Former Enron Chief Executive Jeffrey Skilling may be standing after his verbal boxing match with a federal prosecutor, but he took some sucker punches that could figure heavily into whether jurors in his fraud and conspiracy trial believe his claims of innocence.
But if even one juror believes him, he won the match, experts said.
“That one vote for acquittal prevents him from being convicted,” said Jacob Frenkel, a former federal prosecutor. “The government only wins if it convicts him with votes of 12 jurors. All Skilling needed to do was put enough doubt in the mind of one juror to create reasonable doubt and prevent his conviction.”
As the 52-year-old former leader of the disgraced energy company said after ending almost eight days of grueling testimony in his own defense, it’s in the jury’s hands.
Soon, the same will be true for his co-defendant, Enron founder Kenneth Lay, whose own testimony is scheduled to begin Monday.
Both men are accused of repeatedly lying to investors and employees about Enron’s financial health, saying the company was strong when they allegedly knew accounting tricks hid weaknesses.
Lay and Skilling say no fraud occurred at the company other than that committed by a few executives who skimmed millions from secret side deals. They attribute Enron’s December 2001 descent into bankruptcy proceedings to bad publicity and lost market confidence.
Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors that stretches from 1999 through his abrupt resignation in mid-August 2001. The six fraud and conspiracy charges against Lay pertain to the period between Skilling’s departure and Enron’s flameout.
In the first four days of Skilling’s testimony, defense lawyer Daniel Petrocelli led the ex-CEO through each criminal count against him. Skilling had answers for each. Sometimes it was simply that the allegation wasn’t true. Sometimes he relied on complicated details to show the allegations couldn’t be true because issues weren’t as simple as prosecutors portrayed them.
Like the prosecution witnesses before him, Skilling lacked physical evidence to back up his claims. One was that his accusers either lied about incriminating conversations and meetings, or misunderstood them.
Petrocelli also laid the groundwork for a contentious cross-examination, allowing his client to say he was angry at the government for targeting an innocent man. Skilling had occasional flare-ups with Sean Berkowitz, a Chicago federal prosecutor who joined the Justice Department’s Enron Task Force just two months before the ex-CEO was indicted in February 2004.
Under Petrocelli’s questioning, Skilling freely explained Enron’s complex businesses, appearing animated as he relived the halcyon days of the company he credited himself with building. In contrast, Berkowitz subsequently shot down his efforts to give detailed, complicated answers by demanding a simple yes or no. Sometimes Skilling complied, though he would indicate to jurors that there was more to tell.
“I think Berkowitz did an excellent job of keeping control of a very difficult defendant to cross-examine,” said Michael Wynne, a former federal prosecutor in Houston who watched much of Skilling’s testimony.
He said Skilling “put on a fairly good performance” and didn’t refuse to answer questions. But it appeared that when the ex-CEO hit a rough spot, he would say he didn’t remember or an issue was complicated.
“I thought Skilling spent a lot of time trying to describe why two and two didn’t really equal four,” Wynne said. “And he suggested there were some people who got it and were smart, and some who didn’t. Maybe he was trying to do with this jury the same thing he tried to do with the public years ago.”
Skilling’s fate could hinge largely on whether jurors believe his version of the story about his allegedly illegal stock sales and two other sticky issues unrelated to the criminal charges against him.
Skilling claims he sold 500,000 shares of Enron stock for $15.5 million on Sept, 17, 2001 — half his Enron holdings — in response to a market roiled by the Sept. 11 terrorist attacks. He told regulators in December that year that he “agonized over it, absolutely agonized over it.”
Prosecutors allege he sold because he knew Enron was rife with serious problems unknown to investors.
They played an audiotape of Skilling placing an order to sell 200,000 shares of Enron stock on Sept. 6, 2001 — the Thursday before the attacks. Skilling told the broker he was no longer an officer at Enron, meaning his stock sales no longer had to be reported to the Securities and Exchange Commission. That sale was held up because the broker needed to confirm that.
“Hold that order, and I’ll go ahead and have them send you a letter,” Skilling told the broker, referring to a letter from Enron saying he had resigned. The letter was dated Sept. 10.
Skilling told jurors he didn’t remember placing that order — although he remembered arranging to short-sell stock of another energy company on the same call.
“The Sept. 6 call, his failure to remember that, really damaged his credibility,” Wynne said. “That sequence is going to affect the jury’s consideration of whether or not he had the intent to commit the other offenses he’s charged with.”
Perhaps more damaging were the questions about checks he wrote to a girlfriend who did business with Enron, even though they have no direct bearing on the criminal charges against him.
Under Berkowitz’s questioning, Skilling said he invested $60,000 in the woman’s online photo-sharing company that did business with Enron — one-third of what his investment actually was. Under subsequent questioning from Petrocelli, Skilling called the $60,000 an “initial investment.”
He also acknowledged that his failure to disclose his investment in writing to Lay and Enron’s board “probably” violated the company’s code of ethics.
Berkowitz confronted him with two $10,000 gift checks he gave to the same woman. The check numbers were in sequence, and both were deposited in March 1998. But one was dated December 1997, leaving Berkowitz to suggest he backdated that check to avoid paying taxes on gifts of $10,000 or more.
Skilling said he didn’t remember the checks. But he insisted he had paid all the taxes he owes — more than $66 million from 1997 through 2004. And he is charged with no tax crimes.
However, if jurors conclude he lied about the investment, that he may have cheated on his taxes, and that he lied about forgetting to explain away the aborted stock sale, the panel could decide Skilling’s earnest insistence that he did nothing wrong at Enron is questionable as well, Wynne said.
“It showed that he could kind of pick and choose what he felt was important to disclose, and he only coughed it up when he knew he was caught,” he said.