Ken Lay and Jeffrey Skilling Convicted of Enron Fraud and Conspiracy

On May 25, 2006, a federal jury convicted Enron founder Kenneth Lay on all six counts of fraud and conspiracy, and former CEO Jeffrey Skilling on 19 of 28 counts of securities fraud, wire fraud, and conspiracy. The verdicts marked a watershed moment in corporate accountability, holding top executives personally responsible for orchestrating one of the largest corporate frauds in American history.

The trial, which began on January 30, 2006, exposed the systematic deception at the heart of Enron’s operations. Lay was convicted of lying to investors and employees about Enron’s financial health while the company used complex off-balance-sheet partnerships to hide billions in debt and inflate profits. Skilling, who served as CEO from February to August 2001, was found guilty of conspiracy to commit securities and wire fraud, insider trading, and making false statements to auditors.

Prosecutors presented evidence that both men knew Enron’s reported profits were fraudulent and that the company was on the verge of collapse even as they publicly reassured investors and employees. Lay sold millions in Enron stock while telling employees their retirement savings in Enron shares were secure. The fraud wiped out more than $60 billion in shareholder value and destroyed the retirement savings of thousands of employees.

The convictions represented the culmination of aggressive federal prosecution following passage of the Sarbanes-Oxley Act in 2002. Lay died of a heart attack on July 5, 2006, before sentencing, resulting in his conviction being vacated. Skilling received a 24-year sentence in October 2006—later reduced to 14 years—and was released in 2018. The Enron prosecutions marked the last era when federal prosecutors aggressively pursued criminal convictions of Fortune 500 CEOs; after 2008, similar conduct would be addressed through deferred prosecution agreements and corporate fines.