One On One With John Coffee, professor of securities law at Columbia University
Monday, April 10, 2006
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SUSIE GHARIB: The fraud trial of two former Enron executives moved into high gear today, as one of them took the stand in his own defense. Former Enron CEO Jeffrey Skilling told a Houston jury quote, I am absolutely innocent and he said he didn`t lead a scheme to manipulate the company`s earnings or defraud investors. Skilling and former Enron CEO Kenneth Lay are accused of causing Enron`s collapse, of lying to investors and analysts about the energy company`s fragile finances. Both men have pleaded not guilty. Skilling also told the jury when he left Enron in August of 2001 after 11 years with the company and six months in the top job, he had no idea the firm would implode. He says he thought it was quote in very good condition. Joining us now with more analysis, John Coffee, professor of securities law at Columbia University. Hi, Jack, how are you doing?
JOHN COFFEE, LAW PROFESSOR, COLUMBIA UNIVERSITY: I`m fine. How are you?
GHARIB: I`m good, thank you. So what do you think? How did Jeff Skilling do on the witness stand today? Was he believable?
COFFEE: First of all, he was his characteristic self. He was full of high bravado, no apologies and a kind of take-no-prisoners style. As you just mentioned, he told the jury that Enron was in very good condition when he left in August 2001. He then explained its bankruptcy four months later by saying that was the product of a financial panic caused by short sellers and financial journalists working for them. That may not sit terribly well with the jury that`s just heard several months of testimony from all of the principal officers of Enron, explaining that there were serious problems in most of the divisions.
But it could be that his defense attorney`s real strategy is not to convince the jury that Enron was healthy, but that Mr. Skilling truly believed what he is saying because Mr. Skilling is charged with fraud. You need to understand that to convict someone of fraud, you have to show that they willfully made false statements and it is a defense that you made sincere if incorrect statements. And I think Mr. Skilling is really attempting to convince the jury that he was totally sincere in his fairly extraordinary beliefs that Enron was a very healthy company as of late 2001.
GHARIB: All right, now the prosecution probably won`t get their chance to cross-examination him until later this week. What do you think the prosecutors are going to zero in on?
COFFEE: I think they`re going to chip away, like working on an iceberg, little bit by little bit on this statement that Enron was in very good condition in his judgment. They`re going to show him fact after fact that he was aware of, that various officers have testified they`ve told him or that he received memos or that are incorporated in e-mails or other letters signed by him. And they`re going to say again and again, is this really a company that`s in very good condition? You knew this and you`re trying to tell us it was in good condition? They`re going to push the inconsistency between his complete defense of Enron and the evidence that he knew.
GHARIB: Now, this is -- this whole Enron case is a very complicated story. Do you think that the jury really understands the case?
COFFEE: I think the prosecution has done a very good job in simplifying this case. They stayed far away talking about accounting. They`re talking instead about lying, that you made false statements. Mr. Skilling is going to get hit with several of those because he sold several hundred million dollars worth of stock right after September 11th and he told the SEC that he sold because of September 11th and the poor forecast that it meant for the corporate economy. But the evidence has come out that he actually tried to sell before September 11th and that inconsistency is going to go to his basic credibility. He`s got to find a way to restore credibility where he appears to have made inconsistent statements.
GHARIB: From what you`ve seen so far of this trial, the prosecution`s case and now the beginning of the defense, who do you think is winning here?
COFFEE: Well, the jury gets to decide this and I don`t want to tell anyone that someone is guilty or innocent, but I would say the prosecution has put its evidence in. It`s cumulative, it`s overlapping and while their witnesses were vigorously cross-examined, most of their testimony withstood their cross-examination. This trial is running on time. The judge is conducting an excellently efficient trial. That keeps the jury`s attention high and I think that`s what is critical. In a very long trial, the jury can become confused and angry. I think this is a jury that`s heard a very clear presentation so far.
GHARIB: OK, real quickly, we have just a few seconds left, Ken Lay is going to also take the stand at some point. How do you think he`ll do on the witness stand?
COFFEE: Well, Ken Lay had a bad day today because Mr. Skilling actually testified that he called up Mr. Lay after he had left office in the fall of 2001 and told Mr. Lay in his words that Mr. Lay should quote open the (INAUDIBLE) on Enron and reveal all of its financial transactions and off balance sheet deals with Mr. Fastow. That`s the first time that these two defendants have said anything critical of each other and there may be a certain amount of tension between them as a result of this.
GHARIB: That`s fascinating. Thank you so much, Jack. We appreciate you coming on the program, explaining it all to us. We`ve been speaking with Professor John Coffee of Columbia University law school.
