The Guiltiest Guys in the Room
After enduring four months of testy and often sensational testimony, jurors finally reached a verdict yesterday in the case against former Enron CEO Jeff Skilling and founder Ken Lay. Found guilty of both fraud and conspiracy, Skilling and Lay each face a minimum of 25 years in prison.
Sift through the headlines on the Enron verdict, and you're likely to be left with the sense that the American public has emerged victorious, in the process establishing a zero-tolerance policy of fraud in business. While the verdict will certainly serve as a cautionary tale to future corporate leaders, it would be misleading to assume that the chapter on the culture of corporate corruption has been closed.
The simple fact that Skilling and Lay went to trial, took the stand and maintained, throughout the proceedings, that their actions at the helm of Enron were legitimate, reveals how normalized the chasm between morality and legality in the business world has become. Lay's and Skillings' performances in court (as well as those of their lawyers) revealed a mind-boggling disdain for the judicial process. It was clear from the very start of the trial that Lay and Skilling would be using the courtroom as a stage. Both were eager to take the stand, not primarily to deny the alleged charges, but rather to quibble over whether or not the activities were actually corrupt and illegal.
Before the jurors left to deliberate, Lay's lead lawyer, Mike Ramsey, gave them a crash course in the nuance of "innocence," explaining, "When you're say[ing you are] not guilty, you're not saying innocent. You're saying not proven to my satisfaction without hesitation." Lay himself took a similar tack, trying to further obfuscate his machinations of Enron's accounting by telling jurors that "aggressive accounting does not mean illegal accounting. People misunderstood things that were new and different as being wrong, and they weren't.''
Lay was referring to "mark-to-model" accounting, a form of numeric manipulation that Peter Elkind, co-author of "Enron: The Smartest Guys in the Room," explains quite simply: "Your profits are basically whatever you say they're going to be. So if you need to book additional profits for a period, you could just say that the price of energy will go up." It is this type of market manipulation that set Enron apart from other companies, contributing to the California energy crisis, which Americans are still paying the price for.
Yet, one of the focal points of both Lay and Skilling's defense was their complaint that the prosecution was criminalizing "normal" business practices. Skilling and Lay, caught with their hands in the cookie jar, turned the tables and used the stage to aggressively argue that stealing the cookies should not be considered criminal -- tacking on the childish coda, "Everyone else is doing it anyway" for good measure.
The only thing that Lay and Skilling have expressed remorse for is that the company collapsed at all. While Enron's market manipulations and corruption ultimately cheated Americans out of over $1 billion in retirement funds and obliterated some 4,500 jobs, Lay and Skilling have seemed preoccupied only by the ego blow dealt them by their company's demise. In his closing remarks to the jury, Skilling's lead lawyer, Dan Petrocelli, piled on the pathos: "He's a tortured soul now for the rest of his life. What happened to the business that he built and now forever what it will be known as -- that's his legacy."
Blaming "hostile journalists" and "poor market confidence," the two Enron bigwigs maintained throughout the four-month proceedings that it was America's inability to understand their business and lack of confidence that led to the corporation's downfall.
This twisted attitude didn't escape prosecutor Kathy Ruemmler, who stated in her closing argument that this "extraordinary arrogance is the exact same tactic that they used when they were running Enron."
There is certainly some cause for celebration. It was by no means a foregone conclusion that Skilling and Lay would be found guilty. The pathological personalities of both men established them as "true believers" in their company -- making it, at times, difficult to prove criminal intent. Skilling lawyer Daniel Petrocelli opened the trial by posing this question to the jury: "In 1999, [Skilling] had more money than he ever dreamed of having. So why would he do it? What is Jeff Skilling's motive?" But it is clear that both Skilling and Lay's egos were tied up in the success of the company and neither had reservations about using any legal loophole and manipulation to increase profits and remain afloat for the sake of greed.
This obsessive maneuvering pervaded their legal defense. The recent Enron verdict is a heartening chapter, but it provides the beginning, rather than an end, of reckoning with a culture of blame-dodging that bleeds far beyond Enron. One needn't look far to connect the dots. Banks like Citi, JP Morgan, Chase and Merrill Lynch all aided and enabled Enron's scamming. Accounting monolith Arthur Anderson helped Enron perform impossible numerical acrobatics. And, most notably, political ties between Ken Lay and the Bush family enabled strategic appointments that led to an atmosphere of deregulation.
These banks, politicians and accountants all helped pave the way for characters like Ken Lay and Jeff Skilling to push the envelope in the business world, and to assert that the crimes they were committing were merely a matter of standard operating procedure. To the end they insisted the mounds of evidence against them were just a series of coincidental "mistakes." "Mistakes are not a crime," Skilling lawyer Petrocelli told the jury. Toppled white-collar criminals who follow in Lay and Skilling's wake may well use the same desperate plea.