The defense for former Enron chairman Kenneth Lay and chief executive Jeffrey Skilling began presenting its case this week, calling into question the sources of feted whistleblower Sherron Watkins and probing -- in excruciating detail - the legal procedures in place at the failed energy giant.

It was the 10th week in the government's fraud and conspiracy trial against the two men. Skilling was expected to take the stand himself before the close of the week. Meanwhile, Lay's lead lawyer, Michael Ramsey, sat out the first week of the defense's testimony after having surgery to clean out a clogged artery. He should be back in the courtroom next week.

One of the week's more prominent witnesses was Max Hendrick, a lawyer with big-time Texas firm Vinson & Elkins. Hendrick investigated claims by former Enron insider Sherron Watkins that the company was fudging its accounting to hide serious losses. He testified that his investigation of the matter was not a whitewash, and revealed that much of what Watkins knew was based on office gossip, though her memo laid out some very specific concerns about Enron's books.

Hendrick also acknowledged that Vinson & Elkins had been involved in some of the very same transactions it was asked to investigate, and earned somewhere between $35 million and $40 million a year in fees from Enron. In fact, Hendrick said that he remains very close to James Derrick, former general counsel for Enron, and that the two men are considering starting a firm together.

Derrick testified about the ins and the outs of the legal checks Enron had in place, talking in detail about the insistence of Skilling that a rigorous set of controls be in place to detect risks in transactions.Joannie Williamson, a former administrative assistant to both Lay and Skilling, opened the case for the defense, testifying about both men's good character. Employees from Enron's retail energy and broadband units followed her on the stand.

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