Corporate Lepers, Local Heroes?

HealthSouth's Richard Scrushy appears to have benefited from the trial's hometown location. Will there be a repeat for Enron's chieftains?

By Kate Murphy

For CEOs and other top execs embroiled in scandal, 2005 was shaping up as a very rough year -- until this week. In March, Bernie Ebbers was convicted by a jury of cooking the books at WorldCom and is awaiting sentence. More recently, juries slapped Dennis Kozlowski of Tyco International (TYC ) and John Rigas of Adelphia Communications (ADELQ ) with guilty verdicts.

But on June 29, a Birmingham (Ala.) jury cleared HealthSouth (HLSH ) founder and hometown hero Richard Scrushy of all wrongdoing, despite testimony from a parade of former underlings claiming he was involved in a fraud for which several of them are now serving jail time (see BW Online, 6/30/05, "Scrushy Has a Score to Settle").

The question arises: Might Scrushy's acquittal carry lessons for former Enron Chairman Kenneth Lay and ex-CEO Jeffrey Skilling in their trial on conspiracy charges in Houston, scheduled to begin in January, 2006? Might another local jury reject the government's attempts to bring down two of its own? It's an intriguing question. Let me explain.

I've been covering developments in the Enron cases for several years now. And no doubt, key differences exist between the government's case against Scrushy and the case it's building against Skilling and Lay. For starters, HealthSouth remains a viable company employing thousands of people, whereas Enron is a skeleton of its former self.


  Enron employees who lost their jobs and retirement savings weren't the only people hurt. From local Porsche dealers to caterers, graphic designers, and travel agents, many folks either went out of business or took a tremendous hit because of what happened at Enron. No such fallout blew through the Birmingham (Ala.) area.

Secondly, though both companies and their execs gave generously to local causes, Enron was also known in the community for its aggressive and arrogant culture. Almost everyone in greater Houston has a story about an over-the-top encounter with an Enron employee.

I once had a date with an Enron trader who told me I was lucky he asked me out because he normally didn't date "outside the tribe."  One former Enron worker I knew liked to tell bartenders who refused to serve him yet another Tequila shot to "kiss his assets. And my booty is a hell of a lot bigger than yours," he'd say, slurring his words.

While Scrushy continued his visits to local churches and community events in the leadup to his trial, Lay and Skilling have done little to inspire sympathy since their indictments. Lay's alibi so far seems to be that he knew absolutely nothing.

And Skilling's behavior has been bizarre at times. Earlier this year, he started showing up at an Enron-related trial, against court orders, and created what police described as a drunken disturbance in New York City last year. These incidents have provoked speculation that he might claim an insanity defense.


  What's intriguing to me, however, is the reaction I've encountered from former employees of the fallen energy titans. At a recent screening of the documentary film, Enron: The Smartest Guys In the Room, many ex-employees who attended didn't blame the company's management or corrosive corporate values, much less their own actions, for the bankruptcy. Rather, they blamed the politicians, the bankers, the lawyers, or the media -- everybody but Enron's top brass.

Former execs I've interviewed still get emotional describing their cherished Enron business ethics. "We were the essence of capitalism," one former vice-president for governmental affairs told me, holding back tears. "Making money was the highest goal, and it was good. It was. It was good."  Several ex-employees maintained that Enron would still be a going concern if only the rest of the world "got it."

You hear the same from many lower-level former employees who attend the Enron-related trials in Houston as if they were sporting events. They sigh extravagantly and mumble unkind aspersions when government prosecutors question witnesses or make objections.


  But this is nothing compared to the scorn they heap on government witnesses they view as turncoats, like Enron whistleblower Sherron Watkins, and former Enron execs David Duncan and Ken Rice, who have testified for prosecutors. "May they rot in hell," one former Enron staff attorney told me. She blames them for her unemployment and worthless 401(k), not Lay and Skilling.

Of course, former employees like the ex-staff counsel aren't likely to serve on the jury hearing evidence against Skilling and Lay. But the trial's outcome could depend on who the 12 unbiased jurors perceive to be more arrogant -- the Enron executives or the government.

Murphy is a freelance writer living in Houston

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