February 19, 2004
Skilling busted

Looks like the federal prosecutors have given me a birthday present.

Jeff Skilling, the ex-CEO credited with cultivating the culture that led to Enron's burgeoning success and its stunning crash, surrendered to the FBI in Houston early today.

Accompanied by a gaggle of high-powered attorneys including Bruce Hiler of Washington and Dan Petrocelli of Los Angeles, the tieless former executive arrived at the FBI's local headquarters just before 7 a.m. and silently ran a gantlet of television cameras. Asked by reporters how his client was doing, Petrocelli replied, "under the circumstances extremely well."

Minutes later, FBI agents drove their handcuffed suspect to Houston's federal courthouse downtown, where he is scheduled to appear before U.S. Magistrate Judge Frances Stacy as early as 9 a.m. to hear his charges, arrange for bail and enter his plea. As cameras flashed and a news chopper hovered overhead, FBI agents escorted the once-powerful businessman in through the backdoor of the courthouse.

Sources told the Chronicle that Skilling, 50, was named in a sealed indictment on Wednesday, making him the top Enron executive to be accused of a crime in the trading giant's downfall. The specific charges against Skilling will not be revealed until the indictment is unsealed this morning. Lawyers who are close to the case expect the charges to accuse Skilling of conspiring with other executives in a series of schemes to manipulate earnings and fool investors about the health of Enron.

Yes, they said handcuffed. Isn't this a lovely sight?

We'll find out later just what the indictment is about, and where the case goes from here. And just because I know you're wondering:

The only Enron corporate kingpin above Skilling was ex-board Chairman Ken Lay, who has not been charged. Prosecutors are still investigating Lay.

It's been a good day already, hasn't it?

UPDATE: Skilling is charged with 35 counts of insider trading, fraud, and conspiracy, with seven more counts against Rick Causey. You can see the indictments here (PDF). Skilling has pled not guilty, posted $5 million bond, and passed a lie detector test (PDF). (Awfully nice of the Chron to host that, eh?) His next court appearance, which will be for the purpose of scheduling future court appearances, is March 11. Let the show begin!

UPDATE: I had originally said that all the counts in the indictments that were unsealed today were against Skilling, but that's not correct - I'd misread what was in the story. I've fixed the text to reflect that. Thanks to Greg V for the catch.

Posted by Charles Kuffner on February 19, 2004 to Enronarama | TrackBack

Happy Birthday to Chuck
Happy Birthday to Chuck
Jeff Skilling's been busted
For inmates to f-

Posted by: Laurence Simon on February 19, 2004 8:58 AM

Company executives see nothing wrong with stealing and deceiving their emplowyees, investors and customers, because they consider themselves ubermenschen and the rest of the people as animals. They believe in the Nietzsche phylosphy that there are two kinds of humans. Opressors and the oppressed. They feel it is the duty of the "losers" to serve them. It's like a farmer owns his cattle. He can take the flesh and hide of his animals and do with them whatever he likes. The society sees nothing wrong with this. Company executives see themselves as the farmers. They own the cattle, the rest of the people and can do with them and their properties as they like.

Posted by: Ricky Vandal on February 19, 2004 9:10 AM

I've been supportive of the Enron prosecutions up until this point. This may be overreaching by the government.

My understanding of the Enron case is basically the result of reading the Powers Report in its entirety. Now I understand that Skilling was not cooperative with the Powers investigation, and he was objectively an ass in his Congressional testimony. But neither of those are crimes.

What did Skilling do while employed by Enron and what were his motivations? If I were a juror in Skilling's trial, I would need to know the answer to those questions. Skilling seems particularly adept at not leaving his fingerprints on any of the SPEs. Skilling did not financially gain from the SPEs. Yes, he benefitted from the increasing stock price, but this had to be peanuts compared to the windfall Fastow reaped.

Skilling would like me on his jury because I would want evidence he committed a crime. Skilling's lawyers would kick me off because I'm too close to his industry and have a better opportunity to understand what Enron did with the SPEs.

I'd be willing to nail Skilling and Lay for the illegal sales of Enron stock. But proving beyond a reasonable doubt that either conspired to enrich others through the SPEs, thus contributing to the collapse of Enron, is orders of magnitude more difficult. Furthermore, insider trading is a far lesser crime than the fraud that brought Enron down.

Perhaps I'll learn more when I read the indictment, but I simply can't envision what criminal fraudulent acts the government can make stick to Skilling. If Skilling is indeed guilty, maybe the government can get a plea.

Posted by: Greg V. on February 19, 2004 10:03 AM

Perhaps I'll learn more when I read the indictment, but I simply can't envision what criminal fraudulent acts the government can make stick to Skilling. If Skilling is indeed guilty, maybe the government can get a plea.

I feel pretty confident in saying that Skilling will not plead out to anything prior to a trial. We'll know more about the government's case soon enough, but I'll bet Fastow's testimony will be a big part of it.

Posted by: Charles Kuffner on February 19, 2004 10:17 AM

The meat and potatoes of the indictment begins on page 16 with discussion of the SPEs. There is preciously little evidence in the indictment to support Skillings alleged role and the accusations against him. I have never seen such evidence, so I would have to concur with Kuff's speculation that the evidence is Fastow's testimony.

I believe Fastow's role was ground zero in the Enron collapse. The government had him dead to rights. A trial could have netted Fastow 30 years. I will be extremely critical of the government if they traded away 20 years of prison for Fastow in the hopes of getting Skilling and end up getting nothing on Skilling.

Posted by: Greg V. on February 19, 2004 11:39 AM

Please be aware that the document referenced above is *not* the indictment, but a civil case initiated by the SEC to disgorge assets Skilling allegedly received through the fraud.

Posted by: Greg V. on February 19, 2004 11:45 AM

For the record, Skilling is only charged with 40 counts. You must have mistaken two counts that were against Causey alone to be against both defendents.

Posted by: Greg V. on February 19, 2004 5:31 PM

I found five more counts against Causey alone. Therefore, only 35 name Skilling. I think I've scanned the indictment closely enough that that won't change.

Posted by: Greg V. on February 19, 2004 5:54 PM

Thanks for the catch. I've fixed the text.

Posted by: Charles Kuffner on February 19, 2004 5:58 PM

The Chronicle was definitely not a model of clarity in this matter. The Chronicle stated that it was a 42-count indictment. While technically correct, it can easily mislead a reader.

The AP, however, doesn't have that wiggle room. The AP writer wrote his story without reading the indictment. Furthermore, the headline claims 42 counts and the story claims 40 counts. The last two counts of the indictment were against Causey alone. Those were easy to catch. The other five were early in the body of the indictment.

Posted by: Greg V. on February 19, 2004 6:09 PM

When I saw the announcement on CNN in my hotel room in London, I thought to myself, "I know Chuck is smiling right about now."

Posted by: William Hughes on February 20, 2004 5:06 AM

I know, I know... It is very satisfying to see Jeff Skilling in 'cuffs. It's fun to hear that his accounts have been frozen. But it is also scary to consider the implications of what they are doing to him... and how they're doing it. There is no longer a balanced playing field. The government and its prosecutors, in their lust to win, will stop at nothing to get that n otch in its belt. They see nothing wrong with literaly crippling a defendant and making it almost impossible to mount a good defense. The Feds, in their effort to win, have no problem convicting an innocent person and they will do just that; they would much rather convict an innocent than no one at all.

Yes, it IS satisfying watching these guys go down. But we really should make certain that we truly are convicting guilty parties and not simply satisfying a blood lust for imagined justice.. Remember, there are a lot of criminals out there.

Posted by: Jim Snyder on May 7, 2004 10:56 PM

Andy Fastow played left field for both the Milwaukee Braves and Chicago Cubs before going to Enron. Few people know this.

Posted by: Ike on June 28, 2005 6:26 PM