KENNETH LAY, the former chairman of Enron, and Jeff Skilling, his former chief executive, left a court in Houston smiling and waving last night after the judge in the fraud case against them ordered several of the charges to be dropped.

Judge Sim Lake ordered three of the charges against Mr Skilling and one against Mr Lay to be dropped because US government prosecutors had failed to provide sufficient evidence to uphold them in 32 days of testimony.

The decision was seen as a big victory for the pair, even though Mr Skilling still faces twenty-eight counts and Mr Lay six.

The judge said that the charges against Mr Skilling that were dropped related to allegations of securities fraud and of lying to auditors about events in the first quarter of 2000. Prosecutors did not present any evidence that dealt with that period.

The dropped charge of securities fraud against Mr Lay was linked to a conference call with investors and analysts that took place in November 2001.

The order to drop the charges came after the US Government rested its prosecution against the pair, which included evidence from 22 witnesses, most of whom were former Enron workers.

While the pair still face decades in jail if found guilty of the remaining charges against them, the decision to drop some of the allegations gives their lawyers a powerful new line of argument. It is expected that lawyers acting for Mr Lay and Mr Skilling will seize upon the dropped charges when the defence opens next Monday morning as evidence that US government prosecutors filed trumped-up charges as part of an ongoing vendetta against the senior Enron executives. Messrs Lay and Skilling have maintained their innocence since the trial in Texas began last month.

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