Feb. 19, 2004, 10:08AM
Enron's Skilling charged
By MARY FLOOD
with insider trading, fraud and more
Copyright 2004 Houston Chronicle
The 42-count indictment, unsealed this morning, lays out the government's case that Skilling and ex-CFO Richard Causey lied and schemed to pump up the company's stock price to enrich their personal bank accounts at the expense of the Houston energy giant, which collapsed into bankruptcy and put thousands out of work.
Between 1998 and 2001, the indictment states, Skilling raked in an $89 million profit from the sale of artificially inflated Enron stock and options -- on top of a $14 million salary.
Causey netted a $5 million profit from such sales, in addition to $4 million in paychecks, the indictment says.
The indictment seeks forefeiture of Skilling's River Oaks home and Causey's Woodlands home in addition to prison time that prosecutor Sam Buell said could add up to 325 years in prison and $80 million in fines. Federal sentencing guidelines, however, would determine how much punishment could actually be levied.
Accompanied by a gaggle of high-powered attorneys including Bruce Hiler of Washington and Dan Petrocelli of Los Angeles, Skilling arrived at the FBI's local headquarters just before 7 a.m. and silently ran a gantlet of television cameras. Asked by reporters how his client was doing, Petrocelli replied, "under the circumstances extremely well."
Minutes later, FBI agents drove their handcuffed suspect to Houston's federal courthouse downtown. As cameras flashed and a news chopper hovered overhead, FBI agents escorted the once-powerful businessman in through the backdoor of the courthouse, where he stood before U.S. Magistrate Judge Frances Stacy to hear his charges, arrange for bail and enter his innocent plea.
The top Enron executive to be accused of a crime in the trading giant's downfall, Skilling had to borrow a tie from a marshal before the hearing could begin.
Skilling's lawyers suggested prosecutors have gotten caught up in their zeal to prosecute such a high-ranking Enron official.
"The only thing this indictment shows is that when the government sets up a task force designed to indict a particular person, that person will be indicted," Hiler told the Chronicle. "They've indicted an innocent man, and we will begin showing you that today."
The long-awaited indictment, which adds to and supercedes a previous indictment against Causey, hurls a battery of charges against the pair:
• Conspiracy to commit securities and wire fraud
• Securities fraud involving Enron's notorious Raptor deals as well as other transactions
• Wire fraud
• Securities fraud for presentations made to stock analysts
• Making false statements to auditors in annual and quarterly letters
• Insider trading.The indictment names as co-conspirators Andrew Fastow, Enron's former chief financial officer who's already struck a plea bargain that will give him 10 years in prison; Ben Glisan, the former treasurer who is serving five years; David Delainey, former CEO of Enron North America and Energy Services, whose plea bargain requires him to hand nearly $8 million to the government and the SEC; Wesley Colwell, former chief accounting officer for Enron North America; and Michael Kopper, a former aide of Fastow who is awaiting sentencing.
"This is the Holy Grail the government has been pursuing for two years," said Robert Mintz, a former federal prosecutor in New Jersey. "This is a vindication in the minds of the public that the dramatic downward spiral could not have occurred without the knowledge of those at the top."
Skilling has consistently denied knowledge of any wrongdoing and testified before Congress he had done nothing improper.
"From the day of Jeff Skilling's testimony before Congress, he was marked in the eyes of the task force," said Jacob Frenkel, a Washington, D.C.-based former federal prosecutor and SEC lawyer. He said that when a case gets to the level of a CEO it will likely go to trial and be a "slugfest."
The only Enron corporate kingpin above Skilling was ex-board Chairman Ken Lay, who has not been charged. Prosecutors are still investigating Lay. He also has maintained he did nothing wrong.
The charges against Skilling come on the heels of the Jan. 21 indictment of Causey and the Jan. 15 guilty pleas of Fastow and his wife, Lea.
Legal experts familiar with the cases expect that Fastow, who agreed to serve 10 years in prison for two counts of conspiracy, gave prosecutors information that aided the case against Skilling.
Skilling joined Enron in 1990 and served as chief operating officer from 1997 through early 2001. He served as CEO for only six months in 2001 before he abruptly resigned in August 2001, at a time the stock price was declining and shortly before the company imploded.
But he told Congress he thought everything at the company was in good financial shape and it only declined because public discussion about Fastow's side deals caused people to lose confidence in the company. It was the equivalent of a "run on the bank," Skilling told Congress.
Attorneys in the case had expected charges against Skilling to mirror the earnings manipulations allegations prosecutors leveled at Causey last month.
When Causey pleaded not guilty to the initial six felony conspiracy and fraud charges, prosecutor Buell said Causey and other Enron senior managers told the public the company was in "robust health and growing rapidly" when it was really "propped up by accounting schemes and, in many areas, was failing."
Prosecutors already alleged Causey, with other executives, set budget targets and used a series of deceptive vehicles to make it appear the company met those targets. This was done, the government charged, to fool investors and profit from the higher stock prices.
Causey's attorneys, Reid Weingarten and Mark Hulkower, have repeatedly said their client did nothing wrong and will fight the charges.
Defense lawyers analyzing the Causey indictment have said they think the government's earnings manipulation arguments could be complicated and difficult to tie together for a jury.
Skilling is expected to argue that the deals in question were reviewed by sometimes dozens of lawyers and accountants and that some subordinates such as Fastow hid their crimes from Skilling. He'll also argue the deals had real business purposes that would trump the nefarious purposes prosecutors allege.
Chronicle staffer David Kaplan contributed to this report.
Karl Stolleis/ChronicleFBI agents lead former Enron CEO Jeff Skilling in handcuffs to Houston's federal courthouse this morning to face a 42-count indictment that also names former CFO Richard Causey.
