My first reaction to the news that former Enron chief executive Jeffrey Skilling had been sentenced to 24 years and four months in jail for his part in America’s largest corporate fraud was one of surprise at the severity of the jail term – particularly since US District Judge Sim Lake made it clear that he expected the majority of the term to be served. It just seemed such a long sentence when compared to those given to rapists, child molesters and drug dealers. But ‘white collar’ crime is far from victimless. On reflection, and after having read some of the testimonies from the many whose lives have been wrecked by Enron’s collapse, the tariff seemed all the more appropriate.
Back in May, Skilling had been found guilty on 19 counts of fraud, insider trading and lying to auditors while at the helm of Enron. Skilling continued to deny all the charges claiming that he was unaware of all the false accounting and off-balance sheet transactions. This surely opens him up to the charge of ‘Fool or Knave’ and given Skilling’s reputation for self-regard and arrogance, it is unlikely that he would accept the former. The only conclusion then, is that Skilling was fully cognisant of what was happening at Enron and that the court came to the correct verdict.
It was the ‘Midas’ reputation that Skilling enjoyed that fuelled the spectacular climb in Enron’s share price, reaching $90 a share at their peak, (by coincidence, framed share certificates in the now bankrupt company have been trading on eBay for around $90.) In the process, he managed to pull the wool over the eyes of Wall Street’s finest analysts – who were given short shrift if they ever dared to question any of Enron’s figures or ask for further detail. In light of what we know today, the nickname given to Enron’s corporate logo, “The crooked E”, seems entirely appropriate.
I thought I would turn to the blogosphere to see if anyone shared my initial reservations about the quality of justice in this case but found sympathy for Skilling in very short supply there. Some correspondents were willing to propose far more unpleasant fates for Mr Skilling, although as far as I know, the US is not looking to increase the number of inmates at Guantanamo Bay at this time. One typical blog read, “The breadth and scope of this criminal’s actions destroyed the lives of thousands of honest workers. I think that is worse than murder.”
Other bloggers were sceptical that Skilling would end up serving any serious length of time in prison, believing that his political connections would result in him receiving a pardon, in one of the departing actions of the current US President. “I doubt he’ll serve a day. And even if he does, his ‘Get Out of Jail Free Card’ will be delivered to him on January 19th, 2008”, read one entry.
The degree of vitriol targeted at Skilling no doubt reflects the bitterness of former Enron employees and investors who saw more than $60 billion in market value wiped out as well as more than $2 billion in pension plans. Some of these victims had the opportunity to address Skilling directly in court at the sentencing hearing. Unfortunately for Jeff Skilling, he became the sole lightening rod for anti-Enron resentment following the untimely death of convicted co-defendant and former Enron chairman Ken Lay and the plea bargain arrangement that saw Enron CFO Andrew Fastow handed a six-year prison term, in return for his co-operation with prosecutors.
The investors, employees and pensioners of Enron put their trust and faith in Skilling and, for them, this makes his duplicity, dishonesty and lack of integrity all the harder to bear. He was prepared to scheme and lie to enrich himself, knowing that it was his erstwhile friends and colleagues who would suffer, when the pack of cards inevitably collapsed. This is the worst kind of betrayal. As the old proverb says, “God defend me from my friends; from my enemies I can defend myself.”
P.S. On a cheerier note, I am sure you will join me in sending congratulations to PEi managing editor Sian Green on the birth of her son Bryn in early October.