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Thursday, 29 August, 2002, 08:37 GMT 09:37 UK
Struggling to nail Enron

Federal prosecutors are flat out trying to build a foolproof case against Enron. Senior executives at the firm are expected to be charged within weeks. BBC News Online talked to three former federal prosecutors to glean an insider's view of how things may proceed.

The case against Enron - crudely put - is all going to rest on the quality of snitching done by the snitch.

And federal prosecutors are desperately hoping the chief snitch's revelations will feed multiple charges against Enron's top dogs.

More than nine months after the scandal broke, the scrutiny of thousands of documents has not led to any criminal charges - such is the complex nature of Enron's finances.

Michael Kopper
Mr Kopper's guilty plea leads to Andrew Fastow
The paper trail - memos, letters, e-mails, bank statements - is very time consuming and often results in little conclusive proof.

"You have to find someone to pinpoint particular bank transactions, elaborate on what was discussed when writing certain memos and explain why it was all kept secret," explains Christopher Bebel, an economics crimes expert at Shepherd Smith & Bebel.

The government has finally found that insider, and he has intimate knowledge of Enron's notorious partnerships that are expected to form the basis of the trial.

The perils of grassing

Michael Kopper - a senior executive who managed the partnerships that allowed top managers to siphon off personal profits and conceal Enron's debts - has agreed to plead guilty and tell what he knows.

Andrew Fastow
But will Mr Fastow testify against Mr Lay?
"Mr Kopper is the first major crack in the otherwise unified front that Enron executives have maintained over the past eight months," said Robert Mintz, a specialist in white-collar crime at McCarter & English.

Fear of prosecution and civil lawsuits has driven Enron employees as far away from the witness stand as possible.

Grassing on colleagues means admitting knowledge of what happened - and that is incriminating.

The prospect of multiplying lawsuits has already stopped key whistleblower Sherron Watkins in her tracks.

Gentle persuasion?

So prosecutors have first had to convince the right insider that the evidence is already stacked against them.

A guilty plea and helpful attitude can then be traded-off against the promise of a more lenient punishment.

Former Enron CEO Kenneth Lay
Kenneth Lay looks set to plead ignorance
With Mr Kopper onboard, the prosecutors can finally start to work their way up the chain to those at the very top.

Mr Kopper is understood to have given prosecutors a list of people who received illegal pay-outs from the partnerships.

That could lead to the indictment of more peripheral Enron executives, as well as a whole host of families and friends of Houston business associates believed to have handled stolen money.

Going for the jugular

But most importantly, Mr Kopper was right hand man to Andrew Fastow, Enron's chief financial officer and architect of the partnerships.

Lawyers are expecting the indictment of Mr Fastow within the next six to eight weeks.

Former Enron CEO Jeffrey Skilling
Jeff Skilling claims no knowledge of Enron's murky finances
Mr Fastow has remained silent since Enron's debacle, and his plea - guilty or not - is key to what happens next.

A guilty plea from Mr Fastow is likely to mean that he - in his turn - will dish the dirt on two former chief executives - Kenneth Lay and Jeffrey Skilling.

Without Mr Fastow's cooperation, lawyers say, the prosecutors will need to enlist the help of many more insiders to nail those at the helm.

The defence of Mr Skilling and Mr Lay has already been played out before Congress: they are pleading ignorance.

If their ignorance convinces the jury, the federal prosecutors may have to start all over again with charges of gross negligence.

And if that fails, prosecutors could fall back on charges of insider trading - although that again is notoriously difficult to prove.

Daunted yet?

No one is underestimating the enormous challenge that the federal prosecutors are facing.

"The large amount of money stashed away by Enron executives means they have been able to pay for the brightest and best lawyers," said Thomas Ajamie who is advising corporate clients involved in Enron actions.

Sherron Watkins
And Sherron Watkins has fallen strangely silent
On top of that, the Andersen trial - which the government only won by a whisker - has made federal prosecutors much more aware of the difficulties ahead.

Andersen's case centred on the deliberate shredding of evidence, a simple concept to explain to a jury.

"How much more difficult is it going to be with Enron's complex financial partnerships?", Mr Ajamie said.

"They [federal prosecutors] want to make this as black and white as possible for the jury, presenting it as outright thievery where executives stole from the company at the expense of shareholders."

"What they're desperate to avoid at all cost is arguments that go into accounting detail," he said.

Sweet reward?

While the task of the federal prosecutors seems huge, a breakthrough is likely to lead to jail sentences for the Enron executives involved.

These white-collar crimes have damaged the backbone of America's economy and wiped out investor's savings in an unprecedented scale, comments Mr Mintz.

"For the first time, perhaps ever, we're going to see white-collar criminals serving jail terms which have been unheard of until now," he said.


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