Enron - in depth
The day the lights went out at Enron
By Peter Spiegel in Washington
Published: February 8 2002 09:58GMT | Last Updated: March 15 2002 10:33GMT
jefferey skilling

To Jeff McMahon, Jeffrey Skilling, former Enron chief executive, was a towering, intimidating figure at the top of the company who let no detail of his sprawling empire escape his reach.

"My description of Mr Skilling's management style is he was an intense, hands-on manager," Mr McMahon, Enron's new president, told a congressional hearing yesterday, remembering how he had a long discussion with his wife about whether to request a meeting with Mr Skilling to discuss his concerns about the company.

But when Mr Skilling came before the same committee, he painted a much different picture, attempting to portray himself as a distant, sometimes shambolic figure who had no idea his minions were stashing away millions of dollars in debts into off-balance sheet partnerships.

"The Enron corporation was enormous," Mr Skilling told congressional investigators. "Could I have known everything going on everywhere in the company?"

"Mr Skilling, a massive earthquake struck Enron right after your departure. People in far inferior positions to you could see cracks in the walls, feel the tremors, feel the windows rattling. And you want us to believe that you sat there in your office and had no clue that this place was about to collapse"
Rep James Greenwood

His tale was told in calm, cool tones, at times sounding a bit like Jack Nicholson delivering off-hand remarks. But members of Congress found them hard to swallow, pointing repeatedly to deal sheets, calendars and board minutes which showed that Mr Skilling was apparently told repeatedly about what one Enron lawyer repeatedly called the "dysfunctionality" going on around him.

James Greenwood, subcommittee chairman, said: "Mr Skilling, a massive earthquake struck Enron right after your departure. People in far inferior positions to you could see cracks in the walls, feel the tremors, feel the windows rattling. And you want us to believe that you sat there in your office and had no clue that this place was about to collapse?"

Mr McMahon's meeting was just one case in point. Mr McMahon described it as nearly apocalyptic in nature - his detailed notes reveal telling Mr Skilling he was being "pressured to do a deal that I do not believe is in the best interests of the shareholders" and "my integrity forces me to continue to negotiate the way I believe is correct"; Mr Skilling remembers a minor pay dispute.

Members of Congress got a similar reaction when they discussed a meeting of the Enron board that Mr Skilling attended.

When Representative Billy Tauzin presented detailed minutes of the October 6, 2000 meeting, Mr Skilling went well beyond the traditional "I do not recall", telling an elaborate tale of power outages in a West Palm Beach, Florida hotel, where executives - including himself - wandered in and out of the session while colleagues sat in the dark.

The meeting of the board's finance committee was no minor affair. The group was carefully reviewing conflict-of-interest controls put in place to prevent Andrew Fastow, Mr Skilling's close friend and Enron chief financial officer, from self-dealing.

Mr Fastow was head of several supposedly independent private partnerships doing deals with Enron, that an internal review found had no economic purpose other than to hide losses from Enron's balance sheet and enrich Mr Fastow.

"I was pressured to do a deal that I did not believe was in the best interests of shareholders"
Jeff McMahon,
Enron's new president

During the Florida meeting, the board was told the partnerships did not take on any economic risk, and were only set up to prevent profit and loss volatility - a damning revelation, since it went to the heart of what would lead to Enron's collapse.

But to Mr Skilling, it was all about the blackout: "I may have stepped out."

Mr Skilling was not the only focus of congressional ire, however. Mr Fastow, who chose to invoke his fifth amendment right to remain silent, was harangued by committee members, who blamed him for the destruction of thousands of lives. "Was the selling of your soul worth it?" asked Democrat Bobby Rush.

Enron executives described Mr Fastow as a mean-tempered, bullying task master who tried to fire lawyers who did not approve of the deals he was transacting with his partnerships.

Jordan Mintz, a senior Enron lawyer, remembered an expletive-laced voice mail message on the phone of a colleague who believed Mr Fastow was violating conflict-of-interest rules.

And Mr McMahon remembered a shouting match with Mr Fastow after the CFO learned of the whistleblower letter, written by Enron vice president Sherron Watkins detailing accounting problems that would eventually doom the company.

"He accused me of being the ghost-writer of that letter," Mr McMahon recalled. "When I found out, I had a fairly loud exchange with him . . . at a high decibel."

Despite the anger of committee members and Enron employees, the hearing was not all parry and thrust.

The entire room, filled to overflowing with lawyers, congressional aides, and reporters, was silenced as Mr Skilling recalled one of his last conversations with Clifford Baxter, the former Enron vice chairman who shot himself last month.

Mr Skilling called Mr Baxter "my best friend", and he nearly broke into tears when he recalled a meeting about a week before Mr Baxter died, where he had raged at the plaintiffs' lawyers.

Mr Baxter compared it to a bright Houston day, where friends and family are out playing in the warm sun, and suddenly a neighbour runs over and accuses him of molesting small children.

"They're calling us child molesters," Mr Baxter said. "That will never wash off."



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