Last week we pointed you toward Malcolm Gladwell's New Yorker story offering a semi-defense of Jeff Skilling. On Friday, Enron prosecutor John Hueston shot back with a long and spirited counter-attack.
The Houston jury recognized that it is no defense to charges of fraudulent earnings manipulation that a group of Cornell business students might conclude, after extensive analysis of public information, that Enron “may” be engaging in such shenanigans. Skilling was found guilty because he was caught flat-footed in lies about the performance of highly-touted business units such as Enron Broadband Services, telling employees the sour truth about the dismal state of the EBS business and then reversing course in a public call with analysts just eight days later. Skilling didn’t suspect earnings manipulation, he condoned and promoted it with CFO Fastow and CAO Causey, who kept a tally sheet that included accounting side deals that unequivocally violated accounting rules. Likewise, Ken Lay repeatedly and falsely misrepresented the performance of Enron’s business units, told employees and others to ignore the Wall Street Journal exposes and reports from short sellers, and lulled them with reports of his purchases of Enron stock as he quietly dumped $70 million of his Enron holdings.
So ignoring Wall Street Journal exposes is a crime? Oh-uh. Somebody should have told us that before we started to attack the backdating scandal.
John Hueston: “Enron Was Both a Mystery and a Puzzle” [Wall Street Journal's Law Blog]