Police photograph of Skilling taken during 2004.
|Born||Jeffrey Keith Skilling
November 25, 1953
Pittsburgh, Pennsylvania, U.S.
|Occupation||former CEO of Enron|
|Conspiracy, securities fraud, false statement, insider trading|
|172 months (originally 292 months) and fined $45 million USD; sentence reduced as a result of Skilling v. United States|
|Children||Three (one deceased)|
Jeffrey Keith "Jeff" Skilling (born November 25, 1953) is the former CEO of the Enron Corporation, headquartered in Houston, Texas. In 2006 he was convicted of multiple federal felony charges relating to Enron's financial collapse, and is currently serving 14 years of a 24-year, four-month prison sentence at the Federal Correctional Institution (FCI) – Englewood in Littleton, Colorado. The Supreme Court of the United States heard arguments in the appeal of the case March 1, 2010. On June 24, 2010, the Supreme Court vacated part of Skilling's conviction and transferred the case back to the lower court for resentencing. During April 2011 a three-judge 5th Circuit Court panel ruled that the verdict would have been the same despite the legal issues being discussed, and Skilling's conviction was confirmed, however the court ruled Skilling should be resentenced. Skilling appealed this new decision to the Supreme Court, but the appeal was denied certiorari. In 2013 the United States Department of Justice reached a deal with Skilling resulting in 10 years being cut from his sentence.
Early life and education
Skilling was born in Pittsburgh, Pennsylvania, and was the second of four children. His father was a sales manager for an Illinois valve company. He grew up in New Jersey and Aurora, Illinois. When he was 16 years old, he worked at WLXT (channel 60), a UHF television station in Aurora.
Skilling graduated from West Aurora High School. He received a full scholarship to Southern Methodist University in Dallas where he was a member of the fraternity Beta Theta Pi. He initially studied engineering before changing to business. After graduation, he went to work for a Houston bank, which sent him to Harvard Business School. During his admissions interview for Harvard Business School, he stated that he was asked if he was smart, to which he supposedly replied, "I'm fucking smart". Skilling earned his M.B.A. from Harvard Business School during 1979, graduating in the top 5% of his class as a Baker Scholar. He became a consultant at McKinsey & Company in the energy and chemical consulting practices. Skilling became one of the youngest partners in the history of McKinsey.
Skilling had a daughter and two sons (ages 22, 20, and 16 at the time of his conviction) from his first marriage, which ended in divorce during 1997. His youngest child, John Taylor "JT" Skilling, aged 20, was found dead in his Santa Ana, California, apartment on February 3, 2011, by what police have determined primarily was the result of a drug overdose. In March 2002, Skilling married Rebecca Carter, a former vice president for board communications and board secretary at Enron. Jeffrey Skilling is the younger brother of Tom Skilling, the chief meteorologist at CW affiliate/cable superstation WGN-TV in Chicago, Illinois.
Skilling started his career in Houston as an analyst for First City Bancorporation of Texas in Houston. First City was one of Enron's banks and just before it failed the first time, Skilling quit. The CEO of Collecting Bank, the FDIC's facility for managing the bad assets of First City, was Sam Segnar, the first CEO and chairman of Enron. The new First City Bank, headed by A. Robert Abboud, was also an Enron bank. Abboud was the former president of First Chicago Bank and Occidental Petroleum under Armand Hammer. First City was initiated by Judge James Andersen Elkins and his law partnership, Vinson & Elkins, one of Enron's main law companies. As a consultant for McKinsey & Company, Skilling worked with Enron during 1987, helping the company create a forward market in natural gas. Skilling impressed Kenneth Lay in his capacity as a consultant, and was hired by Lay during 1990 as chairman and chief executive officer of Enron Finance Corp. In 1991, he became the chairman of Enron Gas Services Co., which was a result of the merger of Enron Gas Marketing and Enron Finance Corp. Skilling was named CEO and managing director of Enron Capital & Trade Resources, which was the subsidiary responsible for energy trading and marketing. He was promoted to president and chief operating officer of Enron during 1997, second only to Lay, while remaining the manager of Enron Capital & Trade Resources. During 1999, Enron initiated EnronOnline, an Internet-based trading operation, which was used by virtually every energy company in the United States.
During Skilling's management, Enron adopted "mark-to-market" accounting, in which anticipated future profits from any deal were accounted for by estimating their present value rather than historical cost. Skilling joked about the California energy crisis at one meeting of Enron employees by asking, "What is the difference between California and the Titanic? At least when the Titanic went down, the lights were on". Skilling later attributed the remark to frayed relations between Enron and California. His employees, meanwhile, plotted to keep the price of energy high in California.
Skilling began advocating a novel idea: the company didn't really need any "assets". By promoting the company's aggressive investment strategy, he helped make Enron the largest wholesaler of gas and electricity, with $27 billion traded in a quarter. On February 12, 2001, Skilling was named CEO of Enron, receiving $132 million during a single year.
Skilling unexpectedly resigned on August 14 of that year, citing personal reasons, and he soon sold large amounts of his shares in the corporation. Then-chairman Kenneth Lay, who previously served as CEO for 15 years, returned as CEO until the company declared bankruptcy during December 2001. When brought in front of congressional committees, Skilling stated that he had "no knowledge" of the complicated scandal that would eventually result in Enron's bankruptcy.
Skilling was indicted on 35 counts of fraud, insider trading, and other crimes related to the Enron scandal. He surrendered to the Federal Bureau of Investigation on February 19, 2004, and pleaded not guilty to all charges. The indictments emphasized his probable knowledge of, and likely direct involvement with, the fraudulent transactions within Enron. About a month after quitting Enron, Skilling sold almost $60 million of his stake in the company (in blocks of 10,000 to 500,000 shares), resulting in the prosecutors' allegation that he sold those shares with inside information of Enron's impending bankruptcy. Skilling's main attorney was Daniel Petrocelli, the 52-year-old civil litigator who represented Ron Goldman's father in his successful civil suit against O.J. Simpson for negligent death. Skilling spent $40 million in preparation for the trial, of which at least $23 million went to his defense lawyers' retainer. Skilling's younger brother Mark is an attorney and assisted his legal team during the criminal trial.
Skilling was arrested in New York City on April 9, 2004, for public intoxication, during which he harassed several passersby and accused them of being undercover FBI agents. Police responding to the 911 telephone calls found him uncooperative and concluded that he needed to become sober in a local jail.
The trial began on January 30, 2006, in Houston, despite repeated protests from defense attorneys calling for a change in venue on the grounds that "it was impossible to get a fair trial in Houston", the base of the Enron catastrophe. Skilling, known for his harsh attitude and arrogance, lost his temper on the witness stand during the trial. Enron's bankruptcy, the largest in U.S. history when it was filed during December 2001, cost 20,000 employees their jobs. In addition, many of them lost their life savings. Investors also lost billions. However, Skilling and many of the company's executives had sold huge portions of their Enron stock before the bankruptcy filing, making a substantial profit. When interviewed outside court during the trial by Dutch journalist Stephan Tychon of pollutico.com about industrial dominance, Skilling admitted that industrial dominance and abuse constitutes a global problem by saying: "Oh yes, yes sure, it does." On May 25, 2006, the jury returned with the following findings regarding Skilling:
- guilty on one count of conspiracy
- guilty on one count of insider trading
- guilty on five counts of making false statements to auditors
- guilty on twelve counts of securities fraud
- not guilty on nine counts of insider trading
In a front page interview with The Wall Street Journal on June 17, 2006, Skilling claimed, among other things, that he had been melancholic after the Enron bankruptcy and considered committing suicide, but that his indictment actually ended his depression; that the worst witness against him was himself; and that he will be able to survive a long prison term as long as he is given "something to do, something to accomplish" while in prison.
On October 23, 2006, Skilling was sentenced to 24 years and four months in prison, and fined $45 million. The case was appealed but all of his convictions save one were ultimately upheld, as was his sentence. Skilling's request to remain free during the appeal was denied by Judge Patrick Higginbotham of the 5th U.S. Circuit Court of Appeals on December 12, 2006. In ordering Skilling's immediate imprisonment, the judge wrote, "Skilling raises no substantial question that is likely to result in the reversal of his convictions on all of the charged counts," although the order also noted "serious frailties" were possible in some (but not all) of the convictions.
Skilling began his sentence on December 13, 2006, and is currently housed at low security federal prison in Littleton, Colorado. According to the Federal Bureau of Prisons, he is scheduled for release on February 21, 2019.
Prior to the trial, attorneys for Skilling requested that the notes taken from FBI agents on the interviews with Andrew Fastow be given to the defense. A number of inconsistencies were discovered soon after a judge ordered that the notes be so given.
On April 3, 2008, Skilling's defense attorney, Daniel M. Petrocelli, argued with government prosecutors that Skilling's trial and the conviction itself was based on honest services fraud which he said did not apply to Jeffrey Skilling. This argument was based on the idea that, even though Skilling committed illegal financial maneuvers, he did so in order to save the company and did not profit from it. This was cited as a possible basis for overturning some or all of his convictions; however, the chances of this were considered to be very narrow.
Experts believed Skilling's best chance was in citing a parallel appeals court decision that had dismissed guilty verdicts on three Merrill Lynch bankers accused of helping Enron to inflate profits.
Richard Dawkins' book The Selfish Gene was Skilling's favourite book  and served as the foundation of his managerial philosophy. Skilling held, by Skilling's interpretation, a Darwinian view of what makes the world work. He believed that money and fear was the only thing that motivated people. He set up the performance review system (PRC) in which employees were graded from 1 to 5. Ten percent of people had to be a five, regardless of absolute performance; those 10% were to be fired. (This process is similar to the grading system in place at Harvard Business School while Skilling was a student there. In each class, instructors were required to grade 15% of the student with either of the two lowest grades available - "Low Pass" or "Fail") The scheme came to be known as "rank and yank". Skilling said "The PRC process is the most important process we conduct as a company".
Supreme Court review
The first challenge by Skilling's defense was whether or not the federal "honest services fraud" statute (title 18 of the United States Code, section 1346) required the government to prove that Skilling's conduct was intended to achieve "private gain" (instead of being intended to advance his employer's interests); and, if not, if this statute is unconstitutionally vague. The Court heard two other cases about the same statute on December 8, several months before it heard Skilling's appeal: Black v. United States and Weyhrauch v. United States.
The second issue—"in-house judging"—was whether or not—when a presumption of jury prejudice arises because of the widespread, community effect of the defendant's alleged conduct, plus, widespread, inflammatory pretrial publicity—- the government may rebut that presumption; and, if so, if the government must prove beyond a reasonable doubt that no juror was actually prejudiced.
In the arguments on March 1, the issue of jury selection received the most attention. Justices Stephen Breyer and Sonia Sotomayor seemed especially bothered by the questioning of one potential juror who reported that she herself lost $50,000 to $60,000 in the Enron debacle. ... "How can we be satisfied that a fair and impartial jury was picked when the judge doesn't follow up when the juror said, 'I'm a victim of this crime,'" Sotomayor asked. The government maintained that the judge and the selection process were appropriate. Sri Srinivasan, a partner at O'Melveny & Myers, was Skilling's Washington defense attorney and Justice Department lawyer Michael Dreeben argued for the government.
On June 24, 2010, in an opinion by Justice Ruth Bader Ginsburg, the Supreme Court unanimously nullified Skilling's honest services fraud conviction, finding that "Skilling's misconduct entailed no bribe or kickback". The Court remanded the Skilling case back to the lower court for further proceedings to decide which charges must now be dismissed as the result of the invalidation of the honest services statute.
In April 2011 a three-judge 5th Circuit Court panel ruled that since the jury was presented with "overwhelming evidence" that Skilling conspired to commit conspiracy fraud, the verdict would have been the same even if the honest services theory had never been presented, and Skilling's conviction was confirmed. The case in the 5th Circuit is United States of America v. Jeffrey K. Skilling, 06-20885. Skilling appealed this new decision to the Supreme Court, but was denied certiorari.
According to the Bureau of Prisons, Skilling is incarcerated in Littleton, Colorado, with an original release date of February 21, 2028. On May 8, 2013, federal prosecutors announced a sentencing deal that cuts 10 years off of Skilling's sentence and makes him eligible for release in 2017. The deal was approved by U.S. District Court Judge Sim Lake on June 21, 2013.
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