The judge at the trial of former Enron executives Jeff Skilling and Ken Lay said he will instruct jurors to consider whether Skilling and Lay deliberately ignored accounting fraud as Enron spiraled into bankruptcy. The jury would not need to decide whether the two had direct knowledge of it--only that they should have been aware of it. U.S. District Judge Sim Lake has not revealed the precise wording of his lengthy jury instructions, which are set to be delivered on Monday morning. That's when closing arguments are set to begin, after 15 weeks of testimony. Skilling attorney Daniel Petrocelli said he will take three hours and 20 minutes of six hours allotted for closing arguments by the defense. Two or more attorneys for Lay will take up the remaining time. The case is expected to go to the jury as early as May 17th.
Judge Lake said he will permit defense lawyers to tell jurors during closing arguments that the government did not call certain "missing witnesses," but attorneys cannot speculate about what those missing witnesses might have said. The defense can't tell jurors whether any of those witnesses invoked their Fifth Amendment rights against self-incrimination to avoid testifying. Nine witnesses testified under plea deals or non-prosecution agreements, and prosecutors named more than 100 un-indicted co-conspirators, which the defense claimed prevented them from helping their clients for fear of government reprisals. The judge also said he will accept the "reliance defense," which could clear the defendants if they are found to have relied in good faith on the advice of accountants and lawyers that Enron's finances were accurately reported.
On May 18th, Lay will be tried without a jury on four counts of bank fraud and making false statements to banks in a separate case on his personal banking. Prosecutors allege Lay obtained $75 million in loans from three banks and reneged on an agreement that he wouldn't use the money to buy margin stock. That case is expected to last two or three days, but Lake will not announce his verdict until after the jury in the conspiracy case announces its verdict.
Skilling and Lay are accused of lying to investors to hide the poor financial health of the company they grew into the seventh-largest in the United States. Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors, and Lay faces six counts of fraud and conspiracy. Both deny wrongdoing, claiming the only crime was the theft by former chief financial officer Andy Fastow, who's admitted to skimming millions from off-balance sheet partnerships that he operated. Skilling and Lay blame Enron's collapse on news of Fastow's theft, a loss of confidence by investors and banks following those revelations, predatory investors and weak market conditions.
A KPMG survey of 538 oil and gas executives indicates oil and gas companies will significantly boost upstream capital spending in the year ahead, even as they voice concern over the volatility of commodity prices and declining reserves. The survey shows that 67 percent believe that volatility in prices is bad for the industry, compared to 58 percent last year. Bill Kimble is with KPMG.
"The public believes that energy companies control the price of gas at the pump. They don't understand that there are futures markets and forward price curves, and they don't understand how the price of gas is set at the pumps. And you see this, Ed, when a large company like an Exxon releases earnings and its picked up in the media and everybody's talks about it and they don't understand that Exxon made decisions to drill based on $20 crude prices, and that they're $70 today."The number of respondents expressing concern over declining reserves is up to 88 percent, compared to 83 percent last year. And 69 percent said upstream capital spending would increase by more than ten percent in 2006, compared to just 20 percent responding the same way a year ago.
"And that is an issue, Ed, that we're gonna see in the media and that's probably going to be our next biggest issue, is 'okay, energy companies, if you make so much money, we want to see you turn around and spend it.' So I expected to see the answer would be pretty high that most of these companies were gonna say 'yes, we're gonna put a lot of this money back into the ground.'"KPMG will discuss the survey findings at its 4th annual Global Energy Conference set for May 23rd and 24th at the Intercontinental Hotel, which will feature a keynote address by former President George Bush.
Plans were announced today to build the nation's largest offshore wind farm in Texas. State Land Commissioner Jerry Patterson says a 40,000-acre complex of wind turbines atop 400-foot pylons will be built off Padre Island in the south Texas waters of the Gulf of Mexico. Houston-based Superior Renewable Energy would build the farm and pay the estimated $1 to $2 billion construction costs. Patterson says the complex would generate enough electricity to power 125,000 homes. But environmentalists say the promise of clean energy may not be worth the deaths of countless birds of rare species. Those birds migrate through the area each year to and from winter grounds in Mexico and Central America. The offshore farm is the second Patterson has announced in less than a year for the Texas coast, with 50 wind turbines planned off Galveston. But the one announced Thursday would be the largest in the nation, with up to 500 turbines looming off Texas ranch land spinning up to 500 megawatts of electricity.
ConocoPhillips chairman and CEO James Mulva said the Houston-based company is studying the latest tax increase announced by Venezuelan President Hugo Chavez. Mulva told reporters after the company's annual shareholder meeting in Houston that it's too early to tell how the new tax structure will affect ConocoPhillips. Chavez and Venezuela's energy minister Rafael Ramirez announced a new 33.3 percent tax increase last Monday--double the current rate. Meanwhile ConocoPhillips said is has been short-listed as a potential partner with Gazprom to develop liquified natural gas under the Barents Sea. And ConocoPhillips will increase its stake in Russia's Lukoil to 20 percent by the end of the year.
Whole Foods Market plans to open two more area stores by 2007, according to the Houston Chronicle. The Austin-based natural and organic foods supermarket will open a flagship store on Post Oak in the Galleria area, as well as a store in Sugar Land's Lake Pointe Town Center.
Consumers were spending last month, but most of the gain in retail sales reported for April came because of soaring gasoline prices. The Commerce Department says retail sales rose one-half of one percent. Economist Bob Brusca, with Fact and Opinion Economics, notes that excluding the impact of rising gas prices, retail sales would have been up only one-tenth of one percent. But Brusca says retail sales were robust in the first quarter, so they're at least holding up. It is expected, however, that the economy will slow in the coming months as consumers react to energy prices and rising interest rates. Brusca says the Federal Reserve might see this morning's number as a sign that it doesn't need to keep hiking interest rates. It boosted the benchmark rate by another quarter point yesterday.
There's little change reported in the number of Americans filing new claims for unemployment benefits. The Labor Department says first-time claims fell 1,000 to 324,000 last week. While that's less of a decline than private economists expected, the figure was said to be influenced by some one-time technical factors. At the same time, the four-week moving average of claims rose by 2,500 to more than 317,000. That's the highest level reported since late 2005.
Mortgage interest rates have moved in a mixed pattern over the past week, according to the latest survey from finance giant Freddie Mac. The average of 30-year fixed-rate mortgages stands at 6.58 percent, down from last week's average of 6.59 percent. For 15-year fixed, the average this week is 6.17 percent. That's down from last week's average of 6.22 percent. And for one-year treasury-indexed ARM's, the average is put at 6.22 percent. That's up from last week when it averaged 6.21 percent. Freddie Mac chief economist Frank Nothaft says there was little reaction to yesterday's Federal Reserve rate boost. He says next week could see some increases if inflation news is bad. Readings are due on the Producer Price Index and the Consumer Price Index.
The former president of Oklahoma City-based Chesapeake Energy is buying 46 percent of a Texas-based oil and gas company. Tom Ward will pay $500 million for the stake in Amarillo-based Riata Energy and will become chairman and chief executive officer. He says Riata's headquarters and about 100 jobs will probably be moved to Oklahoma City by this fall. Riata is an oil and natural gas exploration and production company with properties in Texas, Colorado and Oklahoma. The company has about 1,000 employees, most working in the oil fields of west Texas and Colorado. Current Riata chairman and CEO Malone Mitchell III will stay on as company president, chief operating officer and director. Ward was a co-founder of Chesapeake where he resigned as president and chief operating officer in February.
J.C. Penney said today its first-quarter profit rose 22 percent from last year's comparable first quarter. The Plano-based retail giant credits cost-cutting moves with helping it overcome a modest two-and-a-half percent increase in revenue. It also raised its earnings outlook for the year. Penney says it earned $210 million for the three months ended April 29th. Penney reported revenue of $4.22 billion and its 12th straight quarter of increasing same-store sales.