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Enron trial about to start

By Carrie Johnson
The Washington Post

CRAIG HARTLEY / BLOOMBERG NEWS An Enron employee sits with his belongings outside company headquarters in Houston on Dec. 3, 2001, after the company said it would cut 4,000 jobs — more than half its staff — at the office complex.

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Lawyers inside and out of the case are fretting about whether Houston-area jurors can hear the evidence with an open mind when the company's bankruptcy in late 2001 cost thousands of area residents their jobs and their retirement savings. Along the way, Enron became a favorite punch line of late-night-television comedians, a rich subject for political-campaign attacks and a one-word shorthand for an era of corporate greed.

The defendants, Daniel Boyle and Sheila Kahanek, were not senior executives, and their case involves byzantine interactions with four former Merrill Lynch officials in what prosecutors say were bogus deals hatched to help Enron meet profit targets in 1999. The trial, with jury selection scheduled to begin next Monday, may be most intriguing as a precursor for the prosecutions of Enron's top leaders in the coming months.

"Getting a jury to give these guys a presumption of innocence is going to be a herculean task," said lawyer Rusty Hardin, who in a 2002 trial defended accounting firm Arthur Andersen on obstruction-of-justice charges related to its work for Enron. "I've never seen jurors as aware and possessed of opinions as in the Andersen case. People would stand up and express their opinions about Enron, and they would be literally shaking."

Since that time, Hardin pointed out, even more damaging information about Enron's operations has been disclosed. The company's former chief financial officer, Andrew Fastow, has pleaded guilty to conspiracy, and its onetime chief executive, Jeffrey Skilling, has been indicted on 35 fraud and insider-trading charges.

Attorneys for Boyle and Kahanek and the four former Merrill executives declined to speak at length about the upcoming case. But defense lawyers and jury experts said the most crucial factor in the trial may be persuading potential jurors to be candid about their attitudes toward corporate America and their feelings about Enron in particular.

Enron's reach was so pervasive in Houston that the local U.S. attorney's office recused itself from the case because several lawyers had family and investment ties to the company. Several local federal judges have said they owned Enron stock.

Enron is the most prominent of the corporate scandals of the past few years, inducing strong opinions in many people who could possess hidden motives for getting on the jury, said Jeffrey Frederick, director of jury research for the National Legal Research Group in Charlottesville, Va.

"In this particular case you have to watch out for what's commonly called a stealth juror ... someone who's going in there with an agenda," Frederick said.

History doesn't provide much of a guide for how jurors have handled notorious cases of alleged corporate crime in the past. Both Michael Milken and Ivan Boesky, major figures of the 1980s Wall Street insider-trading era, pleaded guilty before their trials were set to begin. Savings-and-loan magnate Charles Keating Jr. was charged and tried in California, not his home base of Phoenix.

The fair-trial issue has come up before in the Enron saga. Lea Fastow, the wife of Enron's former finance chief, asked for her trial to be moved out of Houston because of extensive "soap opera" type publicity, in the words of one lawyer in the case. The judge ruled the trial would take place in Brownsville, Texas, 350 miles from Houston. The trial was averted after Lea Fastow pleaded guilty this month to filing a false tax return.

Defendants in the Enron-Merrill case have not yet filed a request to move the trial out of Houston, and at least one defense attorney said he opposes the idea because he thinks a local jury will decide in favor of his client after hearing all the evidence.

The trial centers on an allegedly improper deal in which Enron sold Merrill energy-generating barges in exchange for a promise that Enron would later find another buyer for the barges. It helped Enron generate profit and bonuses for executives.

Boyle is a former midlevel global-finance executive at Enron who worked closely with investment banks. Kahanek was an Enron accountant who helped with the barge transaction and allegedly chastised an employee for setting down the terms of the deal on paper. Both are accused of conspiracy and other crimes.

The Merrill defendants face a series of charges including conspiracy in connection with their knowledge of the secret deal.

Federal jurors in Houston are culled from voter-registration records in 13 surrounding counties. Court official David Bradley said the court may have to call "a few more jurors than we normally would" to go through jury selection in the Enron case because of the company's notoriety. The energy trader eventually rose to become the seventh-largest public company in the nation, according to Fortune magazine, before a disastrous fall from grace that inspired several books and a television movie.

Jurors are not barred from knowing anything about a case beforehand, but they must not have developed firm convictions and must be able to keep an open mind when hearing evidence, legal experts said.

Both prosecutors and defense attorneys in the Enron case are preparing a special questionnaire to help root out bias among potential jurors. Judge Ewing Werlein Jr. has said he will let the lawyers put a total of 10 extra questions on the questionnaire. Analysts said the questions would likely focus on jurors' general attitudes about corporate crime and executive pay, as well as whether they or their friends had lost jobs or money as Enron's stock price plummeted.

Nancy King, a law professor at Vanderbilt University who has studied jury behavior, said most judges prefer to give the jury-selection process a chance to work. If not enough unbiased jurors can be found, King said, the trial could be postponed or jurors could be brought in from other areas.

"It's going to be a difficult task," jury expert Frederick said of the Enron jury selection. "I'm not saying it will be impossible."

Copyright © 2004 The Seattle Times Company

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