Jeffrey Skilling
Jeffrey Skilling | |
|---|---|
| Born | November 25, 1953 Pittsburgh, Pennsylvania, U.S. |
| Occupation | Former executive |
| Known for | Former CEO of Enron; convicted in Enron scandal |
Jeffrey Keith Skilling (born November 25, 1953) is a former American executive who was found guilty in 2006 on multiple federal felony charges connected to the Enron scandal. Serving as Enron’s CEO during its downfall, he received a 24-year prison sentence but was released after serving 12 years following several appeals.
Skilling was indicted on 35 charges, including conspiracy, insider trading, making false statements, and securities fraud. Additionally, he was ordered to pay $45 million in fines.
In 2010, the U.S. Supreme Court overturned a portion of his conviction and sent the case back for resentencing. The Fifth Circuit Court of Appeals upheld the convictions in 2011 but mandated a new sentencing hearing. His subsequent petition to the Supreme Court was denied.
After claims surfaced in 2013 that prosecutors had withheld evidence, the United States Department of Justice negotiated a deal reducing his sentence by ten years, bringing it down to 14 years. Skilling was moved to a halfway house in 2018 and released from custody in 2019 after completing 12 years behind bars.
Early life
Jeffrey Keith Skilling entered the world on November 25, 1953, in Pittsburgh, Pennsylvania, as the second child among four siblings born to Betty (née Clarke) and Thomas Ethelbert Skilling, Jr., who worked as a sales manager for an Illinois valve manufacturer. His elder brother, Tom Skilling, later became chief meteorologist at Chicago’s WGN-TV. Skilling’s childhood was split between New Jersey and Aurora, Illinois. At age 16, he gained experience working at Aurora’s UHF station, WLXT-TV (channel 60). He completed his studies at West Aurora High School and earned a full scholarship to attend Southern Methodist University in Dallas, Texas, where he joined the Beta Theta Pi fraternity.
Initially pursuing engineering, Skilling switched his major to business before graduating in 1975. He then took a position as a corporate planner at Houston’s First City Bancorporation, but by 1977 he left to attend Harvard Business School. During his admissions interview, he reportedly described himself as "fucking smart," which impressed the panel. Graduating as a Baker Scholar in 1979, he ranked within the top five percent of his class.
Following graduation, Skilling joined consulting firm McKinsey & Company, focusing on energy and chemical industries. He rapidly advanced to become one of McKinsey’s youngest partners.
Enron
In 1987, while working as a McKinsey consultant, Skilling assisted Enron in establishing a forward market for natural gas. His performance caught the attention of Kenneth Lay, who recruited him in 1990 as chairman and CEO of Enron Finance Corp. In 1991, Skilling took on the role of chairman for Enron Gas Services Co., formed through merging Enron Gas Marketing with Enron Finance Corp. He later became CEO and managing director of Enron Capital and Trade Resources, overseeing energy trading and marketing operations. By 1997, he had been elevated to president and chief operating officer, ranking directly below Lay while continuing to manage Enron Capital and Trade Resources.
During Skilling’s tenure, Enron implemented "mark-to-market" accounting practices that valued expected future earnings at their present value rather than historical costs. He advocated an aggressive investment approach that reduced dependence on traditional assets, enabling Enron to become the largest wholesaler of gas and electricity in the U.S., with quarterly trading volumes reaching $27 billion. On February 12, 2001, Skilling succeeded Lay as CEO and was anticipated to assume the chairman role early in 2002; however, he abruptly resigned just six months later on August 14, 2001.
Skilling made controversial remarks joking about the California energy crisis, highlighting tensions between Enron and California regulators. Meanwhile, some employees engaged in strategies aimed at maintaining high energy prices within the state.
On March 28, 2001, during an interview with PBS's Frontline, Skilling portrayed Enron as "the good guys" and claimed they were "on the side of angels." Yet on an April 17 analyst conference call, he responded to criticism with profanity.
In June 2001, protests erupted at the Commonwealth Club of California during one of Skilling’s appearances; notably, he was struck by a pie while on stage—an incident later captured in The Pie's the Limit documentary.
Following his unexpected resignation in August 2001 came significant stock divestitures. Kenneth Lay reassumed the CEO position until Enron declared bankruptcy protection in December that year. When testifying before congressional committees investigating Enron’s collapse, Skilling stated he had "no knowledge" regarding the factors that led to the company’s failure.
Legal proceedings
Skilling faced charges on 35 counts, including fraud, insider trading, and other offenses connected to the Enron scandal. He turned himself in to the FBI on February 19, 2004, entering a plea of not guilty. Prosecutors contended that he deliberately participated in deceptive transactions and sold nearly $60 million worth of Enron shares shortly after stepping down, implying he had advance knowledge of the company's looming bankruptcy. His defense team was headed by attorney Daniel Petrocelli, with Skilling investing $40 million in trial preparations, which included $23 million spent on legal retainers. His brother Mark, who is also a lawyer, contributed to the defense efforts.
In April 2004, Skilling was involved in a public altercation at a cigar bar in New York City, prompting prosecutors to seek an increase in his bond and impose tighter travel restrictions due to alleged breaches of pretrial conditions.
The trial commenced on January 30, 2006, in Houston despite defense motions requesting a change of venue over concerns about potential bias. Enron's bankruptcy filing in December 2001 was the largest in U.S. history at that time, resulting in the loss of 20,000 jobs and billions of dollars in investor losses. Executives, including Skilling, benefited by selling substantial amounts of stock prior to the company's collapse. On May 25, 2006, the jury convicted Skilling on multiple charges such as conspiracy, insider trading, making false statements to auditors, and securities fraud.
In a June 2006 interview with The Wall Street Journal, Skilling admitted to suffering from depression following Enron’s downfall but stated that his indictment marked the end of his clinical depression. He also expressed willingness to serve prison time if assigned meaningful work.
On October 23, 2006, Skilling received a sentence of 24 years and four months imprisonment along with a $45 million fine. Most of his convictions and sentence were upheld upon appeal. His request to remain free during the appeal process was denied in December 2006 when the judge ordered him to begin serving his sentence immediately.
Skilling started his prison term on December 13, 2006, at Montgomery Federal Prison Camp in Alabama and remained there until 2018. Although originally scheduled for release in February 2019, he was transferred to a halfway house in Texas on August 30, 2018 to complete his sentence.
The Securities and Exchange Commission filed a lawsuit against Skilling in February 2004; however, this case was put on hold pending the outcome of criminal proceedings. In December 2015, a federal court permanently prohibited him from holding any officer or director positions at public companies.
Skilling was released from federal custody on February 21, 2019.
2008 events
Prior to the trial, Skilling’s legal team sought access to FBI interview notes involving Andrew Fastow, revealing discrepancies. On April 3, 2008, defense attorney Daniel Petrocelli argued that Skilling’s conviction under honest services fraud was invalid because he acted with the intent to save Enron rather than for personal gain. This defense aimed at overturning certain convictions but was considered unlikely to succeed. Legal analysts suggested that Skilling’s strongest appeal approach involved citing a related case where three Merrill Lynch bankers had their guilty verdicts overturned.
On October 30, 2008, Skilling was relocated to a low-security prison near Littleton, Colorado after his initial facility, FCI Waseca, was converted into an all-female institution.
Philosophy
Skilling’s approach to management was heavily influenced by Richard Dawkins' The Selfish Gene, which he viewed through a Darwinian perspective, asserting that financial incentives and fear are the primary drivers of human behavior. Early in his tenure at Enron, he introduced the Performance Review Committee (PRC), a biannual employee evaluation system ranking individuals on a scale from 1 to 5, with 5 representing the lowest rating. Although these scores were said to reflect job effectiveness and feedback, the highest ratings typically went to employees who generated revenue or had influential connections. Compensation bonuses were closely tied to these rankings, while employees receiving the lowest marks were given a two-week window to secure another position within Enron before facing termination. This forced ranking method, often referred to as "rank and yank," was mandated by Skilling and described by him as "the most important process we conduct as a company."
Dawkins himself has publicly repudiated Skilling and Enron’s interpretation of his work, emphasizing that Skilling misunderstood his theories and that he never endorsed selfishness as a route to achievement.
Supreme Court review
On October 13, 2009, the Supreme Court of the United States agreed to consider two issues raised in Skilling's appeal. Oral arguments were scheduled and heard on March 1, 2010.
Skilling’s legal team contested whether the federal statute on "honest services fraud" (18 U.S.C. § 1346) necessitated proof that his actions were motivated by "private gain" rather than benefiting his employer, and whether the statute was impermissibly vague. The Court had previously addressed related cases such as Black v. United States and Weyhrauch v. United States.
The second matter examined was the concept of "in-house judging": whether the government could overcome an assumption of jury bias stemming from extensive community impact and prejudicial pretrial publicity, and whether it was required to demonstrate beyond reasonable doubt that no juror was biased.
During the proceedings, Justices Breyer and Sotomayor questioned aspects of jury selection, focusing on a potential juror who had lost between $50,000 and $60,000 due to Enron’s collapse. The government defended the judge’s selection process as proper. Skilling’s counsel was Sri Srinivasan from O'Melveny & Myers, while Michael Dreeben represented the Justice Department.
On June 24, 2010, Justice Ginsburg authored a unanimous Supreme Court decision overturning Skilling's conviction for honest services fraud, determining that his misconduct did not involve bribery or kickbacks. The case was sent back for further proceedings to assess which charges should be dismissed following the statute’s invalidation.
In April 2011, a panel of the Fifth Circuit upheld Skilling’s conspiracy fraud conviction based on substantial evidence independent of the honest services theory. Skilling sought Supreme Court review again but was denied certiorari.
By 2013, Skilling reached an agreement with the Justice Department reducing his sentence to 14 years after an appellate court identified errors in applying sentencing guidelines. He relinquished approximately $42 million for Enron fraud victims and consented not to pursue additional appeals. Federal Judge Simeon T. Lake III approved this arrangement on June 21, 2013. Skilling completed 12 years of incarceration and was released from federal custody on February 21, 2019.
Business activities following Enron
In June 2020, reports emerged that Skilling was seeking investment for an online platform focused on oil and gas trading called Veld LLC. By August 2021, Veld LLC had been officially registered in Texas, with Rebecca Carter, Skilling’s spouse, designated as the company's manager. Nevertheless, the registration of the business was formally canceled on August 30, 2022.
Personal background
Skilling fathered three children during his first marriage to Susan Long, which concluded in 1997. His youngest child, John Taylor "JT" Skilling, tragically passed away at age 20 in 2011 due to a drug overdose. In March 2002, Skilling wed Rebecca Carter, who previously served as Enron’s vice president responsible for board communications.