by John M. Curtis
(310) 204-8700

Copyright February 8, 2002
All Rights Reserved.

aking the hot seat before the House Energy and Commerce subcommittee, silver-tongued ex-Enron CEO Jeffrey K. Skilling denied knowing—at the time he resigned on Aug. 14—the energy titan was about to go broke. As far a Skilling knew, Enron was "solvent and highly profitable" also denying knowing anything about the shady off-the-books partnerships that kept debts looking low and profits high. Unlike his colleagues who took the 5th Amendment, Skilling gambled, believing his prodigious schmoozing skills would get him off the hook. Skilling blamed Enron's collapse on "a classic run on the bank," totally ignoring Enron's unexpected disclosure on Oct. 15 that it overstated profits by $586 million and reduced shareholder equity by a whopping $1.2 billion, leaving $31 billion in debt. When Dynergy came to its senses and rejected merger, Moodys downgraded Enron's bonds to junk, sending shares plummeting to 35 cents. Though cooperative and appearing in charge, Skilling still looked incredulous to the House panel.

      Before Skilling took the stand, Enron's former Chief Financial Officer Andrew S. Fastow, Managing Director Michael Kopper, Chief Accounting Officer Richard A. Causey, and Chief Risk Officer Richard B. Buy, all excercised their constitutional right against self-incrimination. Yet Skilling openly flapped his jaws in front of the House panel. Skilling even went so far as to say he was "devastated and apologetic about what Enron has come to represent," implying that the committee—and the press—gave his former company a bad rap. Welling up with tears, Skilling flashed some emotion remembering his close friend and former Enron Vice Chairman J. Clifford Baxter who reportedly committed suicide on Jan. 24. "He believed, as I believe, that we had created a great company . . . and to have a life time of work denigrated as it was in the press was very painful," Skilling told the committee—despite Baxter cashing in $28 million in stock before Enron went under. Skilling even speculated that Baxter's suicide was due to being "heartbroken" over Enron's failure.

      Yes, Baxter was probably depressed, but not over Enron's bankruptcy. Skilling—like his colleagues who already took the 5th—admitted feeling the heat now that it's time to face the consequences. "I hope you, in the dark night of your own souls, think about some of the people who . . . literally lost their entire life savings and whose lives effectively in many ways are destroyed because of your actions," said Rep. Peter Deutch (D-Fla.), trying to shame the button-lipped execs into opening up. No such luck. After cashing in their stock, they won't be talking anytime soon. Only Skilling wants his back slapped for not dumping his stock. But none of the others received the gargantuan severance package when Shilling bailed out last August. Shilling's "Sgt. Shultz" defense, namely, "I know nothing!" might backfire when more testimony counters his sworn statements. According to minutes at a key Enron board meeting in 2000, Skilling approved CFO Andrew Fastow's double-dipping in overseas partnerships.

      Despite the minutes, Skilling couldn't recall any discussion about using off-the-books partnerships to reduce volatility in Enron's profits, not, as the company claims, to reduce economic risk. Skilling also didn't recall any discussion of how these shady partnerships shielded Enron from showing excessive debt. "I can't for the life of me understand how we would go from where I thought the company was to bankruptcy," said Skilling, belying the minutes that clearly raised concerns about mounting red ink and Fastow's schemes for manipulating profits. "I did not believe that the company was in any imminent financial peril," said Shilling, strangely reminiscent of those immortal words, "I did not have sexual relations with that woman, Ms. Lewinsky." Yes, Skilling, like Clinton, was legally correct, using the words "imminent" and "peril." But his intent was to parse words, obscure meanings and avoid accountability. Skilling testified because he believed he could blow smoke rings around even the most belligerent congressmen. Putting in his own exclamation point, "While I was at Enron, I was not aware of any financing arrangements designed to conceal liabilities or inflate profitability."

      Categorical denial is always the first line of defense for anyone accused of wrongdoing. By facing the panel and not taking the 5th, Skilling preserved his credibility, carefully snaking his way through the swampland between fact and fiction. Despite contradictory information, remaining cool and collected, affable and witty and sticking to his story, he raised the plausible deniability needed to get off the hook. "It was a major mistake for him to testify, and he painfully proved it," said T. Gerald Treece, associate dean of South Texas College of Law, believing that Skilling hurt his cause. "I'm sure that his lawyers were bashing their heads in the wall as he was talking," totally missing the essential point that he was following his lawyers' advice. Unlike the others, Skilling has the persuasive skills to pull it off. Acting clueless helps Skilling by avoiding the stigma of remaining silent. Lawyers worry that creating a public record under oath is subject to eventual impeachment. But it's still preferable to the damage caused by taking the 5th.

      Spinning tall tales is usually preferred over clamming up and creating undo suspicions. Contrary to legal advice, incessant talking bends minds and sells an otherwise gullible audience—including judges, juries and the public at large. Shilling's performance before the House subcommittee seemed plausible despite many loose ends. Skilling never explained why Andersen's David Duncan shredded untold numbers of documents up until the end of January, nearly one month after Enron received notice that the SEC began its probe. If you buy Skilling's spin, no one at Enron did anything wrong, including all the off-the-books partnerships and insider stock dumping during the year before Enron's meltdown on Dec. 2. After all, Clinton's former attorney Bob Bennett, now representing former Enron CEO and Chairman of the Board Kenneth L. Lay, said Andersen was guilty of nothing more than "creative accounting." As long a Skilling keeps his story straight, sticks to his guns, and his signature doesn't turn up on any incriminating documents, he's got a good shot of getting off hook. Silence has its place, but it's no substitute for blowing a lot of smoke.

About the Author

John M. Curtis is editor of OnlineColumnist.com and columnist for the Los Angeles Daily Journal. He's director of a Los Angeles think tank specializing in political consulting and strategic communication. He's author of Dodging The Bullet and Operation Charisma.

©1999-2012 Discobolos Consulting Services, Inc.
(310) 204-8300
All Rights Reserved.