The government's difficulty in convicting Arthur Andersen LLP of obstructing justice won't dissuade prosecutors from pursuing insider trading and securities fraud charges against Enron Corp officials, experts said.
Executives of what was once the world's leading energy trader also may face racketeering or money laundering charges, they said.
And prosecutors and the Securities and Exchange Commission may target banks and law firms for aiding and abetting Enron before it filed the largest bankruptcy in history, experts said.
PHOTO: REUTERS
Federal jurors in Houston convicted Andersen on Saturday of obstructing a government investigation into Enron's demise.
Prosecutors vowed to press ahead on Enron, undeterred by jurors' comments they doubted Andersen partner David Duncan committed a crime in overseeing shredding of documents at Enron, the accounting firm's client for 16 years.
"These are very aggressive prosecutors, and we can predict that they will continue to be aggressive," said Stephen Presser, a professor of business and law at Northwestern University.
Any securities fraud charges would allege that Enron executives hid the company's deteriorating financial condition before its collapse in December. They may also focus on off-balance-sheet transactions that hid billions of dollars in debt while executive promoted Enron's profitability.
The government must decide whether it believes Enron officials knew about important private information when they sold hundreds of millions of dollars in shares, said Christopher Bebel, a former federal prosecutor in Houston.
An Enron shareholder suit claims that former Enron Chairman Kenneth Lay sold US$184.5 million in stock; former Chief Executive Officer Jeffrey Skilling sold US$70.7 million; former Chief Financial Officer Andrew Fastow sold US$33.7 million, and former Chief Accounting Officer Richard Causey sold US$13.4 million.
"Lay took in so much money through his stock sales that he's going to look like an extraordinarily greedy person," Bebel said.
``That's going to make it very difficult for any jury to have sympathy for him.''
Prosecutors also may bring a securities fraud case focused on some of the hundreds of partnerships used by Enron executives, said Michael Granof, a University of Texas accounting professor.
Explaining the intricacies of such so-called special purpose entities to jurors may prove daunting, he said.
"It seems to me that they clearly engaged in transactions which were designed to mislead," Granof said. "You explain that to accounting PhDs and their eyes glaze over."
Former SEC chief accountant Lynn Turner, a consultant to Bloomberg News, agreed prosecutors face difficulties.
"These are the toughest cases that there are to bring and win," Turner said. "They're extremely detailed and technical."
Any securities fraud case probably would include charges of conspiracy, mail or wire fraud and either money laundering or violations of the Racketeer Influenced and Corrupt Organizations Act, experts said.
A benefit for the government is that money laundering and racketeering charges let prosecutors seek criminal forfeiture of assets.
"They want to put as much pressure as possible on the defendant with the idea of triggering a settlement involving jail time and disgorgement of ill-gotten gains," said James Cox, a Duke University law professor.
Prosecutors may also bring aiding and abetting charges against nine banks and two law firms accused in suits by Enron shareholders of propping up Enron's stock price, experts said.
The shareholders sued Citigroup, JP Morgan Chase & Co, Credit Suisse First Boston, Merrill Lynch & Co, Bank of America Corp, Barclays Bank Plc, Deutsche Bank AG, Lehman Brothers Holdings Inc, and Canadian Imperial Bank of Commerce. The law firms sued were Vinson & Elkins and Kirkland & Ellis.
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