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Enron trial fun

Ah. My fun reading for this week is going to include testimony from the Enron trial. For those not keeping track, the trial is reaching somewhat of a crescendo this week, with former CEO Jeff Skilling taking the stand in his own defense. He is using the time-honoured defense of most crooked CEOs: the No Clue defense. As in: "I had no clue that the company I'd been running for four years was cooking the books!". Is that believable? If true, what does such an admission say about the competence of corporate executives, in general? If Skilling and Lay are found to be innocent through incompetence, maybe the lawmakers who deal with Wall Street should consider creating a law akin to involuntary manslaughter for large-scale fraud.

The No Clue defense isn't really believable, anyway. Here's an older NYT article which points out inconsistancies in Skilling's defense. The Big Inconsistency: Skilling has flatly denied that Enron used cash reserves to bolster company earnings (an illegal practice). A former Enron accountant has already pointed to one specific instance of this happening (July 2000, to the tune of $14,000,000). Skilling also claims to have read every financial schedule from "cover to cover", and never saw any problems within. That kinda blows away any claim that he could be ignorant of the fraudulent accounting, although it's still minutely possible that he was too incompetent to notice the scams. There are other recollection problems highlighted in the NYT article.

I've been trying to find Jeff Skilling's net worth via google without much luck. He did sell large quantities of Enron stock in September 2001, just two months after his abrupt resignation, worth about $15.5 million. He claimed, during the investigation, that he sold this stock because he was worried about a market crash after September 11th, but his original sale request went to the broker on September 6th. It was held up for a while because his broker wanted to ensure that Skilling wasn't breaking any SEC rules, given his recent position.

I hope that by the end of the trial, we're calling it the "No Hope" defense. Rot, you bugger, rot.

Hey Bri,

It's the standard pattern for business and politics - if given the option between looking guilty and looking stupid, choose stupid.

"Involuntary manslaughter for large-scale fraud". I love it!

H-

Briguy,

Your stats on Skilling's stock sales are woefully short of the mark: May 2000, he sold 450,000 for $33 mm. In September he sold 500,000 for a total of $70 mm in 2000.

In 2001 he sold an additional 700,000 shares between prices of $70 and $50 per share, netting him approximately $42 mm more.

All told, his compensation at Enron over 10 years netted him close to $200 mm.

Lou Pai actually got away with more: After he left Enron, he converted his stock and options for more than $250 mm and bought land in Colorado--at which point he was the second largest private land owner in the state.

Lay got away with about $300 mm, from stock sales, all told.

Wow, thats a pile of dough! I don't think there has been a bank heist in history that can match that sum of money, even if you were to adjust it to present day dollars.
Does anyone know what these thieves would get if they did jail time? I did say that with my fingers crossed in hope.

Paul

Millermj,

Thanks for the info! I tried googling "Jeff Skilling" "net worth" and didn't have much luck. It's good (or bad, maybe) to know exactly how much these bandits stole. I wonder how much of that money came directly from the deregulation of power and resulting chaos in California?

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