One commentator opined that Jeffery Skilling, former COO of Enron, but who replaced Ken Lay as CEO in February 2001 (Skilling abruptly resigned six months later in August 2001), considers himself smarter than the room and will dance around the committee's inquiries like Astaire around Rogers.
Skilling claimed to have little or no recollection of the myriad questions posed to him. He feigned ignorance of the highly questionable accounting practices associated with Enron's earnings reporting. If he said "I am not an accountant" once, he said it fifty times during the senate hearings on Tuesday, February 26. He also claimed to have little knowledge of the particulars of the structures or transactions of the rogue partnerships that were designed, in theory, to hedge Enron's more risky investments in technology. Skilling admits that he was ultimately responsible for risk assessment and management, but denied any skepticism of the risk associated with the partnerships and the capitalization of those entities with large amounts of Enron stock. This strategy, according to whistle-blower and sole Enron hero Vice President of Corporate Development Sherron Watkins, was highly risky and such risk would have been apparent to Skilling regardless of his claim that in his estimation it was not.
Watkins stated that it is never appropriate to use equity to impact an income statement. She emphasized this as one of the cardinal rules of accounting. When asked about this, Skilling again asserted that he was not an accountant, implying he had little understanding of such matters. But not a minute later, he gave a succinct example of when equity does impact the income statement in the form of stock options as compensation. It was perfectly obvious he had a complete understanding of "such matters" and could easily have been an accountant himself. Skilling's larger problem in these hearings is his ego. He is a show-off. He can't help letting the committee know how smart he really is, thereby eliminating any chance he has of convincing a single member that he doesn't fully grasp the complexities of accounting.
Skilling is completely despicable in his saccharine compassion for the employees of Enron. The two notable committee members asking the hard questions of this arrogant corporopath are Senators Byron Dorgan (D-ND) and Peter Fitzgerald (R-IL), who hammer away when it is their turn. Dorgan asked Skilling why he had encouraged Enron employees to invest their money in Enron when he was methodically selling $66.9 million worth of his own shares of Enron stock between 1998 and 2001. Skilling replied that possibly the employees should have diversified more. However, he claimed to sympathize because he said he also lost somewhere in the neighborhood of $85 million in stock himself. He did admit that he still had most of the $66.9 million in proceeds from selling stock in his personal coffers. (It was almost amusing when Senator John McCain (R-AZ) asked Skilling about his exorbitant annual bonuses, Skilling couldn't recall the various bonus amounts, ranging from $2 million to $5.6 million in different years, but he could clearly recall the particular executives who were issued bonuses throughout his 10-year tenure.)
Executives who also profited from 1998 through 2001 are as follows: Ken Lay sold $101 million worth of his own stock; Andy Fastow, CFO of Enron and main culprit of the corporation's financial demise because he devised and orchestrated the partnerships, sold his stock worth $30.4 million; broadband chairman Ken Rice sold his stock worth $72 million. It appears that the lion's share of the stock was sold during the end of 2000 and beginning of 2001 when Enron stock peaked at $83/share. One year later, it was worth $.60/share. During some of this period, Enron employees were blocked from trading or selling their shares, while upper management was allowed to privately divest of theirs.
Finally, Both Dorgan and Fitzgerald applied pressure to Skilling to explain how the Enron travesty happened, especially in context of the employees who lost their life savings, and investors who lost significant portions of their investment and retirement portfolios. Skilling blamed the "MAC clauses" in their loan contracts with banks. He said that when the banks learned of the unstable financial condition of Enron, they were able to call in their outstanding loans based on the clause that allows this action if any "materially altering changes" occur in the company's financial picture. Skilling went so far as to suggest that the Senate Commerce Committee holding the hearings reevaluate the clause and disallow this to occur in the future. In other words, it is somebody else's fault, not Enron's, that they had to declare bankruptcy. Furthermore, Skilling postured that they should be allowed to continue their shell game without fear that banks will pull their financial support. Skilling blamed "a run on the bank" in Enron's case for its failure.
This outrageous lack of accountability, or sense of responsibility for their clear deceitful business practices, is unconscionable. Our lawmakers must define policies that protect the investor, meaning the workers who invest portions of their income in company retirement plans and the general public, which also invests in these companies as part of their financial security. The deliberate deception should be treated as criminally negligent and harmful to the public's well being as robbery or any other crime that hurts people financially. Imagine working for a decade or more, investing all your hard-earned dollars so that your family can live its life with financial security, only to have it stolen from you by the executives of the company. Greed, arrogance, and criminal negligence wholly characterize the people responsible. This is not so complicated as our policymakers would like us to believe. The Enron collapse, simply put, is a high-scaled con. We do have laws protecting us from such conduct. Obviously they need a little refinement.
It is interesting to note that the natural gas commodity component of Enron had record high earnings during 2000-2001. This would be the same time frame that most Americans had record high expenses in natural gas consumption to the point that many of us were financially damaged. The connection is there and the threads must be connected to see how despicably Enron operated, but not without the explicit help of its Washington pals, who are our legislators and executive branch members. This needs to be fleshed out as well, especially if we are ever to avoid this corporate misconduct in the future.
O'Meara's Farewell Party March 1
O'Meara's Pub, literally an icon in our community for decades, is closing its doors. Sadly, the farewell party will be held this Friday, March 1, as a way of saying goodbye to those who have been patronizing O'Meara's for all these years. In some cases, this means generations of residents. The farewell bash will be a great one, in the same spirit of fun and camaraderie that has characterized O'meara's and kept it as a neighborhood tavern and gathering place for the community, with a special love of the Irish. In fact, consider the farewell festivities as an early St. Patrick's Day celebration. O'Meara's is located at the t-section of 18th and State Streets in downtown Bettendorf. Come green and be seen!