Skilling sentence sends a clear, tough message
Published 9:00 pm Tuesday, October 24, 2006
A federal judge on Monday had about as much sympathy for Jeffrey Skilling as the disgraced former Enron CEO had for the employees, stockholders and power customers he bilked.
In handing down the harshest sentence of the Enron scandal – 24 years and four months, practically a life sentence for the 52-year-old Skilling – U.S. District Judge Sim Lake compared the penalty to the “life sentence of poverty” suffered by so many when Enron imploded.
The message sent by Lake was clear, appropriate and necessary: big-time corporate fraud will get you big-time punishment.
Skilling’s sentence was just a few months short of that given to former WorldCom CEO Bernie Ebbers, who received 25 years for engineering the $11 billion accounting fraud that brought down his company.
Skilling says he will appeal. For the sake of justice, we hope he fails.
Prosecutors faced a difficult task in unraveling the twisted, criminal schemes that Skilling and his cohorts – including co-defendant Kenneth Lay, the former Enron chairman who died in July, six weeks after his conviction – inflicted on their victims.
The Snohomish County PUD played a now-famous role in the story, exposing tape recordings of depraved Enron traders manipulating West Coast power markets to jack up prices at the expense of “Grandma Millie.”
While that was happening, Skilling, Lay and other corporate bigwigs like Ebbers were being hailed as corporate geniuses, leaders of a “new economy” where profits and stock values soared. It wasn’t real, of course. When it all came crashing down, Skilling and Lay had pocketed millions but thousands of people had lost their jobs, $60 billion in market value had vaporized and $2 billion in pension plan values had been wiped out. In the Northwest, Enron’s criminal behavior was in good part responsible for electricity rates that climbed by 50 percent.
This was epic corruption. Twenty-four years is not too much for one of its chief architects.
That message should be heeded throughout the halls of corporate America. As ethically challenged business leaders look for an edge by pushing accounting rules to their limits, they make things riskier for the rest of us. For example, the practice of “backdating” stock options – going back in time to pin the exercise price of an option at a low price, making it worth much more to the executive cashing it in – can be a particularly sordid kind of insider trading that lowers that value of assets most Americans are counting on for retirement income.
Corporate executives understand risk. The unethical few must be convinced that the penalties for breaking the rules aren’t worth it. That will only happen if people like Skilling and Ebbers are put away for a long time.
