Skilling's Sequel: Clueless
By Lorraine Woellert
Jeffrey Skilling has clearly learned a thing or two since his last visit to Congress. After a smoldering appearance before a House committee on Jan. 29, during which the former Enron CEO mostly sat in silence through a day of verbal flogging, Skilling came out swinging on Feb. 26.
Testifying before the Senate Banking, Housing & Urban Affairs Committee, Skilling was aggressive, interrupting several senators, questioning their assumptions, their analogies, their abilities, even challenging the veracity of a few lawmakers. In between, with the help of his lawyer, he doggedly defended himself against charges of wrongdoing.
For a man with a reputation as quick on his feet, it struck several senators as odd, indeed incomprehensible, that Skilling, with his Harvard MBA and savvy business background, never caught a whiff that something was rotten at Enron. "You're very smart," noted Senator Barbara Boxer (D-Calif.). "That's why I don't believe you."
This was a made-for-the-cameras hearing. The banking panel sat Skilling between Enron's top whistle blower, Vice-President Sherron Watkins, and a man whose testimony Skilling continues to challenge, former Enron Treasurer -- now President -- Jeff McMahon. It was quite a picture: The former CEO sandwiched between a pair of surviving Enron execs who have questioned his account of the circumstances leading up to energy giant's collapse.
The trio turned the hearing into five hours of "he said, he said, and she said." Skilling stared intently at Watkins during her opening statement, almost seeming to be glaring at her. But when it was his turn to speak, he never took her on directly. Instead, he blamed his accountants, blamed his subordinates, blamed the financial system, then blamed his accountants again for failing to alert him to Enron's troubles.
While Watkins was sympathetic to ex-Enron CEO Ken Lay when she first appeared before Congress earlier this month, this time she placed at least some of the blame for Enron's collapse on Skilling's predecessor for failing to save the company when he had a chance. The low-key McMahon wouldn't be drawn into the blame game but did admit that his $1.5 million retention bonus "probably wasn't necessary."
A corporate honcho who doesn't need huge sums of money to do his job -- and admits it? The moment of candor caught the entire room off-guard, even prompting Senator Peter Fitzgerald (R-Ill.) to apologize to McMahon for having to bring it up in the first place. Watkins, who received no such retention bonus, remained silent during the exchange.
So what did Congress learn from the latest Enron testimony? Mostly, that for such a highly paid and reputedly savvy CEO, Skilling seemed awfully clueless.
He couldn't recall whether he had received $5.6 million in bonuses in 2000. He doesn't know how much Enron stock he sold in 1999 and 2000, while he was talking up the company's shares to its workers. He didn't know that the Raptors entities were backed with $700 million in Enron stock. He didn't know the off-the-books Chewco was undercapitalized.
He didn't know former Enron CFO Andrew Fastow was raking in tens of millions of dollars from his LJM partnerships. He didn't know that former Enron Treasurer Ben F. Glisan Jr. had a stake in some of those same deals. He didn't know how many subsidiaries Enron had in offshore tax havens (all he did say was that it wasn't that many). He didn't recall when Wall Street analysts began questioning Enron's earnings. At one point, an exasperated Senator Ron Wyden (D-Ore.) declared: "I'm not clear what you spent your time on."
So what did Skilling know? That Enron never had a problem on his watch. That the company was "illiquid," not insolvent. That everything would have been just fine if creditors had just given the company a couple months. And that his mentor, Ken Lay, "doesn't deserve prison" for whatever his role might -- or might not -- have been in last year's California energy crisis.
"I don't know if we've gotten much closer to the truth today," Senator Byron L. Dorgan (D-N.D.) said at the end of the session. But that has never stopped Congress from putting on a good show. And the committee has four more hearings to go.
Woellert, who covers Congress for BusinessWeek, is following the Enron hearings on Capitol Hill
Edited by Douglas Harbrecht