[I posted this on April 10, 2006. I'm feeling nostalgic, I suppose.]
Former Enron Corp. Chief Executive Jeffrey Skilling told jurors in his fraud and conspiracy trial Monday that he abruptly resigned from the energy trading company a few months before it collapsed because he was worn out and troubled by its falling share price — not because he knew disaster loomed.
“I am absolutely innocent,” Skilling said right after he swore to tell the truth while testifying in his own defense Monday.
Then he let jurors know what’s at stake for him:
“I guess in some ways my life is on the line, so I’m a little nervous.”
As he testified, he became more relaxed and conversational, with no hint of the swaggering bravado for which he was known when he ran what was once the nation’s seventh-largest company. Known for his plainspoken manner as he led Enron’s transformation from a staid pipeline company into an energy giant, Skilling addressed jurors directly, his eyebrows raised slightly, looking earnest and alert.
At times he appeared self-deprecating, even telling jurors that he was admitted to Harvard Business School “by some huge mistake.” [Note, he used that same joke at the 2000 Analyst Conference. He was referring to Rex Shelby at time.]
He repeated what he said twice before congressional panels in 2002, that Enron was “in very good condition in the middle of August when I left.”
His lawyer, Daniel Petrocelli, asked if he had any clue that Enron would flame out in scandal less than four months later.
“Not in my wildest dreams, no. It’s almost inconceivable now what happened,” the ex-CEO said.
“Would you have left if you thought the company was going to experience the events that later transpired?” Petrocelli asked.
“No,” Skilling replied matter-of-factly.
The 52-year-old ex-CEO’s testimony kicked off the 11th week of the federal trial. His co-defendant, Enron founder Kenneth Lay, aims to testify later this month.
Both are accused of repeatedly lying to investors and employees about Enron’s financial health when they allegedly knew fraudulent accounting propped up a facade of success. Enron careened into bankruptcy proceedings in December 2001, six weeks after announcing unprecedented losses and a massive equity writedown that generated intense scrutiny from once-adoring Wall Street and regulators.
The two men say there was no fraud at Enron other than that committed by former Chief Financial Officer Andrew Fastow and a few others, who skimmed millions from secret schemes, and that bad publicity coupled with lost market confidence sank the company.
In staccato fashion, Petrocelli asked Skilling if he ever destroyed documents or computers, set up offshore accounts to hide money, or did anything to hide past behavior or dealings. Each time, Skilling said, “No,” sometimes accentuating his answer by leaning forward.
“Did you leave town?” Petrocelli asked.
“I went to Fredericksburg,” Skilling replied, eliciting courtroom laughter at his referral to a small town a few hours’ drive away.
Skilling is charged with 28 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces six counts of fraud and conspiracy.
If convicted of all counts, Skilling faces a maximum of 275 years in prison and tens of millions of dollars in fines — though an actual prison term would likely exceed two decades. Lay faces a maximum of 45 years in prison if convicted of the six counts against him.
Jurors took copious notes and listened intently as Skilling spoke. His first wife, Susan Skilling, and their daughter and two sons, aged 22, 19 and 15 — watched his testimony, flanked by Skilling’s second wife, former Enron corporate secretary Rebecca Carter.
The ex-CEO described how Enron consumed his life and how, as it grew into a successful company, he decided to move on because he’d neglected his family and his “head wasn’t in it anymore.”
“I guess you could say I was obsessed with Enron,” he said. “Every day was intense, and I had not spent the time I should have spent with my family.”
But he also said he told Lay on “that fateful day, Friday, the 13th of July,” that he wanted to resign after 11 years with the company because he was bothered by Enron’s falling stock.
Skilling told investors on the day his resignation became public that he quit strictly for personal reasons. Several prosecution witnesses said they didn’t know the falling stock helped prompt his resignation until they read his comments about it in a newspaper.
Skilling said he thought Enron’s businesses were in good hands. He took a rafting trip with his youngest son, considered a teaching job, and founded a private investment company.
Yet his attention focused on Enron again when the company announced massive third-quarter losses and a $1.2 billion writedown of shareholder equity in mid-October 2001. A storm of media and regulatory scrutiny followed, particularly regarding partnerships Fastow created and ran to conduct deals with Enron.
Fastow testified that he used the partnerships to help Enron manufacture earnings by pretending to buy its poor assets and investments with Skilling’s knowledge.
Skilling said he didn’t believe there was a bad motive or intent attached to Fastow’s partnerships. He said he called Lay and offered to come back to help right the ship.
“I thought it would show support to the marketplace. Most people know I understand the business. By coming back, I would send a strong signal to the marketplace that I didn’t think anything was wrong,” Skilling said, contradicting his earlier statement that his credibility with Wall Street had waned.
Lay and other managers rejected his offer.
He said he tried to galvanize other ex-top executives to put up a combined $200 million to help reignite investor confidence in Enron, but aborted the effort when one of the chief would-be contributors — former Enron Vice Chairman Cliff Baxter — backed out.
“I was devastated because there’s nothing harder. This had been my life. I was very proud of what we had built, so it was devastating to be so powerless, to not be able to do anything,” he said.
He referred to congressional hearings into Enron’s collapse as “witch hunts,” and said he ignored advice from attorneys to invoke his Fifth Amendment right not to testify. His two defiant appearances set him apart from many other ex-executives who invoked that right, including Lay.
“Someone had to get out and start explaining what had happened before someone else stepped into this vacuum and explained it incorrectly,” he said.
But he clammed up when he learned from SEC investigators that he was a target in the Justice Department’s investigation. He was indicted in February 2004, and said he “never … not once” considered making a deal with prosecutors the way more than a dozen other Enron executives did.
“I will fight those charges until the day I die,” Skilling said.