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|  | FEBRUARY 19, 2004
The Case Against Jeff Skilling Enron prosecutors haven't been dragging their feet. With few of the ex-CEO's directives in writing, they have no smoking guns Ever since Enron Corp. collapsed more than two years ago, the Justice Dept. has been hot on the trail of former CEO Jeffrey K. Skilling. A chorus of critics have charged prosecutors with foot-dragging. But they're missing the point. The real reason it has taken so long to indict Skilling is that putting him behind bars is going to be a surprisingly tough thing to do. The visionary manager, who graduated in the top 5% of his class at Harvard Business School and made partner at McKinsey & Co. in a nearly record-breaking five years, did an amazing job keeping his fingerprints off the Enron disaster. He bailed out of the energy giant just in time, two months before the first disclosure of accounting problems and four months before it declared bankruptcy. He initiated an automatic stock-sale program, which will help insulate him from any potential insider-trading charges, 10 months before he resigned. He rarely used e-mail or gave orders in writing. Alone among the current crop of vilified corporate chieftains, he seems to have managed to walk away from the ruins without leaving a trace. HUNGRY FOR HIS HEAD. Skilling will be the hardest target yet for the hand-picked prosecutors on the Enron Task Force, which is expected to indict the former CEO on Feb. 19 (Editor's note: Skilling was indeed indicted, see "The Books Being Thrown at Skilling" and "Jeff Skilling's Morning in Court"). Millions of pages of internal corporate documents have been made public, and so far not one smoking gun has emerged directly linking Skilling to wrongdoing at the company. That means Justice's case may have to be built entirely on circumstantial evidence. "People talk as if Jeff Skilling rolled up his sleeves and said: 'This is how we are going to do these transactions,'" says his lawyer, Bruce Hiler of the Washington office of O'Melveny & Myers. "That just isn't true." The Skilling case looms large because the public, fairly or not, sees Enron's top executives as the poster boys of corporate crime -- and won't be satisfied with the cleanup until they're dealt with. While the government has nabbed several key execs, including former Chief Financial Officer Andrew S. Fastow and ex-CEO David W. Delainey of Enron Energy Services (EES), none of these scalps will matter to burned investors if Skilling and ex-Chairman Kenneth L. Lay remain untouched. "Skilling embodies the arrogance that led to the whole raft of corporate scandals more than any other figure," says George Washington University Law School Professor Lawrence E. Mitchell. "It would be a disaster to indict him, go to trial, and lose the case." A FAIR TRIAL? Clearly, it will be challenging to send Skilling to jail, but prosecutors have more than a few cards to play. The Justice Dept. has won cooperation from several key executives who worked closely with him. When a case is filed, they will be able to testify about any verbal instructions they may have received from the former CEO -- who often left messages on voice mail, according to one high-ranking former manager. And Skilling's notoriety, in the end, could seal his fate. The 50-year-old Houstonian has become a symbol of corporate irresponsibility. Politicians and pundits have already pronounced him guilty in the court of public opinion. "Truthfully, do you think Jeff Skilling can get a fair trial anywhere in America?" asks criminal defense lawyer Robert Mintz, a former Assistant U.S. Attorney in New Jersey who prosecuted white-collar cases. "It is difficult to find a jury that can approach this case with a completely open mind." That, in fact, gets at a perplexing aspect of this case. When viewing Enron from a distance, most people assume Skilling must be guilty. But the assumption becomes murkier when examined up close. AUTOMATIC STOCK SALES. Consider the issue of insider trading. It is, in the public mind, the chief sin of Enron's leaders. Well aware of the company's problems, they dumped more than $1 billion worth of stock before the final collapse. And Skilling, who sold 1.12 million shares for $67 million between 1999 and his resignation in August, 2001, joined right in. Unlike, say, the friends and family allegedly tipped off by ImClone Systems (IMCL ) ex-CEO Samuel D. Waksal, Skilling held on to a large percentage of his stock. From July, 1999, until his departure from the company more than two years later, Skilling always owned more than 1 million shares. Throughout that period, he exercised options and sold shares at about the same rate he got new ones. And Skilling didn't trade like a man who was racing to get his money out of the market before bad news hit. Many of his biggest stock sales took place in 1999 -- well before the deals that led to the company's demise. In November, 2000, more than a year before the company went bankrupt, Skilling executed an automatic stock-sale plan, instructing his broker to sell 10,000 shares a week. Under Securities & Exchange Commission rules, this type of program serves as a defense against insider-trading charges for sales executed after it began. Skilling halted the plan and made his last sale as an employee on June 13, 2001 -- nine weeks before he left the company. "If he thought the whole company was a house of cards at this point, would he have stopped selling?" asks Hiler.
BW MALL
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