posted a $5 million bond secured with family-owned properties at a hearing following the verdict.
Skilling attorney Daniel Petrocelli promised to fight the convictions.
"We will have a full and vigorous appeal," Petrocelli said.
Prosecutors charged that Lay and Skilling knew Enron's reports of booming profits were just financial trickery, but told the world all was well to keep the stock price up even as the Houston-based power trader slid toward its demise.
In testimony, Lay and Skilling said they painted a rosy picture of the company because they believed it was in great shape, not because they wanted to cover up problems.
Skilling suddenly resigned in August 2001 after just six months as chief executive officer and was replaced by board chairman Lay, who had been CEO before Skilling.
But the two men testified that Skilling left because he was burned out, not because of Enron's growing financial problems.
They blamed media coverage and Fastow's thievery for a financial crisis that sank the firm they built from a quiet pipeline business into an international trading powerhouse.
Prosecutors said the two men milked Enron for hundreds of million of dollars and lived lives of luxury while driving the company into a bankruptcy.
Lay took home $220 million in compensation from the sale of Enron shares from 1999 through 2001, while Skilling got $150 million, Assistant U.S. Attorney John Hueston said in opening arguments.
Their convictions bring to 19 the number of Enron executives who pleaded guilty or have been found guilty of crimes.
Prosecutors built their case by slowly going up the chain of command to secure guilty pleas and cooperation from key players, several whom testified that Lay and Skilling knowingly led Enron's giant scam.
The key witness was Fastow, who tearfully told the jury of his misdeeds and said Skilling and Lay were deeply involved in what he described as a massive coverup of Enron's troubled finances.
He has pleaded guilty to conspiracy in exchange for a 10-year jail sentence which he likely will begin serving soon.
Enron's demise raised questions about the quality of corporate oversight and was quickly followed by similar scandals at firms such as HealthSouth, WorldCom, Global Crossing and Adelphia.
Enron auditor Arthur Andersen was convicted in June 2002 of obstruction of justice for its role in the Enron saga. The U.S. Supreme Court overturned the conviction a year ago, but Anderson is now virtually out of business.
After Enron, the U.S. Congress scrambled to pass the Sarbanes-Oxley Act in 2002, toughening financial and auditing requirements for publicly-owned companies.
Reuters and the Associated Press contributed to this report.