Brash Enron Chief, Brash Strategy
The New York Times
February 25, 2002
By KURT EICHENWALD
W hen the time came earlier
this month for executives
from the Enron Corporation
(news/quote) to explain their
roles to Congress in the events
that led to the company's
collapse, all the top officials
whose actions are being
examined by federal prosecutors
chose to invoke their Fifth
Amendment right against
self-incrimination.
All, that is, except Jeffrey K.
Skilling, Enron's former chief
executive.
In a decision that has left legal
experts and other Enron
executives flummoxed, Mr.
Skilling spent much of Feb. 7 on
Capitol Hill, taking hostile
questions from members of a
House Energy and Commerce
subcommittee. As a result, Mr.
Skilling is now locked into a
series of answers that can be
used against him, regardless of
the direction the criminal case
takes. Tomorrow, he returns to
Congress, this time to answer the
questions of a Senate panel.
Why is he doing it? The answer appears to be based in
part on the character of the man, as well as on the unique
circumstances of the sprawling Enron investigation. It is,
in essence, a high-risk, high-wire legal strategy with a
logic that applies only to the given circumstances, but one
that may ultimately prove to be a colossal blunder.
By cooperating in recent months with other investigators,
however, Mr. Skilling and his lawyers gained access to
crucial documents that could help them formulate their
legal strategy. And he had little to lose by repeating before
Congress much of what he had already said, rather than
suffering the embarrassment of invoking the Fifth.
The risks, according to defense lawyers and prosecutors
familiar with white-collar cases, are almost self-evident.
People who take public and irreversible positions in a
criminal case may be confronted by their own words if
they testify at a trial. That could increase the legal
jeopardy they face, regardless of whether they had done
anything wrong.
"Anybody who is really under severe scrutiny," said Jack
Bray, a prominent white-collar defense lawyer at the King
& Spalding office in Washington, "as so many of these
Enron people would be, is absolutely going off the high
board without looking down into the pool if they testify
before Congress. For everybody who has accomplished
anything by doing it, there are nine guys splattered on
the bottom of the pool."
Beyond the legal peril, such testimony appears to
accomplish little in the long run, lawyers said. Most
people who testify in such situations hope to persuade
Congress that they cannot be blamed for the events under
investigation, as well to save themselves from
embarrassment by not invoking the Fifth. But such goals
are seldom accomplished.
Mr. Bray said, "They usually get gunned down in a series
of interrogations that hurt them, embarrass them and
portray them in the way they don't want to be portrayed."
There is plenty of evidence that Mr. Skilling has suffered
far more damage, at least in terms of public relations,
than even the former chairman of Enron, Kenneth L. Lay,
who chose to invoke the Fifth. Mr. Lay took more than an
hour of public attacks, but ever since Mr. Skilling
answered questions, his testimony has been parsed,
criticized and even held up as an example of possible
perjury.
"All the information we got was that he really thought he
was smarter than everybody in Washington,"
Representative Billy Tauzin, Republican of Louisiana, said
on the CBS News program "Face the Nation" on the
weekend after Mr. Skilling's testified, "that he could come
and just, you know, flamboozle us, just tell us anything
he wanted, and we would buy it. I'm afraid he may have
put himself in some legal jeopardy as a result."
Asked about the reasons behind the decision to testify,
Bruce Hiler, Mr. Skilling's lawyer, gives a succinct answer.
"Jeff explained when he appeared before the House why
he was testifying," Mr. Hiler said. "He said he felt he owed
it to the men and women of Enron and that he hadn't
done anything wrong."
To some degree, current and former Enron executives who
know Mr. Skilling said, the decision to testify was right in
character. A proud man often criticized as arrogant, Mr.
Skilling delighted in dangling his intelligence and success
in front of others. The embarrassment he would have
suffered among his friends and family for invoking the
Fifth would have been devastating, those executives say.
"If you know Jeff, you know why he testified," said one
executive who knows him well. "He's arrogant and
competitive. He couldn't let somebody else win and force
him to humiliate himself."
Some outside lawyers have interpreted that common
explanation as a sign that Mr. Skilling is testifying against
his lawyer's own advice. Mr. Hiler refused to say anything
about his advice, but he signaled that the decision had
been made as part of a broader legal strategy.
"I'm sure there are those who, for their own reasons, wish
he were not testifying," Mr. Hiler said. "And there are
others who don't understand the facts and the evidence."
In truth, while publicity about the Enron case has
exploded in the last eight weeks, Mr. Skilling effectively
made the decision about whether to testify many months
ago. Enron began to spiral toward collapse in the fall,
when much of the country was focusing attention on the
terrorist attacks. But during that time, the Securities and
Exchange Commission began its Enron investigation, as
did a special committee of the company's board.
Both groups, working with little public attention, collected
plenty of documents - the S.E.C. by subpoena, and the
special committee by simply demanding them. Unlike
most executives in such circumstances, Mr. Skilling had
access to few of those records because he had resigned
from the company in mid-August, citing personal reasons.
When both investigative groups asked Mr. Skilling to
testify, he said yes. That gave Mr. Skilling and his legal
team access to important documents that they otherwise
might not have been able to get, weeks or months before
his Congressional appearance. Providing such documents
to witnesses is standard procedure in such interviews.
So by deciding to speak to the S.E.C. and the special
committee, Mr. Skilling had not only the opportunity to
refresh his recollection of events based on the available
documentation but also had a chance to become aware of
any potential issues raised by the documents that posed
legal dangers for him.
Once the decision to cooperate was made, it could be
argued, most of the potential damage from testifying had
already occurred. He was interviewed for two days by
S.E.C. investigators, who were able to drill in on certain
issues, long before he took questions from members of
Congress, each afforded only a few minutes.
The same holds true for his statements to the lawyers for
the Enron board's panel. While no interview transcript
was made, extensive notes were taken. Those notes, along
with the testimony of witnesses in the room, could be
used later to challenge Mr. Skilling.
Was getting documents from those bodies worth the risk
of testifying? After all, Andrew S. Fastow, the former chief
financial officer and a central subject of the continuing
investigations, refused to speak with the special
committee and invoked the Fifth before the S.E.C. and
Congress.
Some facts in this case make Mr. Skilling's decision to
testify more understandable. Unlike many other corporate
scandals, where prosecutors have indicted the company
and allowed executives to walk away unscathed, there is
little doubt that current or former Enron officials will be
charged if crimes are discovered. With the company now
in bankruptcy proceedings, any indictment of Enron
would be largely symbolic.
"Without a corporation out there to plead, that ups the
chances of a prosecution," said John J. Fahy, a former
federal prosecutor in Newark. "And it makes it a lot more
difficult, if somebody pleads guilty, for them to get a
sweetheart deal."
For anyone wishing to cut a deal with the government, the
coin of the realm is cooperation against those higher up.
But the number of potential defendants is relatively small.
By testifying, lawyers said, Mr. Skilling could well be
signaling to potential witnesses and the government that
any allegations brought against him will be vigorously
contested.
Given the prosecution team that has been assembled for
the Enron investigation, lawyers involved in the case said,
anyone's defense strategy should quickly contemplate
what other potential defendants will do.
The Enron inquiry is being run by Leslie R. Caldwell,
head of the securities fraud division of the United States
attorney's office in San Francisco. She has the reputation
of a prosecutor who moves fast to make cases and "flip"
potential witnesses.
Some corporate cases become bogged down for years in
complexity. But Ms. Caldwell, lawyers said, will probably
put the pressure on early, breaking off manageable pieces
of the case, like the potential obstruction of justice
through document destruction. She will start bringing
indictments with the intent of turning defendants into
witnesses against others in the more complex cases. Some
lawyers in the case said the first charges in this case
could come within a few months.
Mr. Skilling's willingness to combat allegations against
him may therefore make him somewhat less of an easy
target for other Enron executives interested in cutting a
deal by offering information against him. Whether that
legal strategy proves to be smart, or the height of folly, will
be clearly known only in the months and years to come.
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