Did he[Skilling] sit upright one night and realize he'd lost control of Andrew Fastow, the company's chief financial officer? Did he notice the Fastow black box was beginning to emit strange noises, odors, an occasional wisp of greasy smoke, suggesting all was not right inside?
Did he know Fastow and a close aide had fattened their own wallets with tens of millions at Enron's expense as the price for arranging transactions to conceal losses on various Enron-owned assets that had declined in value? Was his resignation a sublime stratagem to make sure somebody else -- Ken Lay -- would be presiding over Enron when the revelations that Mr. Skilling was fleeing became public?
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We admit to finding this theory tempting: Mr. Skilling, from the moment he decided on resignation, has been engaged in a high-wire bluff to avoid accountability for Fastow's actions, including his incredibly nervy decision to testify under oath before a Congressional panel even as Mr. Lay did the normal thing and heeded his lawyer's advice to plead the Fifth.
Alas, the Justice Department's Enron Task Force seems unwilling to get to the bottom of Enron, preferring to frame the trial in Houston as a "pump and dump" case, in which Mr. Skilling and Ken Lay talked up the failing company's shares while selling their own. The implicit narrative: Mr. Lay and Mr. Skilling are rich and Enron collapsed, so they must be guilty of something that amounts to not announcing to the world that Enron was destined to collapse.
Missing, though, is an important element of narrative credibility in Mr. Lay's case, since his stock sales seem to have been involuntary, forced by margin calls. He even forked over $10 million in cash, his signing bonus for returning as CEO, to prevent further liquidation of his soon-to-be-worthless shares. That one is born every minute might seem betokened, furthermore, by Mr. Lay's very presence as co-defendant with Mr. Skilling in the dock. He's there, it's easy to suspect, mainly because failing to indict Mr. Lay (former friend of President Bush) would have subjected the Enron Task Force to Democratic charges of political favoritism.
Mr. Skilling, after all, persuaded the board to approve Fastow's role in outside companies created to do deals with Enron. He knew some of these transactions, the Raptors, accounted for much of Enron's reported profits in two successive years. He was apparently incurious about how much Fastow was pocketing from his non-arm's length dealings with Enron. When a company insider, Sherron Watkins, finally determined to blow the whistle, she went not to Mr. Skilling but to Mr. Lay. And so forth.
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Even the mainstream press has turned a skeptical eye on the government's tactic of naming more than 100 "unindicted co-conspirators," frightening many former Enron executives and outside advisors away from testifying for the defense. All this is done, we suspect, more to protect the government's case against Mr. Lay than its case again Mr. Skilling: Just one more way in which the prosecution may end up hurting itself by needlessly conflating a weak story about Mr. Lay with a plausible one about Mr. Skilling -- that he gave Fastow too much rope and then ran away in full cognizance of what he had begotten, making fools of Mr. Lay, and the board.
Given the inherent difficulties of accounting fraud trials, you'd have thought the prosecution would have seized the opportunity to present a case that any jury could understand: Andrew Fastow was stealing and Mr. Skilling knew, but looked the other way because Fastow's activities were propping up Enron's stock price and reported profits.
Once again, I think Lay had his head in the sand, he was forced to sell his shares in Enron to meet margin calls. Is he guilty of being a bad executive? Sure. Is he guilty of having shaky personal finances (and I believe criminal but not for this trial)? Sure. Should those failings be criminal? Absolutely not. He's a figurehead in this investigation, the Enron Task Force would be seen as a failure if they didn't at least indict and try Lay, they've done that. Unfortunately for them, they're going to have a tough time presenting the facts that prove he committed a crime.
Update: For more on the Enron trial see Enron Trial, Soprano Style Litigation, More Enron and Enron Love.
Other Enron analysis can be found at Houston's Clear Thinkers.
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