Another Brick in the Enron Wall

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Last month, I expostulated that the plea bargain agreements of Enron's (OTC: ENRNQ) former CFO Andrew Fastow and Treasurer, his wife, Lea, were stepping stones in the quest to indict Ken Lay, who served as Chairman and CEO during most of the years that the massive frauds at the energy trader took place.

They haven't gotten to Ken Lay just yet, but apparently prosecutors were comfortable enough with the case against another Enron kingpin, Jeff Skilling. Skilling's been arrested and charged with more than three dozen counts related to the company's collapse. Skilling surrendered to authorities this morning in Houston and has pleaded not guilty on all counts. U.S. Magistrate Judge Francis Stacy set his bail at $5 million. Total potential penalty if Skilling is convicted on all counts would total 325 years and $80 million in fines. Ten of the counts deal with with improper insider trading, which netted Skilling more than $62 million in profits.

Skilling thus becomes the 28th former executive at Enron to be charged in the case. To date, he is the highest profile and highest-ranked executive to be charged -- now more than two years after the corporate scandal that destroyed more than $70 billion in shareholder equity and cost bondholders billions more.

Last month, Mr. Fastow agreed to a 10-year prison sentence in connection with his cooperation in helping make cases against other executives, including Skilling and the top prize, Lay. Both have maintained their innocence, stating that Fastow and others set up illegal schemes to hide billions in Enron debt without their knowledge. Fastow has now told investigators that he was hired specifically to do off-book financing and that his superior officers and directors praised the work he had done to make Enron look more financially successful than was actually the case.

And so unraveling the spectacular fraud at Enron grinds slowly forward, ideally honing in on gathering enough information to indict Lay. There are many victims of the Enron fraud who have grown quite impatient for this to happen. Prosecutors with whom I have spoken nearly universally describe just how difficult cases of individual culpability are to make in instances of corporate fraud. Just because we do not see the Enron executives behind bars at this moment doesn't mean that there isn't progress. Certainly, even with the indictment of Skilling today, it's not as fast as many of us would prefer.

Bill Mann owns none of the companies discussed in this article.