Analysis: Houston Has a Problem: The Countdown Starts at Enron ; as the Accounting Scandal Builds to Its Court Climax, Katherine Griffiths Reports from the Texan City on the Rise and Fall of the Energy Trader, the Wrongfooting of Wall Street and the Financial Fallout in the Local Community
Griffiths, Katherine, The Independent on Sunday (London, England)
Taking a drive through River Oaks, a prosperous area of Houston, Texas, is like looking into the past of America's fourth-largest city.
The ornate mansions " some of which span an entire block " were first built by the oilmen who struck black gold here. In the 1960s, astronauts moved in as Nasa's Johnson Space Center grew up. And in the 1990s, the people who created Enron, the energy trader that became Houston's most famous local company, took up home in the city's most exclusive postcode.
A few of them are still there, though these days they are keeping a much lower profile. Kenneth Lay, Enron's former chairman, lives with his wife, Linda, in a high-rise block of luxury flats.
Jeffrey Skilling, the former chief executive who once owned a huge, Mediterranean- style palazzo, is still thought to be spending much of his time in the area. Andrew Fastow, the former chief financial officer, lives not quite in River Oaks but in the still- desirable area of South Hampton.
But Fastow will not be there for much longer. He pleaded guilty to helping to orchestrate a massive fraud at Enron and is about to spend 10 years in prison under a plea bargain he struck with prosecutors.
Lay and Skilling might not spend much more time there either. Along with Richard Causey, Enron's former chief accountant, they will go on trial in Houston in January, after lawyers met last week to agree the legal framework. Having struck his plea bargain, Fastow " once Skilling's right-hand man " will be giving evidence against them.
The three are charged with orchestrating an audacious and wide- scale fraud, which led to Enron's collapse into bankruptcy in December 2001 and left thousands of workers without a job and many investors suffering heavy losses.
While the three's lawyers have been working on the complex case for months, momentum is now picking up. This autumn, a series of pre- trial hearings will be held in Houston's federal courthouse, just a few blocks from the gleaming skyscraper that used to be Enron's headquarters.
But the trial, scheduled to begin on 17 January and to last eight months, is not eagerly awaited by many in Houston. Locals have spent three years trying to make up for the impact of Enron's collapse on the economy, which included putting 6,000 people out of work in the city and bringing down another local employer " the company's accountant, Arthur Andersen.
Car dealerships, building rentals, restaurants and bars all felt the blow, especially as it came when the economy was still reeling from the terrorist attacks of 11 September.
Houston has also spent the past few years trying to gloss over its symbolic connection with the company. 'Enron Field', home to the local baseball team, has been changed to 'Minute Maid Park' after the orange juice firm that now sponsors it. And Enron has also been quietly erased from the hospital wings, concert halls and charitable foundations that it used to fund.
Philip Hilder, a lawyer in the city, said: 'Enron's collapse had a devastating effect on Houston's psyche and was a real blow to its pocketbook. Many people felt betrayed by a company that was perceived to be a shining star but turned out to be a shooting star, which burned out fast.'
While the three defendants might not relish facing a jury drawn from the local area, the prosecution won't have an easy ride either. The Enron case is not like the lawsuits that have been wrapped up against Bernie Ebbers, the former chief of the collapsed telecoms group WorldCom, or Richard Scrushy, the ex-head of the medical services company HealthSouth. In those cases, a small number of executives faced relatively straightforward charges of theft (Ebbers is heading to prison for 25 years, while Scrushy was acquitted).
In the case of Enron, the US government has assembled an entire taskforce of famous prosecutors from across the country. …