Enron: Skilling's Involvement

Skilling's Surrender

Former Enron Corp. chief executive Jeffrey K. Skilling surrendered to the FBI this morning to face fraud and other charges contained in 42-count indictment by a federal grand jury. Skilling is accused of conspiracy, insider trading, securities, wire fraud and making false statements to auditors. He pleaded not guilty to all counts.

"At the end of the day, there are people who will tie this [prosecution] up and paint a bigger, global picture" of misdeeds at Enron and Skilling's alleged involvement in them, said Kirby D. Behre of Washington, a former federal prosecutor who defends corporate executives.

Behre, a partner at Paul Hastings' Corporate Compliance, Government Investigations and White Collar Defense Group, was online Thursday, Feb. 19, at 3:15 p.m. ET to discuss the surrender of Skilling and the Enron scandal.

Behre is a former federal prosecutor and trial lawyer who has practiced criminal, civil and government contract law for the past 18 years. As a partner at Paul Hastings' Corporate Compliance, Government Investigations and White Collar Defense Group, Behre has represented and defended corporations and individuals in civil and criminal investigations of alleged business crimes and civil fraud.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

________________________________________________

Kirby D. Behre: Jeffrey Skilling's indictment is a major step forward for the criminal prosecution of the events relating to Enron. Skilling is the moosehead on the mantlepiece for the prosecutors: the government will point to him as a trophy in its war against corporate fraud and corruption. This indictment is only the beginning however since the government will now have to prove its case which is extremely complex. In addition, traditionally it is difficult to establish culpability of high level officials who often claim to be big picture above-the-fray individuals.

_______________________

Washington, D.C.: Do you think the government will cut a deal with Skilling to go after Lay? Or is Skilling the guy that they want?

Kirby D. Behre: It's possible that they might attempt to cut a deal with Skilling but he is so high up that usually the government's interest in an individual like Skilling is not that great. You typical cut deals with people in the middle in order to gain evidence against higher ups. Skilling has nobody left to snitch on other than Ken Lay. In addition, the fact aht he was indicted suggests that perhaps the government has decided that its case is best advanced by prosecuting him rather than cooperating with him.

_______________________

Washington, D.C.: How much evidence against the other Enron officials do you think the government has gathered from Lea and Andrew Fastow?

Kirby D. Behre: It's impossible to say, however, the government would not have entered into clear agreements with the Fastows unless they believe the information would directly aide the government's case against the company. Precisely what that evidence is and who it potentially implicates is a mystery at this point.

_______________________

Washington, D.C.: What exactly was Skilling's role in the Enron scandal?

Kirby D. Behre: At this point, the complete picture has not yet been revealed byt the government. But this indictment and other information released to the public suggests that the government believes that Skilling was the architect of several of the frauds that the government alleges were perpetrated by Enron executives.

_______________________

Alexandria, Va.: How come the federal govt. does not come first after Kenneth L. Lay instead of others like Andrew Fastow, Jeffrey Skilling, and others? K. Lay is responsible for the total damages.

Kirby D. Behre: Traditionally prosecutions of complex cases start with middle level individuals and works its way to the top. So, Lay is not out of the woods yet.
In fact, the events in the last few weeks with Fastow agreeing to cooperate and now Skilling's indictment suggest that the government might still believe it has a shot against bringing charges against Lay as well. It's interesting to note how the public clamors for the head of the CEO when in fact a fraud as alleged here require involvement of numerous individuals at many different levels. And often times, the CEO may know in general that something improper is occuring but has sketchy knowledge of precisely what was done. So the charges and pleas that have brought to date are extremely significant and regardless if Lay is ultimately charged, the government has successfully reached into the highest level of this corporation -- a feat that is rarely accomplished in these types of cases.

_______________________

Arlington, Va.: How significant is Skilling's "surrender" to FBI officials? This doesn't change the scandal or that all the execs are guilty. Will he have a chance of not serving time?

Kirby D. Behre: It is potentially very significant because he is a senior executive. However, these are simply charges and he has not been convicted yet. The government has a long road to travel before he is convicted. However if he is convicted, he will face a substantial period time in jail -- probably in excess of 20 years.

_______________________

Fairfax, Va.: Mr. Behre, if you were Skilling's legal defense, what advice would you give him?

Kirby D. Behre: I'd make sure that he considers all of his options including if he wants to cooperate with the government or fight these charges "tooth and nail." As I noted, he is facing extensive time in jail and in this climate and in light of the charges, it will be a difficult case to try. The way the federal sentencing works -- the only way to avoid a lengthy prison term is to be acquitted or to cooperate with the government. Under the federal sentencing system, once a defendant is convicted there is virtually no way to avoid a very substantial and mandatory prison term.

The first step which they have probably already taken is to gather as much information as possible regarding the basis for the government's allegations. This is difficult and time consuming to do but critical so that the defendant can make an informed decision about how to address these charges. The fact that he has plead not guilty today does not eliminate the possibility that after some consideration he might reconsider and enter into a plea with the government.

_______________________

Maryland: He pleaded not guilty to all counts. Do you think there is any possibility that he is being truthful? Or, do you think the outlook is pretty bleak and that he's bound to be found guilty for at least a few if not all?

washingtonpost.com: Former Enron Chief Executive Surrenders to FBI (Post, Feb. 19)

Kirby D. Behre: Only time will tell whether he is being truthful. Obviously in a case like this, there is always a chance that the government's dragnet catches someone who does not deserve to be charged or punished. The government has been under extreme pressure by the public, press and by it's own Dept. of Justice to bring charges against high level officials. It is precisely in that type of an atmosphere that mistakes can be made. These are charges and not convictions. There's an old adage in criminal law: A grand jury would indict a ham sandwich. It remains to be seen if these charges will pass muster with a jury.

_______________________

New York, N.Y.: This is sort of lame, but can Skilling invoke the 5th Amendment at his own trial and if so what would be the reprecussions of that act?

Kirby D. Behre: Absolutely. He is not required to testify and he has a constitutional right not to do so. The impact of a decision not to testify can be severe however. A defendant who chooses not to testify loses his ability to directly tell his side of the story to the jurors.

_______________________

Malden bridge, N.Y.: Are the government and innocently defrauded individuals going to receive their due recompense, or is it going to be another whitewash as the Savings and Loan scandal was.

Kirby D. Behre: Although several of the individuals charged have substantial individual wealth it is extremely unlikely that investors will be fully compensated or even partially compensated for their losses. There are civil suits pending to seek to recover damages but given the financial health of the company, those suits are not likely to yield substantial repayments.

_______________________

Houston, Texas: Andrew Kopper pleaded guilty and supposedly provided evidence against Mr. Fastow, the former CFO for Enron. His sentencing has been postponed until October. Can he expect a probated sentence?

Kirby D. Behre: It's very difficult to say because the extent of his cooperation has not been revealed to the public. As a practical matter, he held a high enough position that it may be difficult for the government to urge a judge to sentence him other than jail time. If one uses Fastow's ten year deal as bellweather then Kopper might be facing a couple of years even if he does cooperate.

_______________________

Washington, D.C.: I am currently reading "The Smartest Guys in the Room" and can barely follow the complexity of the financial transactions described (and I have a MBA!). I would think that prosecutors would be worried about jurors' abilities to follow the details of the cases against the Enron people. Is this a concern they may have, i.e., are the prosecutors more likely to cut a deal with Skilling, et. al., because the case may be difficult for a jury to follow?

Kirby D. Behre: Good question. Absolutely the government is concerned about the impact that the complexity of the case has on its ability to convict. In every criminal case, the government must simplify the facts and allegatiosn to a level that a typical juror can understand and appreciate. The hallmark of a great prosecutor is the ability to convert complexity into broad themes and over-arching theories. This case will be portrayed, not as one concerning highly technical accounting transactions, but one of greed, fraud and deception. In addition, the case will be sprinkled heavily with evidence concerning the impact that greed and fraud had on the working person who held stock at Enron.

_______________________

Kirby D. Behre: Today was a big day for the government but the case has just begun. Some of the brightest criminal defense lawyers are involved in this case and they will mount vigorous defense in a highly complex case. In order to assess the impact of these charges and the ultimately success of the government's investigation, we will have to wait and see what evidence the government has to prove these allegations. Right now it sounds good but whether the government can back up its indictment with evidence sufficient to convict the defendant remains to be seen.

_______________________