Jeffrey Skilling

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Jeffrey Skilling, credit AP Worldwide. From the movie Enron: The Smartest Guys in the Room

Jeffrey Keith "Jeff" Skilling (born November 25, 1953) is the former CEO of Enron Corporation, who was convicted of federal felony charges relating to Enron's financial collapse. Skilling, who headed Enron from February to August 2001, surrendered to the Federal Bureau of Investigation on February 19, 2004 in connection to the fraud charges against Enron and Skilling's predecessor/successor in the CEO position, Kenneth Lay.

After a 56-day trial ending with a jury verdict on May 25, 2006, Skilling was found guilty of 19 out of 28 counts against him, including one count of conspiracy, one count of insider trading (although he was acquitted of the other nine counts of this particular charge), five counts of making false statements to auditors, and twelve counts of securities fraud. Each conviction carries a maximum sentence of 5 to 10 years in prison.^[1] On October 23, 2006, Skilling was sentenced to 24 years and 4 months in federal prison ^[2] for his 19 counts of conviction. On 13 December 2006 Skilling was ordered to report to Federal Correctional Institution, Waseca in Waseca, Minnesota to begin serving his sentence.^[3]

1 Personal life
2 Enron
- 2.1 Indictment and trial
3 Notes
4 See also
5 External links
6 Media appearance
7 References

[edit] Personal life

Skilling was born in Pittsburgh, Pennsylvania the second of four children. He grew up in New Jersey and Aurora, Illinois. When he was 16, he was the chief production director for WLXT Channel 60, a UHF television station in Aurora.

After graduating from West Aurora High School (where he graduated number 16 in a class of 600), Skilling received his B.S. in applied science at Southern Methodist University (1975), where he was a member of Beta Theta Pi. During his admissions interview for Harvard Business School, he was asked, "Are you smart?" – to which he famously replied, "I'm fucking smart". [1] Skilling earned his M.B.A. from Harvard in 1979, graduating in the top five percent of his class. He became a consultant at McKinsey & Company in the energy and chemical consulting practices.

Skilling has a 22-year-old daughter, a 20-year-old son, and a 16-year-old son from his first marriage, which ended in divorce in 1997. In March 2002, he married Rebecca Carter, a former vice president for board communications and board secretary at Enron. Skilling is the younger brother of Tom Skilling, the chief meteorologist of WGN-TV (Channel 9) in Chicago, Illinois.

Skilling had a breakdown on the streets of New York City in April 2004, in which he harassed people on the street and accused total strangers of being undercover FBI agents. Police responding to the 911 calls found him uncooperative and concluded that he was emotionally disturbed and in need of emergency assistance. ^[4]

[edit] Enron

Enron logo

As a consultant for McKinsey & Company, Skilling worked with Enron in 1987, helping the company create a forward market in natural gas. Skilling impressed Kenneth Lay in his capacity as a consultant, and was hired by Lay in 1990 as chairman and chief executive officer of Enron Finance Corp. In 1991, he became the chairman of Enron Gas Services Co., which was a result of the merger of Enron Gas Marketing and Enron Finance Corp. Skilling was named CEO/managing director of Enron Capital & Trade Resources, which was the subsidiary responsible for energy trading and marketing. He was promoted to president and chief operating officer (second only to Lay) of Enron in 1997, while remaining the head of Enron Capital & Trade Resources. In 1999, Enron launched EnronOnline, an Internet-based trading operation, which was used by virtually every energy company in the U.S.

Skilling began advocating a strange idea: the company didn't really need any "assets." By pushing the company's aggressive investment strategy, he helped make Enron the biggest wholesaler of gas and electricity, with $27 billion traded in a quarter. On February 12, 2001, Skilling was named CEO of Enron, receiving $132 million in a single year.

The firm's figures, however, had to be accepted at face value. Under Skilling, Enron adopted mark to market accounting, in which anticipated future profits from any deal were tabulated as if real today. The possibility of unforeseen setbacks was dismissed as a lack of faith. Thus, Enron could record gains from what over time might turn out losses, as the company's fiscal health became secondary to manipulating its stock price on Wall Street during the Tech boom. But when a company's success is measured by agreeable financial statements emerging from a black box, a term Skilling himself admitted, actual balance sheets prove inconvenient. Indeed, Enron's unscrupulous actions were often gambles to keep the deception going and so push up the stock price, which was posted daily in the company elevator. An advancing number meant a continued infusion of investor capital on which debt-ridden Enron in large part subsisted. Its fall would collapse the house of cards.

Under pressure to maintain the illusion, Skilling began to behave strangely. In April 2001, he verbally attacked Wall Street Analyst Richard Grubman^[5], who questioned Enron's unusual accounting practice during a recorded conference call. When Grubman complained that Enron was the only company that could not release a balance sheet along with its earnings statements, Skilling replied "Well, thank you very much, we appreciate that . . . asshole." Though the comment was met with dismay and astonishment by press and public, it became an inside joke among many Enron employees, mocking Grubman for his perceived meddling rather than Skilling's lack of tact.^{[citation needed]}

Skilling greeted the California energy crisis with amusement, jokingly asking one meeting of Enron employees the difference between California and the Titanic ("At least when the Titanic went down, the lights were on"). [2] Skilling later attributed the remark to frayed relations between Enron and California. [3] His employees, meanwhile plotted to keep the price of energy high in California.^[6]

Skilling unexpectedly resigned on August 14 of that year, citing personal reasons, and he soon sold large blocks of his shares in the corporation.^{[citation needed]} Then Enron chairman Kenneth Lay, who previously served as CEO for 15 years, replaced him until the company declared bankruptcy in December of 2001. When brought in front of congressional committees, he stated that he had "no knowledge" of the complicated chain of scandal that would eventually result in Enron's bankruptcy.^{[citation needed]}

On March 28, 2001, PBS's Frontline interviewed Skilling, where he claimed Enron was one of "the good guys". ^[7]

[edit] Indictment and trial

Main article: Trial of Kenneth Lay and Jeffrey Skilling

Skilling was indicted on 35 counts of fraud, insider trading, and other crimes related to the collapse of Enron. He pleaded not guilty to all charges. The main reason for his arrest was his probable knowledge of the fraudulent transactions within Enron. About a month after quitting Enron, Skilling sold almost $60 million of his stake in the company (in blocks of 10,000 to 500,000 shares), leading to the prosecutors' allegation that he sold those shares with inside information of Enron's impending bankruptcy. Skilling's attorney is Daniel Petrocelli, the 52-year-old civil litigator who represented Ron Goldman's father against O.J. Simpson in civil suit. Skilling spent $40 million in preparation for the trial, at least $23 million of which going to his defense lawyers' retainer. Skilling's younger brother Mark is an attorney and assisted his legal team during the criminal trial.

The trial commenced on January 30, 2006 in Houston, despite repeated protests from defense attorneys calling for a change in venue on the grounds that "it was impossible to get a fair trial in Houston – the epicenter of Enron's collapse. Enron's bankruptcy, the biggest in U.S. history when it was filed in December 2001, cost 4,000 employees their jobs and many of them their life savings. Investors lost billions." On May 25, 2006 Skilling was found guilty on 19 counts of conspiracy, fraud, false statements and insider trading. He was found not guilty on nine counts of insider trading. Skilling, known for his arrogance and harsh attitude, came off in a mostly positive light, though he did lose his temper on the stand. ^[8]

On October 23, 2006, Skilling was sentenced to 24 years and 4 months in prison in Waseca, Minnesota, and fined $45 million for his role in the collapse of Enron. The case is currently under appeal. Skilling's request to remain free during the appeal was denied by Judge Patrick Higginbotham of the 5th U.S. Circuit Court of Appeals on December 12, 2006. In ordering Skilling's immediate imprisonment, the judge wrote, "Skilling raises no substantial question that is likely to result in the reversal of his convictions on all of the charged counts" [4], although the order also noted "serious frailties" in the convictions.

Jeff Skilling entered prison at Waseca, Minn on 12-13-2006 to begin a 24 year and 4 month sentence.

[edit] Notes

In a front page interview with The Wall Street Journal on 17 June 2006, Skilling claims, amongst other things, that: (1) he had been in a depression after the Enron bankruptcy and considered committing suicide, but that his indictment actually lifted his spirits and brought him out of his depression, (2) he states that the worst witness against him was himself, and (3) he says that he will be able to survive a long prison term - as long as he is given "something to do, something to accomplish" while in prison.
Both Skilling and Lay were members of Beta Theta Pi.
Tom Skilling, a WGN News Chicago TV meteorologist, is Jeffrey's older brother.