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THE NEW YORK TIMES: Enron Prosecutors Have Another Key Witness, From Jail

Published: March 20, 2006
The government heads this week into the home stretch of its case against two former Enron chief executives. Prosecutors will be looking to end on a flourish with the testimony of Ben F. Glisan Jr., the only former top executive who has already been sentenced in the Enron debacle.
Mr. Glisan, the former treasurer, is the last major witness for the government before the case shifts to the defense and to what promises to be memorable testimony by the defendants, Jeffrey K. Skilling and Kenneth L. Lay.
Mr. Glisan worked closely with Andrew S. Fastow, the former chief financial officer, on developing special-purpose entities, like the Raptors group, that both men have said in plea deals were used to inflate earnings and hide debt. The government is also expected to use Mr. Glisan to try to connect the dots for jurors hearing a complex case.
For seven weeks and through 14 witnesses, jurors have listened to prosecutors build a case on largely disparate pieces of indirect circumstantial evidence that Mr. Lay and Mr. Skilling, the top executives of what was once the seventh-largest company in the world by revenue, conspired to mislead and defraud investors.
Legal experts have generally praised the government's case, which has shied away from complex explanations of accounting and focused on the actions and words of Mr. Skilling and Mr. Lay in the three years before Enron collapsed in December 2001.
But legal experts continue to debate two crucial issues: whether the government has presented enough evidence that Mr. Lay knowingly lied about the true state of Enron's businesses and, more broadly, whether there was an extensive conspiracy within Enron to defraud and mislead employees and investors, as the government contends.
Those issues underscore the importance of decisions that the judge, Simeon T. Lake III of Federal District Court, will make in the coming weeks about how to structure the jury instruction. If the judge grants a “deliberate ignorance” instruction, as expected by many legal specialists because of case precedent, it could ease the way for jurors to find Mr. Lay guilty — even if the government cannot prove he knew that fraud was occurring on his watch.
“These instructions are making it very difficult if not impossible for defendants to prevail in these types of cases,” said Joel Androphy, a lawyer in Houston specializing in white-collar crime.
Mr. Lay's lead lawyer, Michael Ramsey, agreed that prosecutors were more likely than not to seek the “deliberate ignorance” instruction for his client. “There is nothing direct to say about Ken Lay,” Mr. Ramsey said. “It has all got to be by insinuation and innuendo.”
But legal experts said the cumulative impact of such testimony could be taking a toll on Mr. Lay. Last week provided some of the most emotional testimony against Mr. Lay to date. Johnnie Nelson, a 46-year-old pipeline operator in New Mexico, blamed Mr. Lay for steep losses in his retirement savings account, saying a man he formerly admired had let him down.
At week's end, Sherron S. Watkins, a former Enron vice president and now an author and lecturer, said she had become concerned about potential accounting problems and had taken the concerns directly to Mr. Lay after Mr. Skilling abruptly resigned.
Ms. Watkins criticized Mr. Lay's handling of an inquiry into her accusations and raised the specter that Mr. Lay might have authorized lawyers to look into firing her, which did not happen in the end.
Jurors seemed riveted by her testimony, which was peppered with her negative opinions of Mr. Lay and Mr. Skilling. Judge Lake helped prosecutors by not reining in her answers.
Prosecutors have also presented evidence that Mr. Skilling participated in fraudulent acts. David W. Delainey, the former chief executive of the Enron Energy Services retail division, testified about one meeting in March 2001 in which Mr. Skilling assented to a plan to shift some $250 million in troubled retail contracts to the wholesale energy division.
Mr. Delainey contended that the meeting participants knew the move was being done to deceive investors about the retail unit, which he called a “basket case.”
Mr. Fastow, while admitting his own criminality, testified that Mr. Skilling approved “bear hug” side deals guaranteeing that one partnership, LJM, would not suffer losses for doing deals with Enron that could help it manipulate its earnings. And Mr. Fastow, in somewhat shaky testimony, nevertheless said the side deals had been memorialized in a document called the Global Galactic agreement, aspects of which, he said, Richard A. Causey, the chief accounting officer, had discussed with Mr. Skilling.
Kevin P. Hannon, the former chief operating officer of Enron's troubled broadband unit, offered surprising testimony that Mr. Skilling uttered “They're on to us” in a May 2001 meeting at which senior executives discussed a research report suggesting Enron's stock was overvalued.
Despite the evidence presented so far, some legal experts said they believed the case could crumble once Mr. Skilling and Mr. Lay took the stand.
“There is still no explosive evidence,” said Robert Mintz, a former federal prosecutor who is now a defense lawyer at McCarter & English in Newark. “Jurors will be expecting prosecutors to dissect their testimony with a scalpel.”
Before the defense takes over, Mr. Glisan's appearance for the prosecution offers one more chance for high drama. Mr. Glisan, 40, has already served more than half of a five-year sentence for conspiring to falsify financial results and make Enron appear more successful than it actually was. He was the chief architect of the Raptor vehicles, whose insolvency in the fall of 2001, prosecutors contend, played a role in the ultimate collapse of Enron.
Mr. Glisan is serving time at a low-security prison in Beaumont, Tex., about 100 miles east of Houston, according to Bureau of Prison records. He is sure to draw stares if he enters the courtroom in prison garb, as he did two years ago when he testified in another Enron case involving the sham sale of interests in Nigerian barges.
Affable and sharp, Mr. Glisan was credited with being a crucial government witness in the barge case, which resulted in five defendants being found guilty. Unlike other government witnesses, Mr. Glisan has less to gain from shading his testimony to fit the government's theory of the case because he is already serving his sentence, legal experts say.
Away from the courtroom, lawyers for both sides began hashing out the all-important jury instruction they will eventually submit to the court.
“I am not terribly optimistic after yesterday that we can get a charge together by agreement,” he said Saturday. “The judge will have to get into it and make some rulings.”
The “deliberate ignorance,” or “conscious avoidance,” charge made it fairly easy for jurors to find Bernard J. Ebbers, the former chief executive of WorldCom, guilty last year of conspiracy and fraud charges.
In a motion seeking a new trial, lawyers for Mr. Ebbers, who was sentenced to 25 years in prison, argue that jurors were told they could find him guilty based on “conscious avoidance” even without evidence that Mr. Ebbers “deliberately avoided learning any fact at issue.”
The judge in that case justified the charge on the grounds that the circumstances were “overwhelmingly suspicious” and that Mr. Ebbers had failed to question those suspicious circumstances.
Mr. Ebbers also struggled to win a “missing witness” charge, which defense lawyers in the Enron case are likely to seek as well. In the Ebbers case the judge denied defense motions to grant immunity to some witnesses or to allow use of previous statements to impeach the government's cooperating witnesses.
Absent that, Mr. Ebbers's lawyers sought to instruct jurors that certain witnesses were “missing” because they were under government control, had indicated they would exercise their Fifth Amendment right against self-incrimination and were not given immunity by the court to testify for the defense.
Lawyers for Mr. Skilling and Mr. Lay are facing the same challenges in responding to testimony by government cooperators testifying under plea agreements. Most of the government cooperators, including Michael J. Kopper, a close confidant of Mr. Fastow; and David B. Duncan, the former Andersen partner who had approved much of Enron's questionable accounting, have told defense lawyers they would invoke Fifth Amendment rights.
Others important Enron figures who have not been charged, like the former Enron president Greg Whalley, also have indicated they would invoke the Fifth if called.
That would make it tough for the defense to disprove Mr. Delainey's accusations about what was said at the March 2001 meeting in Mr. Skilling's office. All but one participant in the meeting — a former Enron accountant, Wesley H. Colwell — is likely to be unavailable for the defense.
Mr. Colwell testified earlier in the trial for the government but was not asked about his role in the effort to shift losses out of the retail unit.
Another participant in the meeting that day, Mr. Causey, is not likely to be called by the government except as a rebuttal witness, if at all, prosecutors have said.

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