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Enron, 20 years later


It was hailed as the most innovative company in America, a hometown energy giant whose name graced one of Houston’s skyscrapers and the Astros ballpark.

Enron was founded in 1985 as a natural gas pipeline company and became one of the largest energy and commodities trading companies. Its incredible growth turned the company into the darling of Wall Street, an “it stock” that stood out even among rising tech giants during the height of the dot-com bubble. At its zenith, the self-proclaimed “world’s leading energy company” was the nation’s seventh largest corporation valued at almost $70 billion.

But it was a world of make-believe. On Sunday, Dec. 2, 2001, Enron filed what was at the time the largest bankruptcy in U.S. history after it became apparent that its gangbuster growth was based on accounting gimmicks and a web of lies. Enron’s 20,000 employees lost their jobs and $1.2 billion in retirement funds tied up in company stock; its retirees saw $2 billion of their pension funds evaporate.

Nancy Rapoport, who served as the dean of the University of Houston Law Center at the time of Enron’s collapse and wrote several books on the Enron scandal, recalled the company’s swift and stunning fall from grace.

“Before it blew up, we thought Enron was this amazing company and donor to the city of Houston, the arts and higher education,” said Rapoport, now the law school dean at the University of Nevada Las Vegas. “So it was a shock to all of us when we realized that Enron was so different from what we thought.”

Twenty years later, the shock of Enron’s downfall has long faded, but it remains a cautionary tale of corporate hubris and fraud. Its lessons still carry weight, especially as Theranos founder and CEO Elizabeth Holmes stands trial, accused of defrauding investors and patients about the viability and accuracy of its medical testing technology.

Enron’s Chairman Kenneth Lay and CEO Jeff Skilling convinced the company’s board, Wall Street analysts and investment banks of the energy company’s supposed success. Similarly, Holmes was able to sway investors and Theranos’ esteemed board including former Secretaries of State Henry Kissinger and George Shultz and Gen. George Mattis that the company could conduct hundreds of medical tests from a single drop of blood.

Rapoport said the lessons of Enron bear repeating. Corporate boards must ward against groupthink and company executives should heed Enron’s advertising tag: Ask why.

“If I had to pick a single lesson from Enron, it would be about being wary of charismatic leaders because they can charm and bully their boards into agreeing to things that in the light of day these sophisticated board members would never agree to,” Rapoport said. “Look at the board of Theranos. Like the board of Enron, you had super famous, super intelligent, super well-educated people, but they were captivated by charismatic leaders who broke down their defenses in terms of common sense.”

It’s a good trip down memory lane, so read the rest. I knew at least four people – two friends, one former co-worker who left for a job there, and a member of my extended family – who worked for Enron circa 2001. My wife later worked for Chevron, in what used to be the Enron building. The collapse of Enron began less than three months after 9/11, so to say the least we were in some very turbulent times, and there were all kinds of hot takes about how this was a massive, possibly fatal blow to Houston’s economic fortunes. All things considered, I think we’ve done all right since then. But it sure was a thing at the time.

Who wants to invest in Jeff Skilling?

Here’s your chance.

Former Enron CEO Jeffrey Skilling, released last year after a 14-year prison term stemming from the energy firm’s collapse, is raising funds to launch a digital marketplace catering to professional oil and gas investors, according to four people familiar with the matter.

The venture, called Veld LLC, plans to profit by charging a fee for marketing stakes in operating oil and gas wells, one of the people said, and will offer analytical data to investors interested in the well stakes.

Investors can acquire holdings in between one and 10 wells, which the presentation described as “pods,” and will be sold to the investors as high-yield investments, the people familiar with the business pitch said on the condition of anonymity.

It was not clear how much Skilling is seeking to raise to launch Veld. He has been holding meetings with energy investment firms in recent months, the people said.

Skilling has been working nearly two years on the project, which was first incorporated by his wife in Texas in late 2018 and merged with a Delaware company with the same name the following year. The business is expected to be up and running by year-end, one of the people said.

However, at least one investor who listened to his presentation was reluctant to invest in the venture because of his Enron past, that person said.

Well, the terms of his release said he had to get a job. What could possibly go wrong?

Skilling settles longstanding lawsuit

Old business.

Less than two months after leaving prison, former Enron Chief Executive Officer Jeffrey Skilling settled a 17-year-old lawsuit claiming he helped defraud a Canadian investment firm with the promotion of the defunct energy company’s securities as it headed toward collapse.

SilverCreek Management Inc., a Toronto-based investment firm that bought Enron-issued bonds in October 2001, sued in Manhattan federal court, accusing the company’s accountants, banks, directors, law firms and underwriters of helping facilitate the oil trader’s demise.

SilverCreek had earlier reached settlements with all defendants except Skilling and former Enron Chief Accounting Officer Richard Causey. In a letter last month, it said it had an agreement-in-principle with Causey. And on Friday, SilverCreek and Skilling told U.S. District Judge J. Paul Oetken that they also reached a settlement-in-principle. The terms weren’t disclosed.

Amazingly, I don’t have any old posts to refer to for background information. There definitely lawsuits in the offing as Skilling was first sent to jail, but this one predates that event by several years, so who knows. I do wonder if the settlement offer includes payment in cryptocurrency. That would just be fitting, don’t you think?

Enron’s other legacy

The company is long gone, its leaders have faded into history, but Enron’s emails are forever.

During its 2002 investigation of the bankruptcy of Enron, the US Federal Energy Regulatory Commission (FERC) checked the energy company’s emails: more than 600,000 messages sent from 158 employees, mostly senior management.

The collected missives—a mixture of high-level business negotiations, discussions between managers and their spouses about holiday plans, and many, many requests to be unsubscribed from mailing lists—formed part of the evidence that led FERC to conclude the company had in fact engaged in illegal price manipulation, and the US Department of Justice to press criminal charges against former CEOs Kenneth Lay and Jeff Skilling.

After its investigation, the commission determined the emails were in the public’s interest and dumped them on a website.

Though ostensibly for research and academic use, the trove was so messy and unwieldy that it was effectively useless—until an MIT computer science professor named Leslie Kaelbling bought the data for $10,000 and handed it over to colleagues who cleaned it up, took out duplicates, organized the remaining 200,000 messages into folders, and released it into the world.

“What was weird was that the data itself was in the public domain, but we still had to pay a company for the service of giving it to us on a disk,” Kaelbling said. “After that, we just gave it away for free.”

If Enron went down for defrauding the public, the company has unwittingly repaid a small part of its debt to society through the gift of its emails.

The Enron Corpus, as the collection is known, has been used in more than 100 projects since that research team presented it to the public in 2004. As the biggest public collection of natural written language in an organizational setting, it has been used to study everything from statistics to artificial intelligence to email attachment habits. An online art project by two Brooklyn artists will send every single one of the emails to your personal inbox, a process which (depending on the frequency of emails you request) will take anywhere from seven days to seven years.

Making all this data public has had the benefit of allowing all kinds of research into corporate behavior that just wouldn’t be possible without it. The downside is that as these emails are used as training data for artificial intelligence projects – the Enron Corpus was the training set used for the prototype of Gmail’s “smart compose” feature, though not its final version – they represent a small and atypical slice of society. That’s an entry point for bias to creep into algorithms and other automated processes. I’m sure there’s plenty more to be done with and learned from the Enron Corpus. We just shouldn’t consider it to be the be-all and end-all of how people communicate.

(I found this story while doing a Google news search on Jeff Skilling following the news of his release. So credit the Enron Corpus for finding a way to spread the word about itself, too.)

Skilling officially sprung

There he goes.

Jeffrey K. Skilling, the former Enron CEO who spent the past 12 years in prison for his role in masterminding one of most notorious corporate fraud cases in history, was released from federal custody on Thursday, the Bureau of Prisons said.

In August, Skilling was released to a halfway house at an undisclosed location from a minimum security federal prison camp in Alabama.

Enron’s collapse cost investors billions of dollars and wiped out the retirement savings and jobs of thousands of employees. Skilling, 65, was convicted of 12 counts of securities fraud, five counts of making false statements to auditors, one count of insider trading and one count of conspiracy in 2006 for his role in hiding debt and orchestrating a web of financial fraud that ended in the Houston company’s bankruptcy.

He was sentenced to 24 years in prison and fined $45 million, the harshest sentence of any former Enron executive. Six years ago, Skilling’s sentence was reduced to 14 years by U.S. District Judge Sim Lake.

See here for more on Skilling’s release to the halfway house last year. One of the conditions of his release then was that he had to get a job, but I’m not able to find any information about what that might have been. If he eventually winds up on the speaking circuit like Andy Fastow, I won’t be surprised. In the meantime, I don’t know what there is to make of this news. He did his time and now he’s out, and we’re all that much older. I wonder how long it will be before we see his name in the news again.

Jeff Skilling released from prison

It’s the end of an era.

Jeffrey K. Skilling, the former Enron CEO sentenced to a long prison term for his role in one of most notorious corporate fraud cases in history, was recently released from a minimum security federal prison camp in Alabama to a halfway house at an undisclosed location.

Enron’s spectacular collapse cost investors billions of dollars and wiped out the retirement savings — not to mention the jobs — of thousands of employees. Skilling, 64, was convicted of 12 counts of securities fraud, five counts of making false statements to auditors, one count of insider trading and one count of conspiracy in 2006 for his role in hiding debt and orchestrating a web of financial fraud that ended in the Houston company’s bankruptcy.

He was sentenced to 24 years in prison and fined $45 million, the harshest sentence of any former Enron executive. Five years ago, Skilling’s sentence was reduced to 14 years by U.S. District Judge Sim Lake. He is scheduled to be released Feb. 21, 2018, according to the Bureau of Prisons.

Federal prisoners are often released from prison several months early to a halfway house, a highly restricted dormitory-like setting that helps inmates ease back into society. They must maintain curfews, find work and stay out of trouble. A. Kelley, assistant residential re-entry manager for the Bureau of Prisons in San Antonio, said the bureau would not say where Skilling is living.

Been while since there was Enron news. The last post I have is this Andy Fastow update from 2015, and before that this story about Skilling’s sentence being reduced from 2013. Apparently, as part of the early release (I presume they mean 2019 in the story), Skilling has to get a job. One can only imagine the possibilities. I don’t have anything else to add here, just that this is the end of an era of sorts.

Andy Fastow’s second act

I don’t know what to make of this.

Andrew Fastow

“I’m always surprised when people ask me to speak about business ethics; it’s like getting Kim Kardashian to speak about chastity.”

These words, from the lips of Andrew Fastow, elicit generous laughs from a roomful of bankers and attorneys at Dallas’s Belo Mansion this past September. Over the course of the next hour, he will give a talk on the subject of corporate ethics entitled “Rules Vs. Principles” to the local chapter of the Turnaround Management Association, a talk regularly punctuated with lines like the above, lines designed to show he is fully aware of the evening’s irony. Fastow is bluntly, emphatically apologetic throughout, regularly returning to a mantra he seems to genuinely embrace: “I went to jail because I was guilty.”

He is in his early 50s but looks younger, especially for a man who spent five years in federal prison following his indictment by a federal grand jury—and subsequent guilty plea—on 78 counts of money laundering, fraud, and conspiracy. He looks handsome in an Aaron Sorkin sort of way, charming and charismatic, brilliant and quick-witted. Watching Fastow in Dallas, it’s easy to see how he became Enron’s financial wunderkind, CFO of what would become the seventh-largest company in America, at 36.

And then, a month and a half after his Dallas engagement, his nationwide redemption tour makes a stop in Houston.

It is a cool, rainy night downtown, and the ballroom at the Magnolia Hotel is as packed as Belo’s was. The speaker and his talk are the same, and the resemblance between Houston’s well-groomed, besuited TMA members and Dallas’s is uncanny. Still, something seems different. We notice that Fastow doesn’t seem to have gotten a haircut in the intervening weeks. We notice that he appears a bit disheveled and fidgety as he ascends to the podium.

“This is very uncomfortable for me,” he begins after a short, pensive silence. “Every time I do one of these presentations it’s uncomfortable, but especially so in Houston. I apologize ahead of time if I seem nervous, but I am.” A few minutes later, he gains enough footing to address the scandal head-on: “It embarrassed Houston tremendously. The impact on Houston was substantial. I wake up to this every day. I am tremendously embarrassed, ashamed, and most importantly, I’m very sorry.”

Many people, even former Enron employees, don’t seem to realize that Fastow is back. Released from a Louisiana federal prison camp in 2011, he returned to the Bayou City, his wife, Lea, and the couple’s two sons. Lea spent only one year in prison for her small role in the Enron financial scandal—she pled guilty to income tax fraud—while Andrew served a year for nearly every one he spent as CFO, every year he spent concocting new special-purpose entities to mask Enron’s enormous debts and support the off–balance sheet financing and mark-to-market accounting schemes that finally brought the company down. Enron presaged later scandals at Wall Street’s “too big to fail” banks and ushered in the Sarbanes-Oxley act, aimed at preventing such failures and frauds from disrupting the American economy in the future.

Fastow has apparently been giving lectures on business ethics for awhile now. I’d have gone with a Willie Sutton analogy rather than a Kim Kardashian one, but props to him for keeping up with pop culture. As I said, I don’t really know what to think about this. He’s done his time, and he’s hardly living large these days. I can’t honestly say that I wish him well, but I have no reason at this point to wish him ill. I hope he can do something good with the rest of his life.

Skilling gets resentenced

He got the minimum of what he could have gotten.

The long-running battle between federal prosecutors and former Enron CEO Jeff Skilling formally came to an end Friday when U.S. District Judge Sim Lake signed off on a negotiated sentence agreement that will end Skilling’s incarceration in about four years.

In agreeing to the minimum sentence within the range of 168 and 210 months, Lake said the interest of justice would not be served by having Skilling serve longer. He noted that the architect of Enron’s rise from an obscure pipeline company to an innovative and diverse energy giant will end up spending more time in prison than anyone else connected to the company’s stunning 2001 collapse into bankruptcy.

“This is not an easy decision to make,” Lake said about the number of months to choose.

“The two most significant factors are the need for the sentence to deter others from similar action and to reflect the seriousness of the offense — 168 months adequately reflects both concerns. The court is not persuaded a longer sentence is necessary.”

Appellate reversals of part of the government’s case against Skilling, as well as one of grounds used by Lake in setting the original sentence of 24 years, meant that Skilling already was entitled to a reduced sentence. The agreement knocked about 20 months off the lower end of the revised sentence range, in exchange for which Skilling agreed to forgo any further appeals.

That finality, which brings the Enron saga to a close, frees up about $40 million in Skilling’s assets to be divided among investors, protects the government from the possibility of more appeals reversals and assures Skilling of at least the possibility of having an extended period of time as a free man before he dies.

See here and here for the background. 168 months is 14 years, but he’s been in the clink for seven already, so as noted in my previous post he’d be freed in 2020. All things considered, a reasonable deal for everyone involved, though some former Enron workers are not happy about it.

Skilling’s sentence shortened

Jeffrey Skilling’s day in court will come to an end.

Responding to a federal appeals court mandate, lawyers for former Enron CEO Jeff Skilling and the U.S. Department of Justice Wednesday reached an agreement that could knock a decade off the disgraced CEO’s 24-year sentence.

Skilling, 59, was convicted in 2006 of conspiracy, securities fraud, making false statements to auditors and one count of insider trading in connection with the energy company’s 2001 collapse.

The new agreement provides for a jail term of 14 to 17 years and a financial penalty of $40 million. He would be credited for time already served. Skilling’s sentencing is set for June 21 in Houston.

“Today’s agreement will put an end to the legal battles surrounding this case,” Justice Department spokesman Peter Carr said. “Mr. Skilling will no longer be permitted to challenge his conviction for one of the most notorious frauds in American history, and victims of his crime will finally receive the more than $40 million in restitution they are owed.”

See here for the background. Counting time served, which I presume began in 2006, would make him eligible for parole as early as 2020, which isn’t exactly soon but is a lot sooner than 2030. Fine by me, I guess. Hair Balls has more.

Skilling might get a sentence reduction

But don’t expect him to get out of jail anytime soon.

Attorneys for former Enron CEO Jeff Skilling and the Department of Justice are discussing an agreement to reduce his prison time and possibly avert a drawn-out court battle.

Those involved didn’t disclose Thursday how much his 24-year sentence might be shortened through a settlement, though appeals court rulings in 2009 and 2010 made some reduction likely.

“I don’t suspect that that sentence is going to let Skilling out of jail anytime soon,” said Bill Mateja, former senior counsel to the U.S. attorney general. “I would suspect that there’s going to be some reduction, but certainly he’s going to spend a significant time in prison.”

Skilling, who has served six years, was convicted in 2006 of conspiracy, fraud and insider trading for his role in the collapse of the Houston energy company.


The Justice Department issued a notice to victims on Thursday about the talks with Skilling’s attorneys and invited those affected by the case to file comments about a possible sentencing deal.

“The Department of Justice is considering entering into a sentencing agreement with the defendant in this matter,” said the notice on the Justice Department’s website. “Such a sentencing agreement could restrict the parties and the court from recommending, arguing for, or imposing certain sentences or conditions of confinement. It could also restrict the parties from challenging certain issues on appeal, including the sentence ultimately imposed by the court at a future sentencing hearing.”

The notice describes potential victims as “thousands of former Enron employees, owners of Enron securities and other persons who were harmed as a result of the crimes for which the defendant will be sentenced.”

A Justice Department official said Thursday evening that the government’s goal “is to ensure that Mr. Skilling be appropriately punished for his crimes, and that victims finally receive the restitution they deserve.”

U.S. District Judge Sim Lake held a private conference call with attorneys from both sides last month about the potential deal. Skilling has been waiting to be re-sentenced after a federal appeals panel in 2009 ruled his sentencing was too harsh.

“Because of the complexity of the case and its age, I think it’s probable both parties felt that it was best to come up with a negotiated compromise,” said Houston lawyer Philip Hilder, a former federal prosecutor. “A full-blown sentencing hearing would require a lot of resources and would be time-consuming and difficult because of the age of the case.”

Maybe you can blame sequestration for that. Skilling asked for a new trial last year, claiming to have “new evidence” that would exonerate him. His conviction was upheld in 2011 after a SCOTUS review of his case, but the Fifth Circuit Court of Appeals ordered him to be re-sentenced in 2009 as part of the original ruling that upheld his conviction. These things do take time, don’t they? Skilling is the last of the Enron defendants still entwined in the justice system. We’ll see what happens.

Skilling asks for new trial

Good luck with that.

Former Enron CEO Jeffrey Skilling’s appellate battle apparently will continue with what his attorney says is “newly discovered evidence.”

In a motion for a time extension filed last week, Daniel Petrocelli asked to have until August 17 to submit Skilling’s latest brief. The two-page motion refers to Skilling’s intent to ask for a new trial based on the new evidence but includes no description of what the evidence is.

A hearing on the request for more time will be held June 7 before U.S. District Judge Sim Lake.


Last month, the U.S. Supreme Court turned down Skilling’s request for a new trial that had been based on its previous ruling tossing out one of the legal theories used to convict him.

Skilling had appealed to the Supreme Court after the U.S. 5th Circuit Court of Appeals ruled that the theory in question — an “honest services” statute that the high court had said was inappropriate for this type of case — amounted to a “harmless” error and there was plenty of evidence to support his conviction on other grounds.

More here.

The attorney for convicted Enron CEO Jeff Skilling said Friday his motion for a new trial will hinge on documents produced by the government after the 2006 trial – familiar territory that he has long insisted show prosecutors repeatedly withheld evidence favorable to the defense.

While not citing the specific documents that he claims are “exculpatory,” attorney Daniel Petrocelli told U.S. District Judge Sim Lake during an open-court telephone conference that his argument will center on notes of government interviews with former Enron executives as well documents related to the so-called Global Galactic memo that former Enron executive Andrew Fastow purportedly put together outlining the company’s dealings with off-the-books partnerships designed to conceal the extent of Enron’s debt.

“It all comes from the (earlier) material provided for the appeal,” Petrocelli said. “There were two or three productions of evidence, and all the material comes from those productions.”

On the one hand, I can’t claim to have any sympathy for Jeff Skilling. On the other hand, I believe the post-conviction appeals process has become far too burdensome, with too many obstacles placed in the path of convicts with meritorious claims. We’ve also seen far too many cases lately of prosecutors being caught not disclosing potentially exculpatory evidence. As such, if he really does have new evidence I hope Skilling gets the opportunity to present it. Even better, I hope he sets a precedent that helps clear the way for other appellants. We’ll see how it goes.

Enron, ten years after

Ten years ago today, on December 2, 2001, Enron officially collapsed. Apparently, you can buy some memorabilia cheap on eBay, which is fitting in a weird way. The Chron had a bunch of Enron look-back stories on Sunday to commemorate. Where are all of the defendants now? With the exception of Jeff Skilling, they’re all pretty much disentangled from the justice system. Even Andy Fastow‘s sentence is up this month. Employees who lost their retirement funds wish it were that neat for them. And of course, as a country we basically learned nothing from the Enron experience. Isn’t that usually how it goes?

Skilling conviction upheld

Some Enron news for you:

A U.S. Supreme Court decision does not undo any of the convictions against former Enron CEO Jeffrey Skilling, but his case should still be sent back to a Houston judge for resentencing, an appeals court said on Wednesday.

Last June the Supreme Court ruled that one of the theories behind Skilling’s 2006 jury conviction for conspiracy — the honest-services fraud theory — should not have been used in instructions given to the jury. The high court sent the issue back to the 5th U.S. Circuit Court of Appeals to determine if the use of the theory invalidated any of the charges.

In a ruling filed Wednesday afternoon the 5th Circuit said it found the error “harmless” and affirmed the convictions. See the document below.

Skilling will still be resentenced by U.S. District Judge Sim Lake, however, based on a prior ruling from the appeals court that the Houston judge applied federal sentencing guidelines improperly.

You can see the ruling here. Tom Kirkendall, who has followed the appeals process for Enron defendants a lot more closely than I have and who has been a consistent critic of their prosecution, was unimpressed.

What is most striking about the Fifth Circuit’s decision is its utter vacuity. For example, the decision contends that there was “overwhelming evidence” that Skilling committed securities fraud by engaging in fraudulent accounting in regard to several Enron units. But the decision fails to cite any of the supposedly “overwhelming evidence” and doesn’t even address the rather important point that the prosecution did not accuse Skilling of falsifying any of Enron’s accounting. In fact, the prosecution didn’t even put on any expert evidence that Enron’s accounting for the allegedly misleading disclosures was wrong, much less false. This tortured logic took this Fifth Circuit panel six months to generate?

Tom says that Skilling is now also able to pursue an appeal of his conviction on grounds of prosecutorial misconduct, so this matter is still far from settled. The news story says that former Enron CFO Andy Fastow is scheduled for release from prison later this year, which will be around the time of the 10th anniversary of Enron’s collapse.

Skilling’s appeal goes to SCOTUS

Jeff Skilling, the former CEO of Enron now serving jail time after being convicted on multiple charges stemming from that debacle, gets his day in the Supreme Court.

Skilling now asks the court to grapple with two issues about the four-month trial. One is whether Houston was the right place for it. Skilling argues that prejudicial pretrial publicity and the effect of Enron’s collapse on the Houston community combined to create a tainted jury pool the government could not prove was acceptable.

Second, Skilling argues the prosecutors used an unconstitutionally vague law to convict him. He was accused in some of the charges of failing to provide Enron his “honest services.” Skilling argues he was working for the benefit of his employer and that the flawed theory taints all 19 of his convictions.


Ellen Podgor, a white-collar crime expert and law professor at Stetson University College of Law, said many expect the high court to rewrite or jettison the honest services law. Two other honest services cases before the high court this term involve Conrad Black, a media mogul accused of defrauding his company, and Bruce Weyhrauch, a former Alaska legislator accused of improperly soliciting work from a business that had a matter before the lawmakers.

She said in those cases the justices pelted the government with questions about the possible vagueness of the honest services statute, and the Skilling case brings questions of its constitutionality even more squarely into focus. “One can anticipate some amount of toughness on the government on this issue,” Podgor said.

Here’s coverage of the arguments the attorneys made before the Court. I think we have a pretty good idea at this point about what kind of issues this Supreme Court really cares about. I won’t be surprised if Skilling gets at least a partial victory. Hair Balls and Tom Kirkendall have more.

Skilling to get a new sentence

Some good news, but mostly not-so-good news for Jeff Skilling.

An appeals court today upheld former Enron Chief Executive Jeff Skilling’s 19 federal felony convictions, but ordered a trial court to resentence him.

The three-judge panel of the 5th U.S. Circuit Court of Appeals in New Orleans sided with the government, ruling that a theory of guilt that backfired in other Enron cases didn’t taint Skilling’s convictions. But the court said U.S. District Judge Sim Lake improperly boosted part of Skilling’s 24-year punishment under federal sentencing guidelines.

Without the specific sentence enhancement deemed improper by the panel, Skilling would face a sentence ranging from more than 15 years to more than 19 — a reduction anywhere from five years to nearly a decade, said Brian Wice, a Houston attorney and expert in appeals.

Daniel Petrocelli, Skilling’s attorney, said today they will continue to fight, whether it starts with a request that the entire 5th Circuit hear the case or an appeal directly to the U.S. Supreme Court.

“There are more battles to fight and we will fight them,” he said.

Acting Assistant Attorney General Matthew Friedrich, said the Justice Department is “gratified” by the decision.

“Today’s ruling is a victory for all those harmed by Jeff Skilling and his co-conspirators,” Friedrich said. “Skilling was an architect of the crimes that caused Enron’s collapse, the fallout of which is still being felt today.”

Petrocelli said Skilling, who is imprisoned in suburban Denver, was disappointed, but committed to fighting on.

“This is a big setback,” Petrocelli said. “He had his hopes pinned on winning this appeal, and we just have to fight in a different venue.”

Would that include asking for a pardon? Time’s running out on that front, I would imagine.

I don’t really have an opinion on this one way or the other. I think Skilling was convicted fair and square, and I don’t have much sympathy for him. Loren Steffy has more, while Tom has a contrary view.

A pardon for Clemens?

Seems unlikely to me, too.

Two Houstonians — former Enron executive Jeff Skilling and former Astros pitcher Roger Clemens — are on a watch list kept by P.S. Ruckman Jr., a political science professor in Illinois who writes a blog on pardons and has written a book on the subject.

Skilling’s lawyer, Daniel Petrocelli, said no request is being made on behalf of Skilling, who is in prison and appealing his conviction. No other Enron defendants were on Justice Department request lists as of Wednesday.

But Clemens’ lawyer, Rusty Hardin, notes that a clemency request would make no sense, since Clemens is not charged with any crime, although the FBI is investigating whether he lied to Congress about steroid use.

There have been only very rare pre-emptive pardons, like President Gerald Ford’s pardon of President Richard Nixon.

“That’s an insane invention of people who have too much time on their hands,” Hardin said of the question of a pardon for Clemens.

The blog post in question is here. It also mentions former baseball player Willie Aikens and quarterback Michael Vick; like Clemens and Skilling, none of them have an application in. Much ado about nothing, if you ask me, but it’s a slow news period, so what the heck.

Speaking of Clemens, Richard Justice writes about the recent decision by Memorial Hermann to remove his name from the sports medicine institute he helped fund. He’s critical of Memorial Hermann, but I found these paragraphs the most interesting:

This column isn’t a defense of his behavior. He chose a path that might land him in prison and probably will keep him out of the Hall of Fame.


Few reporters ever get to know the people they cover. We don’t usually know if they drink too much or chase women or pull the wings off butterflies when they disappear into the night.

That’s the problem with confusing accomplishments on the field into judgments on character, integrity, etc.

So since Justice apparently does understand the distinction between the two, does that mean he’ll vote accordingly when Clemens is up for induction? Check back in four years and find out.

Pai pays up

Been awhile since there was an Enron-related story that interested me.

A former top Enron executive who sold nearly $300 million in Enron stock before the company cratered has agreed to pay regulators $31.5 million to settle civil allegations of insider trading.

The amount Lou Pai, 60, agreed to pay is the highest Enron-related settlement reached between an individual and the Securities and Exchange Commission, and the agency said it is one of the highest individual settlements in its history.

Other SEC fines gained in numerous Enron settlements since 2002 range from $30,000 to almost $2 million for individuals, though some higher amounts were split between the SEC and the Justice Department.

But Pai’s settlement is a fraction of the $270 million or more that shareholders who sued him and other executives say he gained from stock sales.

“I’m just shaking my head. That makes me sick to my stomach,” said Diana Peters, one of the thousands of employees left jobless when Enron collapsed in December 2001, months after Pai quit the company.

“He’ll just move down the road and it won’t even be a drop in the bucket for him,” she said. “But if you’ve got that kind of money, I guess you can afford to buy yourself out of anything.”


Pai, who was chairman and chief executive of Enron’s retail energy division, Enron Energy Services, was among the more colorful yet elusive figures at Enron.

He was known to frequent strip clubs as part of enjoying the great wealth he gained from the company’s generous bonuses and stock options, a former employee told the Chronicle for a story in 2003. Yet he avoided the spotlight while at Enron, and has done so since he resigned from the company in May 2001.

Yes, the movie “The Smartest Guys In The Room” talked a bit about Pai and his stripperphilia. He himself did not appear in the film, but there is an image of a jet plane taking off as whoever was speaking talked about how Pai cashed out and headed off to Hawaii with one of the girls from (I think) Rick’s Cabaret.

The bulk of Pai’s stock sales occurred as part of a divorce settlement more than a year before Enron crumbled. Pai has never been charged with crimes, and earlier this year was dropped as a defendant from a massive shareholder lawsuit in Houston.


The stock sales at the heart of the SEC complaint that Pai settled on Tuesday took place from May 18 to June 7, 2001. The SEC said he sold nearly 573,000 shares at $53.78 based on insider information that a division he once ran had financial troubles unknown to investors.

Specifically, the SEC complaint said Pai knew that Enron Energy Services faced substantial losses in the first quarter of 2001. The complaint notes that Enron’s CEO and senior accounting personnel, along with Enron Energy Services management, “secretly revised” division reporting to avoid disclosing those losses. That revision came about by moving the retail division’s trading arm into Enron’s larger trading franchise, Enron Wholesale Services.

That action received much focus in the 2006 fraud and conspiracy trial of Skilling and Chairman Ken Lay. Skilling testified that the retail trading arm was moved into the larger division to combine like functions for efficiency’s sake.

But David Delainey, Pai’s successor as the head of Enron Energy Services, testified that the move was intended to hide millions of dollars in losses, the disclosure of which could threaten Enron’s stock price and credit rating.

Reading this story reminds me why I was bothered less than folks like Tom were about the criminal cases that were brought against the likes of Ken Lay, Jeff Skilling, and so on. Pai was (eventually) punished through the civil process, but the punishment he received doesn’t come close to balancing the scales, in my view. He’s still a millionaire many times over – assuming he hasn’t blown it all, of course – while so many other people, employees and shareholders, got wiped out. I think the only way the civil justice system could really make these guys pay for their wrongdoings is if it left them in the same shape as the people who were affected by their actions – namely, in a situation where they’d have to work for the rest of their lives because they no longer had any accumulated wealth. Here’s a bit I wrote from my review of “The Smartest Guys In The Room”:

There’s a really poignant scene in which Portland General Electric lineman Al Kaseweter matter-of-factly states that he sold his entire retirement portfolio, which was worth $348,000 at its peak, for $1200.

PGE had been bought by Enron before the crash; like most Enron employees were encouraged to do, Kaseweter put the bulk of his retirement funds into Enron stock. Put Lou Pai in Al Kaseweter’s shoes, and I’d agree that justice had been served. Same with Skilling and the rest of that crowd. But that’s not how it works, so despite the problems associated with the Enron prosecutions, I think they were necessary.

What’s wrong with this picture?

Seen on the Chron’s Business page yesterday evening:


Enron Broadband convictions tossed

Last year, on their second attempt, federal prosecutors secured convictions against former Enron Broadband Services CFO Kevin Howard. Yesterday, those convictions were dismissed.

A theory used by prosecutors and an instruction to jurors regarding deliberations prompted U.S. District Judge Vanessa Gilmore to issue a ruling Wednesday that erased five convictions of conspiracy, wire fraud and falsifying books against Kevin Howard, former finance chief of Enron’s broadband division.

Howard was convicted of those crimes after facing a jury for the second time last year. His co-defendant, former broadband accountant Michael Krautz, was acquitted of the same counts.

Their first trial alongside three other ex-broadband executives ended in 2005 with no convictions, a few acquittals and jurors hung on dozens of other counts.

Howard’s attorney, Jim Lavine, said his client was “very humbled and very grateful” at Gilmore’s ruling.

“It has been a long road for him and very hard, but he has incredible support from his family and friends,” Lavine said. “He has always believed the right thing would happen eventually.”

The government retains the right to try Howard a third time. Justice Department spokesman Bryan Sierra said prosecutors were reviewing their options.

The government conceded last November that four of Howard’s five convictions should be tossed aside because they likely would not stand up on appeal. But prosecutors argued that the fifth count stood apart from the others and should be upheld.

Howard’s lawyers responded that the prosecution’s theory tainted all five counts.

Third time’s the charm? Color me skeptical. For more, read Tom, who saw this coming.

Skilling gets prison postponement

Score one for Skilling.

Jeff Skilling won’t be calling this southern Minnesota town home just yet.

Late Monday, the U.S. 5th Circuit Court of Appeals issued an order postponing the ex-Enron CEO’s Tuesday report date to a low-security federal prison until the panel gives “careful consideration” to his request for bail while he appeals his convictions on 19 criminal counts.

“This order is entered solely to allow this court to give careful consideration to the request for bail pending appeal,” the court said.

The last-minute reprieve was a possibility up to Skilling’s deadline of 2 p.m. Tuesday to report to the prison in Waseca, about 75 miles south of Minneapolis. Skilling will await word from the 5th Circuit on whether he can pursue his appeal inside or outside of prison. His appeal is expected to be filed next month.

Whatever. You can run, but you can’t hide.

UPDATE: Denied!

Just a day after saying former Enron CEO Jeff Skilling could delay reporting to jail, the U.S. 5th Circuit Court of Appeals denied his request to stay out of jail pending his appeal.

Skilling was ordered to report to prison immediately.

Judge Patrick Higginbotham of the 5th U.S. Circuit Court of Appeals wrote in his two-page order that “Skilling raises no substantial question that is likely to result in the reversal of his convictions on all of the charged counts.”

As a result, Higginbotham denied Skilling’s request for bail pending his appeal and vacated an earlier order staying his prison report date.

Although Higginbotham’s order notes “serious frailties” in Skilling’s convictions, it says those problems fail to raise a “substantial question” likely to result in the overturning of all Skilling’s convictions, as would be required to grant bail during appeal.

Sorry, Jeff. Better luck next time.

“Enron: The Musical”

I suppose it was just a matter of time.

Jeff Skilling, Andy Fastow and the rest of the Enron gang will have a new home very soon.

No, not prison. The stage.

Enron – the Musical makes its world premiere tonight at Lambert Hall, where it will play for two weekends.

Unlike its high-flying, glitzy subject matter, the musical is a shoestring operation. Its performances will take place on the set of the current children’s show Santa’s Magic Timepiece. With his best Mickey Rooney “we’re putting on a show” enthusiasm, producer/writer/director Mark Fraser insists that backdrop will work just fine.

Fraser, who earns his living as a manufacturers’ representative, wrote the show’s lyrics, too – but not the music. The show uses that favorite device of revues, comedy clubs and piano bars: parody lyrics attached to familiar show tunes.

Enron opens as the staff of accounting giant Arthur Andersen follows an alert from Enron to destroy all evidence. David Duncan, a lawyer at Andersen, croons The Sound of Shredding (to the tune of The Sound of Music).

At the peak of his power, Skilling sings (to the tune of Springtime for Hitler), “Springtime for Skilling and Enron stock!”

To the tune of Thank Heaven for Little Girls, Fastow and henchman Michael Kopper sing:

Thank heaven for off-book deals

For off-book deals improve our balance sheet …

They raised our stock and fooled folks on Wall Street

Those partnerships we set up were appealing

But now they’re not ’cause we got caught for fraud and stealing.

And so it goes, through such ditties as How Do You Solve a Problem Like Jeff Skilling?, 76 Indictments (“came down today / with 110 execs out on bail”) and Get Me to the Court on Time.

Sounds like something Mort Drucker might have cooked up for MAD Magazine, not that there’s anything wrong with that. For sure, this can’t be any worse than The Crooked E. It’s just running this weekend and next, though, so if this appeals to you, hop to it.

Enron sentencings and settlements

Been a rather busy week in Enronland. Let’s catch up a bit:

– Jeff Skilling has reached a settlement on all remaining litigation against him by former employees who lost their pensions in the crash.

The ex-CEO, who is scheduled to begin serving more than 24 years in prison next month, has withdrawn his opposition to an $85 million settlement that plaintiffs reached with former company directors and other executives two years ago.

In exchange, plaintiffs resolved claims against Skilling – the last named defendant who hadn’t settled – effectively bringing the litigation to a close.

“Yes, it’s over. Our clients are thrilled,” attorney Lynn Sarko, who represents ex-Enron employees, said. “While they are grateful that some of their retirement money was recovered, it will never make up for the destruction of their retirement nest egg.”

The lawsuit, which recovered about $265 million in settlements – including the $85 million held up by a Skilling appeal – was filed on behalf of more than 20,000 employees after Enron went bankrupt in December 2001. The Labor Department later filed similar litigation, which was folded into the main lawsuit.

If Jeff Skilling has to work for a living and worry about his retirement like the rest of us once he’s out of jail, then I’ll feel like justice has been done.

– In response to the convictions against Kenny Boy Lay being vacated upon his death, two Senators have proposed legislation to make it easier for victims of crime to seek restitution in similar situations.

On Thursday, Sen. Dianne Feinstein, D-Calif., and Sen. Jeff Sessions, R-Ala., both members of the Senate Judiciary Committee, introduced legislation designed to clarify the legal procedures when a defendant dies in this way.

“We need to ensure that, in these types of cases, hard-won convictions are preserved and restitution remains available for the victims of crime,” Feinstein said in a statement Thursday.

When convicted, a criminal defendant can be ordered to pay restitution to his victims, to try to make them whole. But since Lay’s conviction was vacated, his estate cannot be ordered to pay restitution.

Instead, the Justice Department was forced to file a civil suit seeking to wrest control of $12.7 million worth of assets. If the government is successful, it could then turn over some or all of those proceeds to victims of the Enron debacle.

The Justice Department proposed legislation last summer that sought to preserve such convictions after a defendant dies pending sentencing and appeal – and wanted it to be retroactive to July 1, four days before Lay died. That proposal never garnered a sponsor.

The Justice Department helped Feinstein and Sessions craft the legislation introduced Thursday.

“We share Sen. Feinstein and Sen. Sessions’ commitment to do away with the harmful and unwarranted effects of the abatement doctrine on crime victims,” Justice Department spokeswoman Jaclyn Lesch said.

Feinstein and Sessions’ bill would stipulate that a defendant’s conviction cannot be vacated just because the person has died.

That would allow for the defendant’s estate to be ordered to pay direct restitution to victims. However, the proposal would allow a representative for the estate to appeal the conviction.

The bill also would give the federal government an additional two years to file a civil complaint to try to force an estate to forfeit assets.

I didn’t care for the prosecution’s attempt to push through a bill like this with retroactivity earlier. I’m a little hesitant to endorse this scheme, even though I think it should be easier for the civil litigants to pursue their cases, on the basis of the Task Force’s earlier actions in this matter. I’ll reserve judgment for now; as I expect this bill to die before the Senate session ends, we’ll see what happens next year.

– Former Enron chief accountant Rick Causey was sentenced to five and a half years in prison. As both Tom and Loren Steffy note, he caught a bit of a break when Andy Fastow wound up getting his sentence shaved down, but he might wind up serving more time than Fastow anyway. Which is a little weird.

– Finally, the last two top Enron executives to face the music, Michael Kopper (who was once Fastow’s top assistant) and Mark Koenig (who was Enron’s head of investor relations), received sentences of 37 months and 18 months, respectively. Tom has more on this, including some thoughts on who deserved it more.

Skilling gets 24 years

And so the Enron saga more or less comes to a close, pending appeals and the ongoing civil suits.

Former Enron Corp. CEO Jeff Skilling took the blow of a 24-year prison sentence the same way he took a jury’s decision that he’s a felon: Dry-eyed and calm.

Standing alone before U.S. District Judge Sim Lake to make a statement at his sentencing hearing Monday, Skilling insisted before he learned what his punishment would be that he is remorseful about Enron’s 2001 demise and its devastating fallout to employees and investors.

“I will live those days and everything that happened subsequently for the rest of my life,” he said.


“All that being said, your honor, I am innocent of these charges. I am innocent of every one of these charges,” the 52-year-old former business titan said with a bit of defiance in a hearing that capped an era of fraud that prompted Congress to pass sweeping reforms and stiffen white collar penalties.

Unmoved, Lake imposed a prison term of 24 years and four months — the bottom of a possible range that stretched to 30 years and five months.

He will also fork over $45 million in restitution should he lose his appeal.

Skilling’s term is just a few months shy of the 25-year sentence former WorldCom CEO Bernie Ebbers began serving last month for orchestrating the $11 billion fraud that drove his company into bankruptcy.

“It’s difficult to understand how 24 years for a nonviolent crime can be the low end of anything,” said David Berg, a Houston civil litigator.

But others, including nine of the 16 jurors and alternates in Skilling’s trial who attended his sentencing, approved.

“Judge Lake knows the law. He stood firm where the sentence will be served and when lenience was allowed, he considered that,” said jury foreman Deb Smith.

Philip Hilder, a former federal prosecutor who represents several Enron defendants and witnesses, said Skilling’s punishment was fair.

“It’s not one that’s out of the ordinary,” he said.

Outside the courthouse, Skilling said with a shrug that he was disappointed, but called Lake a “fair guy” and said he would appeal.

“This is no act or anything. I believe that I’m innocent,” he said.

For better or worse, that’s the difference between what Skilling got and what Andy Fastow got. I have little sympathy for Skilling and believe he got a fair trial and an appropriate sentence, but the difference is striking. I’ll be thinking about it for awhile.

There are still Enron issues to be worked through: restitution for former employees, and more trials, sentencings, and lawsuits. But between the death of Ken Lay and the sentences meted out to Skilling and Fastow, it’s hard not to think of this as largely finished. Easy for me to say, I know.

If you’ve been following this at all, you’ll know that Loren Steffy approved of Skilling’s punishment, while Tom Kirkendall did not. What do you think?

Kenny Boy unconvicted

Kenny Boy Lay’s criminal record has been officially wiped clean.

Former Enron Chairman Ken Lay’s criminal conviction was vacated and his indictment dismissed by a judge today.

U.S. District Judge Sim Lake granted the request by Lay’s estate to vacate the conviction, an outcome that was widely anticipated given legal precedent. He also dismissed the indictment used to bring him to trial earlier this year.

Lay died July 5, just weeks after a jury found him guilty on six charges of conspiracy and fraud and Lake found him guilty on four charges of bank fraud.

In his decision, Lake cited a decision in the 5th Circuit Court of Appeals that makes death, before the appeals process has been exhausted, grounds for throwing out a conviction and dismissing an indictment.

I totally understand the rationale behind this, and even though I don’t like the fact that the main effect will be to screw the civil suit plaintiffs, I can’t say I disagree with it. That’s the way it goes.

The Department of Justice tried to trump that precedent, however, when it asked Congress in early September to pass a law that would essentially prevent courts from vacating criminal convictions if a defendant dies before going through the entire appeals process.

The government asked Lake to at least wait until Oct. 23, when Lay was scheduled to be sentenced.

The proposed law does not appear to have been picked up a sponsor in Congress.

This was a two-bit maneuver by the prosecutors, and it deserved to be ignored. Tom called it for what it was last month. I don’t agree with his overall evaluation of the prosecutors and their methods, but another stunt like that and I’ll give it some serious consideration.

Jeff Skilling will be sentenced today. Tom has a preview of that, and he contrasts it to the fate of Andrew Fastow and Rick Causey.

UPDATE: More here.

Fastow gets six years

Andy Fastow receives his punishment, and it’s less than what it could have been.

Andrew Fastow, Enron’s former chief financial officer, received a 6-year prison sentence today for his role in the 2001 demise of the energy company.

Fastow’s sentence had been limited to no more than 10 years in prison as part of his plea agreement to testify in the trial against Enron top executives Jeff Skilling and Ken Lay. U.S. District Judge Kenneth Hoyt had the option to shorten that sentence.

Hoyt said he showed mercy for several reasons, including that Fastow had provided help to the shareholders; that Fastow was persecuted and scapegoated after Enron collapsed; and because of the suffering Fastow’s family endured, specifically pointing to the fact that his wife went to jail.

“The family had take a particularly acrimonious hit,” Hoyt said.

Before the sentencing, an emotional Fastow, 44, shed tears as he told the judge today he has publicly and privately taken responsibility for his actions, and he will struggle with the fallout and shame for the rest of his life.

“I wish I could undo what I did at Enron but I can’t,” he said, his voice choking.

He said he was blessed with family and friends, but ” have failed them. I have to work every day of my life to keep their trust.”

He also said “I will serve my sentence as part of my repentence that I’ve already begun.”

I don’t know Andrew Fastow, so I don’t know how much I believe that his remorse and repentance is real. I’ve got enough Catholic in me to believe in redemption, so I’m willing to give him a chance. Some former Enron employees also apparently feel the same way. Ultimately, what powers redemption for me is taking action to make up for what you’ve done. Fastow is saying the right things now, and that second article indicates he’s been doing some good things, but the jury will be out on this one for a long time.

Kenny Boy’s rehab gets underway

The process to eliminate Ken Lay’s criminal record has begun.

Samuel Buffone, a Washington, D.C., attorney who was expected to represent Lay in his appeals, filed a motion Wednesday asking District Court Judge Sim Lake to substitute Lay’s estate for the late defendant so the lawyer can appear in court on Lay’s behalf.

Buffone said in the motion that once the court recognizes him as the attorney for the estate, he will “move to vacate the convictions of Mr. Lay and dismiss the indictment.”


Lay died on July 5, in Aspen, Colo., of heart disease. Although he was convicted, a final judgment wasn’t issued because he had not yet been sentenced and through the appeals process. Rather than allow an appeal to proceed without him, the court is widely expected to throw out both the verdict and indictment, leaving Lay’s record as though he were never charged.

Lay’s $5 million bond – backed by his children’s homes – also would be canceled at that time. With his conviction vacated, the government also will not be able to seize Lay’s property through the criminal proceedings.

As noted before, one end result of all this will be to make the civil claims against Lay harder to prosecute. Stay tuned.

Ken Lay’s money

The subject of what happens to the allegedly ill-gotten gains Ken Lay owned now that he’s dead was raised yesterday as the news of his death came out. Today, the Chron takes a closer look.

When the criminal case is vacated, so too are the prosecutor’s efforts to seize assets from Lay. The government could file motions to seize assets through a civil proceeding, however. That move by the government seems likely, said David Smith, a forfeiture expert with English & Smith in Alexandria, Va., and former deputy chief of the asset forfeiture division of the U.S. Department of Justice.

“I don’t see any way the government can get around this on the criminal side,” Smith said.

The two main civil cases, a massive shareholder suit that was granted class-action status on Wednesday and the suit brought by former Enron employees can continue to seek damages, but the estate of Ken Lay will take the place of the man as a defendant.

It’s not clear what will happen with the civil suits however.

When former Enron executive Cliff Baxter killed himself in early 2002, attorneys representing the shareholders decided to drop his estate from the case.

Attorneys for the shareholders could not be reached for comment Wednesday

Robin Harrison, an attorney representing the former Enron employees, said he had hoped to begin discussing a possible settlement with Lay and co-defendant Jeff Skilling, Enron’s former CEO, later this summer because they were the only two parties left who had not either been dismissed or reached a settlement.

“It’s too early to tell what might happen to our efforts to resolve the case,” Harrison said.

If any of Lay’s assets were frozen by the government the freeze would go away as the case was vacated, Smith said. That means the plaintiffs in the civil cases would have to scramble to get a lock on those assets, which would be particularly hard to do in the civil arena.

Perhaps even more significant for the civil cases, once the case is vacated it’s unlikely Lay’s prior indictment and conviction could be used as evidence in any ensuing trials, Smith said.

“They would have the burden of proof to prove his guilt all over again,” Smith said. “It’s a mess for the government and the victims, who were probably already counting the money.”

I find that all very strange and a little hard to understand. Ken Lay was indicted and convicted. Yes, I know there’s precedent in the common law, yes, I understand the rationale of not visiting his sins on his heirs, and yes, I agree that as long as an appeal is in process his story has not been fully written yet. It’s still feels wrong to me that the plaintiffs in the civil matters that are pending against him have been dealt such a blow. I just think they should not be denied the opportunity to use what we all know and saw happened in their litigation.

Be that as it may, that’s how it is. I agree with Loren Steffy when he writes that Lay’s death does not bring closure to the Enron saga, but that it “opens the wound anew, and once again underscores the human toll extracted by Enron’s tragedy.” I can feel sympathy for Ken Lay, as Tom does, even if I disagree with the assertion that Lay was unfairly hunted by the federal prosecutors. But at the end of the day, my sympathies really lie with the people who were hurt by Enron’s fall. Whether you believe Ken Lay had a direct role in causing that hurt or not, I believe they deserve it more.

RIP, Ken Lay

Former Enron CEO Ken Lay, who was just convicted on multiple felony counts relating to the fall of his company, died suddenly yesterday at the age of 64.

Convicted Enron Corp. founder Ken Lay suffered a massive coronary Tuesday and died, according to Dr. Steve Wende, of First Methodist Houston. He was 64.

“He and his wife, Linda, were in Colorado for the week, and his death was totally unexpected. Apparently, his heart simply gave out.,” he said in a memo to church staff.

Lay had been awaiting sentencing after being found guilty May 25, 2006, on all six counts that related to Enron fraud, including conspiracy to commit wire fraud, perpetrating wire and bank fraud, and making false and misleading statements to employees at a company meeting, as well as to banks, securities analysts and corporate credit-rating agencies.

His sentencing had been set for Oct. 23.

The Lays owned property in Colorado, the only state outside the Southern District of Texas, which includes Houston, where he was allowed to go before that sentencing.

His attorney during the trial, Mike Ramsey, said today that Lay’s wife, Linda, was with him when he died. Ramsey ‘s own heart problems forced him to miss much of the trial.

I’m sure there will be plenty more on this soon. As you know from reading this site, I’ve never had a particularly high opinion of Lay, but I offer my sympathies and condolences to his family nonetheless. Rest in peace, Ken Lay.

UPDATE: Here’s a fuller obituary. As for the conspiracy theories, well, I suppose this couldn’t hurt.

One thing that will happen now is that the government’s attempt to seize what they say were Lay’s ill-gotten gains from the fall of Enron will likely be dismissed. Link via Tom, who promises more later.

UPDATE: So, does this mean that I’m not one of the “more thoughtful political blogs”, or that I’m an exception to their silence? Enquiring minds want to know.

Enron’s emails

Via David Pogue’s technology blog comes Enron Email.

Search through more hundreds of thousands of email messages to and from 176 former Enron executives and employees from the power-trading operations in 2000-2002.

For the first time, they are available to the public for free through the easy-to-use interface of the InBoxer Anti-Risk Appliance. Create a free account, and go to work. You can search for words, phrases, senders, recipients, and more. (Lots of stuff in there. We found a copy of a message regarding Tom DeLay and political contributions for use in Texas.)

Or, use the built in tools to find offensive messages, personal messages, and others that would have triggered an alert if Enron had been using the InBoxer Anti-Risk Appliance back in 2000-2002, and can alert companies to similar risks, if they happened today.

This has been around for a few months, but I confess I hadn’t heard of it before now. Since Enron is in the news again (twice!), I figure today is as good a day as any to link to it. Thanks to Linkmeister for the tip.

Split verdicts in the Enron Broadband retrials

Last year, the Enron federal task force failed to secure any convictions in the first trial of executives of the former Enron Broadband Services. Even though that case was considered stronger than some of the others they had to try, they got a mixture of acquittals and hung verdicts. Last week, the prosecutors did a little better, convicting one out of two defendants on all charges.

Kevin Howard, former Enron Broadband Services chief financial officer, was found guilty on all five counts in the indictment that accused both men of pushing through a bogus transaction in late 2000 strictly to help the division meet earnings goals.

Michael Krautz, a leading accountant in the division, was acquitted of all charges, making him only the second ex-Enron employee to be found not guilty by a jury.


The clean-cut Howard, dressed in a business suit and tie, left the courtroom stonefaced, declining through his attorneys to comment.

His attorneys vowed to appeal.

“We are surprised, we are disappointed – we don’t think the evidence supported a guilty verdict,” Howard’s attorney Jim Lavine said. “We’ll look to our next steps to appeal.”

Howard faces up to 30 years in federal prison for his conviction on a single count of conspiracy, three counts of wire fraud, and for falsifying books and records.

Krautz was acquitted of the same charges.

Howard, a Houston resident, is free on $500,000 bail pending sentencing scheduled for Sept. 11, at 9:30 a.m., only hours before the sentencing of former Enron executives Jeff Skilling and Ken Lay in a courtroom next door before a different judge.


Some legal experts believe the acquittal of Krautz may actually take some of the steam out of a possible appeal by Lay and Skilling. Namely, it will make it tougher for them to argue they couldn’t get a fair trial in Houston.

“I think it pulls the rug out from under any argument Lay or Skilling make about a change of venue,” said Philip Hilder, a former prosecutor who represented government witness Sherron Watkins.

I never doubted that Skilling and Lay would get a fair trial. If this does undercut that argument, fine by me.

The government last year failed to win convictions against Howard, Krautz and three other former executives in the division in a trial that ended with a jumble of acquittals and nondecisions. The judge then separated the case into three trials to simplify it for jurors.

Former EBS executives Joe Hirko, Rex Shelby and Scott Yeager are awaiting retrial. Yeager’s trial was scheduled for this week but has been put off indefinitely because of an appeal issue; Shelby and Hirko are scheduled to return to the courtroom in September.


Even with the acquittal of Krautz, some legal observers believe the conviction of Howard is enough to keep up the prosecution’s momentum for trying the remaining defendants.

“Had the government bought the bagel on this one, they may have well have walked away from other broadband trials in the wake of the Lay and Skilling success,” said Jacob Frenkel, the former senior counsel at the Securities and Exchange Commission’s enforcement division, who has followed the cases.

“The fact that they won a conviction against the CFO, not withstanding the acquittal, will help the government maintain its vigor and resolve to prosecute the remaining broadband defendants.”

So it’s not over yet, though I daresay that pretty much everything else beyond return court dates by Skilling and Lay will be non-headline news most places. Also fine by me.

As usual, for an alternate view of the events, check out Tom Kirkendall.

The Enron jury

Just filing this for future reference.

Conversations with panelists who sat in judgment of Lay and fellow former Enron executive Jeff Skilling revealed a spiritual group of Texans who went into the jury room teetering back and forth and came out confident the two prominent Houstonians broke the law.


Once the group chose human resources professional Deborah Smith as forewoman, Delgado, principal at Golfcrest Elementary in southeast Houston, said it tried to get organized.

“We went to the indictment and to the jury instructions. We had to understand what our task ahead was, understand what we had to accomplish,” said Delgado, taking a break from checking teachers out of the school for the summer.

Wendy Vaughan, a Katy roofing supplier and fitness company owner, said the group began plowing “diligently through every single count.”

“We were really just ironing out places where there may be reasonable doubt,” said Vaughan, 38.


The prospect of sending another human being to possible lengthy confinement was troubling, some jurors said, but not enough to skew deliberations, said Fernandez, 43.

“With me working in the (court) system, I told them, ‘If any of y’all are thinking about punishment, that’s not our duty at this time. Our duty at this time is guilt and innocence.’ ”

Jurors interviewed generally agreed the evidence and testimony of others ultimately overpowered the testimony of Lay and Skilling.


Multiple jurors named former Enron treasurer Ben Glisan Jr. and former investor relations chief Mark Koenig as the government’s most effective weapons.

Glisan, who calmly pinned Enron’s woes on misdeeds by Lay and Skilling, particularly impressed Delgado.

“He was the only witness who, when he was testifying, looked directly at Mr. Skilling and Mr. Lay,” Delgado said. “He never took his eyes off of them.”

Meanwhile, former chief financial officer Andrew Fastow’s past behavior repulsed a few in the jury box.

“When you get your children involved in a scandal,” Delgado said, clearly annoyed as he recalled how Fastow funneled money through his family and allowed his wife to serve a yearlong federal sentence on a tax charge without intervening. “We knew he wasn’t credible one way or the other.”

Lawyers on both sides scored high marks, with Skilling’s defense team led by Daniel Petrocelli drawing raves for his style, organization and approach.

“I think Mr. Petrocelli comes off as very charming. I was very impressed with his presentation,” said Vaughan, who added that Lay defense team leader Mike Ramsey’s absence because of surgery didn’t seem to have an adverse effect.

Fernandez said prosecutors did an “excellent” job.

“I was very impressed by (Enron Task Force leader Sean) Berkowitz, and I was impressed by John Hueston,” she said.

Personally, I get the impression of a group of people who did their best to evaluate the evidence and deliver honest verdicts. Which, frankly, is what I expected from the beginning. I have no opinion about many of the issues that will be raised on appeal, but the question of whether a fair trial was possible before Houston jurors or not is one that I believe should be immediately swatted down.

After the verdict

So it’s been a day now since Jeff Skilling and Kenny Boy Lay were convicted on multiple felony counts related to Enron’s collapse and death. As you might expect, the Chron has walltowall coverage of the verdict and reaction to it. I’ll leave that to you to read; there’s not much I can reasonably add to all that, but I will note that it’s all pretty much favorable to the prosecution, as you might expect after they nearly ran the table. For an opposing view, I recommend Tom Kirkendall. I can’t say I generally agree with Tom here, but he’s been the best at presenting an alternative perspective on the matter. Read what he says and come to your own conclusion.

There is one thing I do want to address, and that’s this.

If you want a date to mark the beginning of the end of the Bush Era in American life, you may as well make it this one: May 25, 2006. The Enron jury in Houston didn’t just put the wood to Ken Lay and Jeff Skilling. The jurors took a chain saw to the moral claims of the Texas-based corporate culture that had helped fuel the rise to power of President George W. Bush.

Hogwash. Enron ceased being about Bush in any non-meaningless sense in 2002. That’s when this was supposed to have been a political liability for him. Lord knows I certainly fell for the idea that it would be. (Consider that another item in the Why I Should Never Make Predictions file.) I seem to recall another issue coming to the forefront in 2002 that pushed Enron off the stage and will much more clearly define the “Bush Era” for years to come. Right or wrong, most people decided a long time ago that Enron and Bush were at best tangentially related.

This trial and this verdict were about the misdeeds of two CEOs. I may not have been following the testimony obsessively, but I read enough to know that their politics and former connections weren’t even a subtext. It was about what they did and what they should have done. A nice parallel to the Bush Administration, sure, but that’s about it. TAPPED is right – this is gratuitous piling on to Bush by a previously deferential media now that he’s down and isn’t about to get back up. Not that I object to that per se, but let’s just say that some of this attitude might have been nice a little earlier than now.

Anyway. Houstonist has even more reading, if all those Chron links weren’t enough. And of course, we can’t begin to move on from this until we know what the cats think about the verdicts.

Enron verdict in

I know I haven’t been following the trials of former Enron honchos Jeff Skilling and Kenny Boy Lay, but apparently the jury is back and we’re about to get some verdicts. So consider this a placeholder for when they’re in, with more to come later.

Hat tip: Progressive Texan.

UPDATE: Guilty, guilty, guilty! While I was waiting for the Chron to reload (it eventually crashed – too much traffic, I guess), Tiffany just called to say she heard it on the radio. Skilling went down on 19 counts, with acquittals on 9 others, while Kenny Boy was convicted on all ten counts six counts from one trial and three more (by Judge Lake) in the other. More when the Chron powers back up.

UPDATE: Finally, here’s the Chron story.

The jury heard 16 weeks of testimony and arguments and made its announcement early on its sixth day of deliberations. The eight-woman, four-man panel found Lay guilty of all six counts. They convicted Skilling on 19 of the 28 counts against him.

U.S. District Judge Sim Lake set a sentencing date of Sept. 11.

Lake found Lay guilty of three counts in his personal banking fraud trial.

More from Loren Steffy and Trial Watch, which says Lay was convicted by Judge Lake on four counts of bank fraud, not three. Whatever, it’s guilty all around.

UPDATE: Dwight links to a bunch of bloggers’ reactions to the verdicts. (If you link to me linking to Dwight linking to these other bloggers, we’ll be one step closer to Meta Blog Nirvana.) Also, Loren Steffy has two posts where jurors give their reasons for convicting. Trial Watch reports on Kenny Boy surrendering his passport and posting bond.

Now playing defense

So the prosecution rested its case last week in the Ken Lay/Jeff Skilling trial, and after a short break the defense has gotten started. I know, I know, I’ve totally ignored this for some time now. I can’t really say why I’ve not found it as interesting as I’d thought I would. I just haven’t. What can I say?

Some former Enron employees were less than overwhelmed by the prosecution’s case. Loren Steffy says there could have been more dirt piled on Lay and Skilling had the prosecution gotten some different rulings from Judge Lake. Tom has a good summary of the trial so far, and he expects the defense to start blowing some big holes in the evidence that was presented.

That’s all I got. We’ll see if I find this stage more compelling.

(Note: I had this and the next post drafted yesterday evening before the DeLay mess hit the fan. I figure I may as well publish them now before they get too moldy. Besides, the world does go on and we all need a little something besides DeLay-a-rama to keep us going with it.)