I used to believe the prosecution's case a slam dunk, but I have to modify that somewhat. With Skilling's choice of Daniel Petrocelli as attorney, and with Petrocelli's announced strategy, there is some chance that a jury will find Skilling not guilty.

Not that I believe either Lay or Skilling innocent. They directly or indirectly through their subordinates caused many people to lose money in their pensions and their investments, while Lay grew richer by over $200 million and Skilling by over $100 million. But, there exists a possibility that the jury would let them go.

Daniel Petrocelli, L.A.-based and primarily a civil lawyer, has accomplished a lot during his tenure as a lawyer. Perhaps his most memorable triumph occurred when he won a judgment against O.J. Simpson for wrongful death. His passion to represent his clients well, his attention to detail, his ability to explain complicated matters in simple words, and his skill in connecting with a jury will serve him well in this case. While Petrocelli has no prior experience with criminal cases, I suspect he will do as well as any lawyer could.

Petrocelli has supplied an outline of the defense: the transactions were legal, Skilling obtained the advice of professionals for the more complicated transactions, and these types of transactions are routine and legitimate. These strategies are far more believable than the strategy taken by other top managers in recent accounting scandals that they didn't have a clue what was going on. Timothy Rigas of Adelphia and Dennis Kozlowski of Tyco, for example, tried that defense and it didn't work for them.

The first strategy, that the transactions were legal and accounted for properly, is a great first step, because the irony of Enron is that in fact much of what it did was legal. Even the hiding of debt from the balance sheet was proper in a number of instances because the Financial Accounting Standards Board and Securities and Exchange Commission allowed it. And, for the most part, they still do! On the other hand, some transactions were clearly illegal, such as the pre-paid transactions calling for future delivery of oil and natural gas. Enron officials employed these transactions with J.P. Morgan Chase and Citicorp to look like financing transactions when in reality they simply sent cash on a merry-go-round that ended where it started. These transactions are sham transactions, designed to achieve a certain accounting but have no real business purpose.

I like Petrocelli's second strategy of blaming it on the professionals, and this one might stick. The essence of this approach is to state that Skilling asked accountants and lawyers for advice for the proposed transactions; once he obtained their approval, Skilling felt OK to proceed; if anyone is guilty, it is the professionals who should have known the illegality of these proceedings but nevertheless gave their approval. With the demise of Arthur Andersen, the jury might well agree with the defense. (As an aside, I still don't know how Enron's corporate counsel Vinson and Elkins can escape culpability. They knew, or should have known, what Enron's management was up to.) On the other hand, I think Skilling and Lay knew how to dangle millions of dollars of potential revenues in the face of Arthur Andersen, Citicorp, J.P. Morgan Chase, and Vinson and Elkins to obtain the consents they coveted. Skilling and Lay were clever to cover their tricks with such "approvals."

Petrocelli's third stratagem is to claim that these types of transactions are routine and legitimate. I like this tack as well because transactions with derivatives and the use of special-purpose entities are indeed common for large business enterprises as a means to manage risk. But this is not true for all of Enron's business deals, such as the oil prepay already mentioned. That business deal did not attempt to manage risk; instead, it was an effort to disguise economic reality from its auditors and keep hundreds of millions of dollars of debt off the balance sheet. Unfortunately for us, their ploy worked.

These strategies by Petrocelli are interesting because they all contain an element of truth, even though they all contain germs of untruths as well. That probably is the best that Petrocelli can do.

For the investing public, these strategies are more alarming than interesting, since they might convince a jury to release Skilling and Lay. We know that they are not as innocent as they are trying to appear because they set an unethical tone at the top of Enron, they knew or should have known about the major transactions of the firm that involved tens or millions of dollars, and they aggressively distorted earnings and liabilities in an attempt to deceive investors about Enron's economic health.

The story of Richard Scrushy reminds us not to be complacent about this trial. Remember that Scrushy engineered the accounting lies at HealthSouth but somehow convinced a jury that he was not guilty. Skilling and Lay are trying to do the same in this case. Let's hope prosecutors are up to the challenge. Our pocketbooks need them to succeed.

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J. EDWARD KETZ is accounting professor at The Pennsylvania State University. Dr. Ketz's teaching and research interests focus on financial accounting, accounting information systems, and accounting ethics. He is the author of Hidden Financial Risk, which explores the causes of recent accounting scandals. He also has edited Accounting Ethics, a four-volume set that explores ethical thought in accounting since the Great Depression and across several countries.