Ken Lay, testifying yesterday and especially today at the Enron trial, has been attacking the WSJ pretty harshly. The Journal forms one part of Lay’s new axis-of-evil (as reported at the stupendous and invaluable Houston Chron trial blog):
“Enron’s failure was caused by a run on the bank,” Lay said, adding, “It all begins with the deceit of Andy Fastow and probably not more than one or two other people.”
Fastow, the former chief executive of Enron has admitted to running a sham at Enron where he profited personally to the tune of millions of dollars.
Short sellers, Lay continued, also contributed. He then blamed the Wall Street Journal for articles that were critical of Enron in 2001, the year Enron filed for bankruptcy.
Here’s the thing. Obviously, this is a prepared trial strategy. Fastow, short-sellers, and the media killed Enron, not Jeff or me. Repeat. But I wonder whether the emotional valence that jurors normally might get from attacks on “the media” are as present when the media in question is the WSJ, a highly respected publication that to me smells like money and Republicans. I can understand attacking the Times – even saying the word connotes liberal elitism in some quarters. But is the Journal the same? Maybe to jurors from Texas it is. And, notably, I’m not nearly as well-positioned on this particular issue as the defenses’ jury consultant, who might have blessed this strategy after subjecting it to focus-grouping.
Still, as I just told a reporter, this feels risky. Can’t the prosecution, on cross, now lead Lay through the reporting and ask what was wrong with what was said? To the extent that the reporting was mostly accurate, and the market reacted to it, doesn’t that mean that this wasn’t an irrational market run, but instead a reaction by the market to a perceived failure of those internal control mechanisms which Enron had been known for?
[Update: The article resulting in part from the conversation with the reporter I mentioned above is now up on the Business Week Online’s website here.]