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Former CEO Skilling indicted as Enron scandal escalates

By Shannon McCaffrey
Knight Ridder Newspapers

	BRETT COOMER / GETTY IMAGES Former Enron CEO Jeff Skilling is escorted into the Houston federal courthouse after surrendering to the FBI yesterday. He is the highest-ranking executive of the collapsed energy conglomerate to be arrested.
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Skilling, the highest-ranking executive arrested in the scandal, surrendered to the FBI before dawn yesterday and was led to the Houston federal courthouse in handcuffs. He pleaded not guilty before U.S. Magistrate Judge Frances Stacey and posted the $5 million bond with a cashier's check.

Skilling faces 325 years in prison and hundreds of millions of dollars in fines and penalties if he's convicted of all the charges.

Prosecutors say Skilling helped orchestrate a wide-ranging scheme to mislead government regulators and investors into believing that Enron was thriving when it was being kept afloat only through a series of gimmicks and sleight-of-hand financial maneuvers.

Enron's spectacular collapse in 2001 led to the nation's largest bankruptcy, left investors broke and sent shudders through Wall Street.

Enron's rapid fall was the first — and most famous — in a string of corporate scandals that followed, in which executives were accused of cooking the books to artificially inflate profits.

Skilling was credited with helping to transform Enron from a staid energy-pipeline company to an innovative high-tech energy-swapping powerhouse. At its height, Enron was ranked No. 7 on the Fortune 500 list and its stock was trading at $90 a share. It now sells for about 8 cents a share.

Skilling's background Name: Jeffrey Keith Skilling Age: 50; born Nov. 25, 1953 Education: B.A., Southern Methodist University, 1975; MBA, Harvard, 1979 Experience: Worked for McKinsey & Co. before joining Enron in 1990. Became Enron's chief operating officer and president in December 1996 and later chief executive officer in February 2001. He resigned abruptly on Aug. 14, 2001, claiming personal reasons. Family: Wife, Rebecca Carter, former Enron executive secretary. Was married for 22 years to Susan Long, whom he met at SMU. The couple divorced in 1997. Skilling has three children with Long. Source: The Associated Press

Outside the federal courthouse in Houston yesterday, Skilling's lawyer Daniel Petrocelli said his client was being pursued only because the government needed a scapegoat. He said his client had passed a lie-detector test with "flying colors."

Polygraph test results typically aren't admissible in court, however, because they're considered unreliable.

"Jeff Skilling has nothing to hide," Petrocelli said. "He did not steal. He did not lie. He did not take anyone's money."

The thick indictment was handed down by a federal grand jury in Houston almost two years to the day after Skilling appeared before Congress and denied knowing anything about Enron's deceptive financial practices.

A superseding indictment unsealed yesterday filed seven more counts of fraud and insider trading against former Enron Chief Accounting Officer Richard Causey, who was indicted a month ago on six counts of fraud and is free on bond. Earlier, he pleaded not guilty.

In Washington, Deputy Attorney General James Comey, who heads the Justice Department's corporate-fraud task force, said the stiff charges against Skilling should signal that the government was serious about cracking down on corporate wrongdoing.

"No executive is too prominent or too powerful, and ... no scheme to defraud is too complex or too fancy to avoid the long arm of the law," Comey said at a news conference with FBI Director Robert Mueller.

Comey said Skilling and Causey "had a one-track mind, and that was to make sure that Enron consistently beat the earnings expectations of Wall Street analysts, no matter what it took."

Skilling, 50, was charged with wire fraud, securities fraud, conspiracy and insider trading. He was named in 35 counts in the 42-count indictment.

The Securities and Exchange Commission filed a separate civil-fraud complaint against Skilling and Causey yesterday, seeking to recoup millions in ill-gotten gains.

The insider-trading charges allege that Skilling unloaded more than $63 million in Enron stock, making tens of millions of dollars in profits. On Sept. 17, 2001, several weeks after he resigned abruptly as Enron's CEO, citing personal reasons, Skilling sold 500,000 shares of Enron stock and made more than $15 million.

Enron's slide began soon after Skilling departed. Speculation has been widespread that he left because he knew the complex web of financial transactions keeping the company afloat was unraveling.

The government also is seeking to recoup $66 million from Skilling and $6 million from Causey.

Absent from yesterday's indictment was any mention of former Enron Chairman Kenneth Lay, long the public face of the company and a friend of President Bush. Skilling replaced Lay as CEO in February 2001, and Lay took the reins at the company again after Skilling resigned.

Stressing the importance of the arrests, Comey noted yesterday that Skilling was "the guy at Enron, both as the chief operating officer and the chief executive officer."

"When folks look at the record here and the work that's been done, the taxpayers have gotten their money's worth and are going to continue to get their money's worth," he said.

Skilling's indictment came on the heels of the government's plea deal with former Enron Chief Financial Officer Andrew Fastow and his wife, Lea. Andrew Fastow agreed to a 10-year prison sentence and promised to cooperate with the government in building a case against Lay and Skilling.

Twenty-eight people, including 20 former Enron executives, have been charged since the federal probe into the company began.

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