Thursday, May 25, 2006
As Mark Babineck reports for the Houston Chronicle, a Houston jury found former Enron CEOs Ken Lay and Jeffrey Skilling guilty on charges of fraud and conspiracy. Lay was convicted on all six counts against him; Skilling was convicted on 19 of 28 counts. It took the jury six days of deliberations to make their decision.
After the jury announced its verdict, Judge Sim Lake, who presided over the Lay/Skilling trial, found Lay guilty on three counts of banking fraud in a separate trial.
Sentencing was scheduled for September 11. The NY Times reports that the fraud and conspiracy charges carry a sentence of 5-10 years.
The guilty charges come after sixteen weeks of trial and four and half years after Enron went bankrupt. Enron, an energy trading firm, rose to power on a tide of energy deregulation at the federal and state level. The more deregulated the market, the more opportunities there were for Enron to game the system to pull in massive profits.
First, Enron convinced the Federal Energy Regulatory Commission (FERC) to deregulate the natural gas markets in 1993. After achieving that, Enron turned its attention to state energy markets.
Enron spread around millions in campaign contributions at the state and federal level to get deregulation-friendly legislators into office and appointed to FERC. It worked: more than 20 states deregulated their energy markets in the 1990's, in large part in response to Enron's lobbying. (See our case study on Enron in Connecticut here.) But deregulation often created more havoc than good. Rolling blackouts hit California in 2000-1, for example, costing the state billions of dollars -- costs which were passed on to consumers and taxpayers.
Enron was a bully. Ken Lay and Jeff Skilling saw opportunities for profit, and then threw their financial weight around with campaign contributions to make sure people friendly to their agenda got into office. While Lay and Skilling got their way, the rest of us got screwed.
Today's convictions may provide some measure of comfort for those whose livelihoods or life savings were destroyed by the reckless and fraudulent behavior of Mssrs. Lay and Skilling, but it does nothing to prevent future Lays and Skillings from engaging in similar public-screwing behavior.
Until we change our campaign laws to make sure representatives get into office who are there to represent the public, not SOBs rich enough to put $100,000 in a candidate's pocket, the American public should expect a government which gives them poor regulatory oversight, shoddy accounting standards, and more economic collapses like Enron.