The importance of themes: Enron prosecutors say this is a case of lies and choices. Lay and Skilling's defense says they are far from "evil."

Choices and Lies Vs. Evil

Last week saw the confluence of three critical legal stories impacting Wall Street. The new law requiring hedge-fund registration went into effect, Alan Greenspan departed as Chairman of the Federal Reserve. And, get this, both stories were overshadowed by the selection of jurors in some courthouse down in Texas. It's hard to play down the significance of mandatory hedge-fund registration or Greenspan's retirement, but somehow they do pale next to the commencement of the Enron trial.

Of course, this trial really only involves two former officers involved in the alleged illegal activities, but in reality it's only these two who matter. Jeffrey Skilling, a former Enron CEO, faces 31 charges of conspiracy, fraud, lying to auditors and insider trading. Ken Lay, Enron's former chairman and CEO, faces seven charges of conspiracy and fraud. Both Skilling and Lay have pleaded not guilty (and remain innocent until proven guilty, despite the impression given by television’s talking heads).

Arguably, this trial is about a series of extraordinarily complex financial transactions that involve tax shelters, intricate corporate malfeasance and arcane accounting fraud. But any trial lawyer could have told you a few years ago that neither side would bother traveling the complicated route. In every trial, the lawyer becomes a storyteller -- the same way Homer was to the Greeks. Well, sort of.

What matters are the "themes" each side utilizes to frame its case -- and much more often than not, the lawyer whose set of themes are accepted by the jury will eventually prevail. Not surprisingly, the best way to ensure acceptance of your themes is to make them simple and catchy. ("If the glove doesn't fit, you must acquit," anyone?)

The prosecutors don't want jurors confused by obscure accounting terms -- their themes were clearly asserted in opening statements: "This is a simple case. It is not about accounting; it's about lies and choices. Defendants Lay and Skilling chose to falsely assure the public there were no problems at Enron. They chose to lie."

"Choices" has always been one of my personal favorite themes, as it fits practically every case I've ever encountered. Someone always has to take responsibility, and that is a matter of what "choices" people make. The other prosecution theme: "lies." Notice they didn't use the word "fraud," which is loaded with far more legal concepts (with names like scienter). Juries are made up of real people. Real people understand what it means to lie. Ask a dozen judges from throughout the country to define fraud and you'll walk away more confused than when you started. So the prosecution went with "lies and choices."

Skilling's attorney went with: "This is not a case of hear no evil, see no evil. This is a case of there was no evil." This tactic is also a common practice for defense counsel. He is attempting to increase the burden on the prosecution. As anyone who has ever sat through the last ten minutes of Law & Order can tell you, the prosecution has to prove its case "beyond a reasonable doubt." A rather high standard to begin with, it is often ignored by jurors who assume that, if someone is on trial, then they likely "did it."

So many defense attorneys try to make that burden as overwhelming as possible from the start. In this case, Skilling's attorney is trying to increase that burden to proof of "evil." In other words, unless the jury finds Skilling guilty of being "evil," the jury should acquit. Skilling (and Lay) may or may not have conspired to defraud investors. Even if they did, that’s a far cry from being evil. Even Darth Vader didn't turn out to be totally "evil."

Of course, trials are not legally about these themes. They are about the voluminous documentary evidence and lengthy testimony that will encompass the next four months. But that doesn't change reality. Come closing arguments, you can safely bet the verdict will hinge on whether the jurors decide this is a case about Skilling and Lay's "choices" or about their inherent "evil."

uretsky@phillipson-uretsky.com

2/8/06