Jeffrey Skilling

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Jeffrey K. Skilling
Born November 25, 1953
Pittsburgh, Pennsylvania, U.S.
Charge(s) conspiracy, securities fraud, false statement, insider trading
Penalty sentenced to 24 years and 4 months, fined $45 million USD
Status Incarcerated
Occupation Former CEO, Enron Corp.
Spouse Rebecca Carter

Jeffrey Keith "Jeff" Skilling (born November 25, 1953) was the CEO of Enron Corporation in 2001. He was convicted in 2006 of multiple federal felony charges relating to Enron's financial collapse, and is currently serving a 24-year, 4-month prison sentence at the Federal Correctional Institution, Waseca in Waseca, Minnesota.

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[edit] Personal life

Skilling was born in Pittsburgh, Pennsylvania, the second of four children. He grew up in New Jersey and Aurora, Illinois. When he was 16, he was the chief production director for WLXT Channel 60, a UHF television station in Aurora.

After graduating from West Aurora High School (where he graduated number 16 in a class of 600), Skilling received his B.S. in applied science at Southern Methodist University (1975), where he was a member of Beta Theta Pi (Kenneth Lay was also a member of the fraternity). During his admissions interview for Harvard Business School, he was asked if he was smart, to which he famously replied, "I'm fucking smart."[1] Skilling earned his M.B.A. from Harvard Business School in 1979, graduating in the top five percent of his class. He became a consultant at McKinsey & Company in the energy and chemical consulting practices. Skilling became one of the youngest partners in the history of McKinsey.[2]

Skilling has a daughter and two sons (ages 22, 20, and 16, at the time of his conviction) from his first marriage, which ended in divorce in 1997. In March 2002, he married Rebecca Carter, a former vice president for board communications and board secretary at Enron. Skilling is the younger brother of Tom Skilling, the chief meteorologist of WGN-TV (Channel 9) in Chicago, Illinois.

Skilling suffered a nervous breakdown on the streets of New York City in April 2004, during which he harassed several passersby and accused them of being undercover FBI agents. Police responding to the 911 calls found him uncooperative and concluded that he was emotionally disturbed and in need of emergency assistance.

Prior to his imprisonment he lived in the River Oaks section of Houston, Texas. [3]

[edit] Enron

As a consultant for McKinsey & Company, Skilling worked with Enron in 1987, helping the company create a forward market in natural gas. Skilling impressed Kenneth Lay in his capacity as a consultant, and was hired by Lay in 1990 as chairman and chief executive officer of Enron Finance Corp. In 1991, he became the chairman of Enron Gas Services Co., which was a result of the merger of Enron Gas Marketing and Enron Finance Corp. Skilling was named CEO/managing director of Enron Capital & Trade Resources, which was the subsidiary responsible for energy trading and marketing. He was promoted to president and chief operating officer (second only to Lay) of Enron in 1997, while remaining the head of Enron Capital & Trade Resources. In 1999, Enron launched EnronOnline, an Internet-based trading operation, which was used by virtually every energy company in the U.S.

Skilling began advocating a novel idea: the company didn't really need any "assets." By pushing the company's aggressive investment strategy, he helped make Enron the biggest wholesaler of gas and electricity, with $27 billion traded in a quarter. On February 12, 2001, Skilling was named CEO of Enron, receiving $132 million in a single year.

The firm's figures, however, had to be accepted at face value. Under Skilling, Enron adopted mark to market accounting, in which anticipated future profits from any deal were tabulated as if real today. Thus, Enron could record gains from what over time might turn out losses, as the company's fiscal health became secondary to manipulating its stock price on Wall Street during the Tech boom. But when a company's success is measured by agreeable financial statements emerging from a black box, a term Skilling himself admitted, actual balance sheets prove inconvenient. Indeed, Enron's unscrupulous actions were often gambles to keep the deception going and so push up the stock price, which was posted daily in the company elevator. An advancing number meant a continued infusion of investor capital on which debt-ridden Enron in large part subsisted. Its fall would collapse the house of cards.

Under pressure to maintain the illusion, Skilling began to behave strangely. In April 2001, he verbally attacked Wall Street Analyst and notorious short seller Richard Grubman[4], who requested for the third time the balance sheet with the earnings statement. Jeff Skilling had explained to Grubman three times (in three consecutive quarters) that Enron did not publish the two statements concurrently. When Grubman complained that Enron was the only company that could not release a balance sheet along with its earnings statements, Skilling replied "Well, thank you very much, we appreciate that . . . asshole." Though the comment was met with dismay and astonishment by press and public, it became an inside joke among many Enron employees, mocking Grubman for his perceived meddling rather than Skilling's lack of tact.[5]

Skilling greeted the California energy crisis with amusement, jokingly asking one meeting of Enron employees the difference between California and the Titanic ("At least when the Titanic went down, the lights were on").[6] Skilling later attributed the remark to frayed relations between Enron and California.[7] His employees, meanwhile, plotted to keep the price of energy high in California.[8]

Skilling unexpectedly resigned on August 14 of that year, citing personal reasons, and he soon sold large blocks of his shares in the corporation.[9] Then Enron chairman Kenneth Lay, who previously served as CEO for 15 years, returned as CEO until the company declared bankruptcy in December 2001. When brought in front of congressional committees, he stated that he had "no knowledge" of the complicated chain of scandal that would eventually result in Enron's bankruptcy.[10]

On March 28, 2001, PBS's Frontline interviewed Skilling, where he claimed Enron was one of "the good guys". [11]

[edit] Indictment and trial

Main article: Trial of Kenneth Lay and Jeffrey Skilling

Skilling was indicted on 35 counts of fraud, insider trading, and other crimes related to the collapse of Enron. He surrendered to the Federal Bureau of Investigation on February 19, 2004, and pleaded not guilty to all charges. The main reason for his arrest was his probable knowledge of the fraudulent transactions within Enron. About a month after quitting Enron, Skilling sold almost $60 million of his stake in the company (in blocks of 10,000 to 500,000 shares), leading to the prosecutors' allegation that he sold those shares with inside information of Enron's impending bankruptcy. Skilling's attorney is Daniel Petrocelli, the 52-year-old civil litigator who represented Ron Goldman's father against O.J. Simpson in civil suit. Skilling spent $40 million in preparation for the trial, at least $23 million of which going to his defense lawyers' retainer. Skilling's younger brother Mark is an attorney and assisted his legal team during the criminal trial.

The trial began on January 30, 2006 in Houston, despite repeated protests from defense attorneys calling for a change in venue on the grounds that "it was impossible to get a fair trial in Houston – the epicenter of Enron's collapse. Enron's bankruptcy, the biggest in U.S. history when it was filed in December 2001, cost 20,000 employees their jobs and many of them their life savings. Investors lost billions." When asked during trial in the street, Skilling admitted that industrial dominance and abuse constituates a global problem: "Oh yes, yes sure, it does." [2] On May 25, 2006, the jury found Skilling: [12]

  • guilty on one count of conspiracy
  • guilty on one count of insider trading
  • guilty on five counts of making false statements to auditors
  • guilty on twelve counts of securities fraud
  • not guilty on nine counts of insider trading

Skilling, known for his arrogance and harsh attitude, came off in a mostly positive light during the trial, though he did lose his temper on the witness stand.[13]

In a front page interview with The Wall Street Journal on 17 June 2006, Skilling claims, among other things, that: (1) he had been in a depression after the Enron bankruptcy and considered committing suicide, but that his indictment actually lifted his spirits and brought him out of his depression, (2) he states that the worst witness against him was himself, and (3) he says that he will be able to survive a long prison term - as long as he is given "something to do, something to accomplish" while in prison.

On October 23, 2006, Skilling was sentenced to 24 years and 4 months in prison, and fined $45 million. The case is currently under appeal. Skilling's request to remain free during the appeal was denied by Judge Patrick Higginbotham of the 5th U.S. Circuit Court of Appeals on December 12, 2006. In ordering Skilling's immediate imprisonment, the judge wrote, "Skilling raises no substantial question that is likely to result in the reversal of his convictions on all of the charged counts",[14] although the order also noted "serious frailties" in the convictions.

Skilling began his sentence on December 13, 2006,[15] at a low security federal prison in Waseca, Minnesota. According to the Federal Bureau of Prisons, he is scheduled for release on February 21, 2028, when he would be 74 years old.[16]

[edit] 2008 Events

Prior to the trial even beginning, attorneys for Skilling requested that the notes taken from FBI agents on the interviews with Andrew Fastow be turned over to the defense. Early after a judge ordered that the notes be turned over, a number of inconsistencies were discovered.[17]

On April 3 2008, Skilling's defense attorney, Daniel M. Petrocelli, argued with government prosecutors that Skilling's trial and the conviction itself was based on honest services theory which he said did not apply to Jeffrey Skilling. This argument was based on the idea that, even though Skilling committed illegal financial maneuvers, he did so in order to save the company and did not profit from it.[18] This in turn could lead to all of his convictions being overturned; however, the chances are very narrow[19].

Experts believe Skilling's best chance lies in citing a parallel appeals court decision two years ago that threw out guilty verdicts on three Merrill Lynch bankers accused of helping Enron to inflate profits.[19]

[edit] Media appearance

[edit] References

  1. ^ "Enron: the government unveils its morality tale," Stevedenning.com, 2004-02-20, Retrieved on 2007-06-27.
  2. ^ "Enron: the government unveils its morality tale," Stevedenning.com, 2004-02-20, Retrieved on 2008-05-19.
  3. ^ "Ex-Enron Chief Is Sentenced to 24 Years," The New York Times, October 23, 2006
  4. ^ "Skilling comes out swinging", Money/CNN (April 10, 2006). 
  5. ^ Bethany McLean and Peter Elkind , Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, 2003, ISBN 1591840082
  6. ^ Barrionuevo, Alexei., "Enron trial focuses on character", New York Times via IHT, 2006-04-21, Retrieved on 2007-06-27.
  7. ^ "Skilling May Still Have $66 Million Left From Stock Sales", CNN live event/special, Aired 2002-02-26, Retrieved on 2007-06-27.
  8. ^ "Enron Traders Caught On Tape". CBS News. Retrieved on 2006-12-10.
  9. ^ OPPEL JR., RICHARD A. (2001-12-22), "Former Head of Enron Denies Wrongdoing", New York Times: Late Edition - Final, Section C, Page 1, Column 2 
  10. ^ "Prepared Testimony of Jeffrey K. Skilling", House Committee on Energy and Commerce, Subcommittee on Oversight and Investigations via findlaw.com, 2002-02-07, Retrieved on 2007-06-27.
  11. ^ "Blackout Program #1916 Transcript". PBS. Retrieved on 2006-05-27.
  12. ^ "Enron Chiefs Guilty of Fraud and Conspiracy". New York Times. Retrieved on 2006-05-27.
  13. ^ "Lay and Skilling's day of reckoning". CNN. Retrieved on 2006-05-27.
  14. ^ Stinebaker, Joe., AP, "Skilling Expected to Go to Prison Today", ABCnews.com, 2006-12-13, Retrieved on 2007-06-27
  15. ^ "Skilling to report to prison". Guardian. Retrieved on 2006-12-13.
  16. ^ Federal Bureau of Prisons - Jeffrey Skilling search
  17. ^ Skilling Appeal Argues Secret FBI ‘Sledgehammer’ Notes Require Reversal | ABA Journal - Law News Now
  18. ^ [1][dead link]
  19. ^ a b Jailed boss seeks to reverse Enron verdict | Business | The Guardian

[edit] External links

[edit] Article by Jeffrey Skilling

[edit] Other Links

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