Why Enron Still Matters
Matt Bodie has a provocative post up on Prawfs titled “The Enron Trial: Reasons Not to Watch“. Explaining that he doesn’t find the trial all that interesting, Matt argues that Enron is an overexposed story, Skilling and Lay aren’t the real “bad guys”, and the jury is likely to decide the case on factors other than the underlying factual guilt. The first objection is fair (my colleague Jonathan Lipson has pointed out that ““[t]he Enron case has already spawned a cottage industry among legal academics.” ). However, Matt and I part ways on his second and third objections.
Matt argues that :
Like many criminal conspiracies, the worst offenders have pled, leaving trials for those who have the best case for innocence. Lay and Skilling may or may not have really known what was going on. Sure, even not knowing is bad, given their positions of authority. And creating a culture of noncompliance is also wrong.
I’d guess that the reason Skilling and Lay have not pled and Fastow has is demographics. Fastow is a young(ish) man, who can serve significant time and still emerge with earning power. Lay and Skilling don’t have the years left to do the time that the government (apparently) would find appropriate. But more importantly, take a look at the indictment. I think it is right to be hesitant about conflating all crime with evil, but I don’t know why Lay and Skilling should be described as merely knowingly lazy at the helm. The government is charging, rather, that they personally profited from a conspiracy that they designed. The purpose of that conspiracy was to defraud thousands of investors. (Yes, I recognize that this is all contested and contestable, and you can make this a story about criminalizing agency costs. Moreover, as Larry Ribstein has observed, “the moral force of the criminal law should be reserved for the cases that deserve it.” But I think that the case is going to turn on the perceived truthfulness of the defendants on the stand, which by all accounts is a core jury competency.) Fastow, by contrast, self-dealt to the company’s detriment: a crime whose impact on the securities markets was more indirect, although ultimately catastrophic. In any event, if Skilling and Lay are guilty of the knowledge and purpose charged by the indictment, they are evil. Maybe less evil than, say, murderers, but that is a distinction I leave for other folks to make.
As for the jury point, I agree that this trial may not be resolved based on an application of cold logic to clear facts – but I don’t think that the morality play we’re seeing in Houston is noticeably different in that dimension from any other criminal trial. Criminal adjudications create norms for relevant potential offender communities – - here corporate CEOs – - and it is that process of norm creation that drives my interest in the story.
Plus, just check out the stories the attorneys told today. On one side, we’ve got the prosecution, spinning the jury a familiar tale about greedy, lying executives. In my view, they’ve got the worse of the case on the facts, which is why I’m with Gordon and Christine in betting on a partial or full acquittal. On the other side, the defense has to rehabilitate not just their clients but a corporate law system that may diverge from ordinary intuitions about responsibility:
‘Ken Lay has, does and will continue to accept responsibility for the bankruptcy of Enron. He was the man in control … But failure is not a crime. Bankruptcy is not a crime. If it were we’d have to turn Oklahoma back into a penal colony because there would be so many people we’d have to lock up,” Lay’s lawyer Mike Ramsey told the jury this afternoon.
I understand Matt’s Enron-overload. But I guess I’m not there yet. I can’t wait for tomorrow!