"Is it possible to tell a story in one word?" I heard a George Washington University professor, Michael Kull, ask a corporate audience in Arizona in last week. The audience looked skeptical. "Let me prove it to you," said the professor. He paused before he emitted almost in a shout: "Enron!" The room burst into laughter. Everyone knew that story! No need to say another word!

The government's morality tale

Or at least: everyone had a partial version of the Enron story, of which the final chapters have still to be written. Yesterday, the lead business story around the world concerned the next step in the saga: the indictment of the once-high-flying CEO, Jeffrey Skilling. The step was long expected, indeed overdue, and the government tried to make the most of the media moment. Skilling was duly paraded in front of television cameras - handcuffed, tieless, seemingly unkempt - being led into court by an immaculately groomed female FBI agent for his arraignment. (The Wall Street Journal reports that he had chosen to wear neither a tie nor a belt because he didn't want to give government agents the satisfaction of removing those articles when they took him into custody, a person close to the case said.) 

The government's dramatics of course were totally unnecessary for the business at hand, since Skilling has voluntarily agreed to appear. But they were essential for the wider story that the government was trying to tell on television screens around the world - justice is at hand for at least one notorious leader of The Corrupt Economy!

There are obvious reasons why the government was so intent on making the most of the scene. 

• Till now, the prosecution of the wrongdoers in The Corrupt Economy had essentially netted small fry, while the big fish were noticeably still not only outside prison but seemingly at little risk of ending up there. 

• While more than two dozen individuals have been criminally charged in the Justice Department's Enron investigation, none of them has gone to trial. 

• The much publicized Martha Stewart trial was essentially a side-show about alleged lying in a matter involving a couple of hundred thousand dollars, which only underlined how many real scoundrels, who had made tens of millions of dollars from their activities, still were untouched. 

• The trial of former Tyco CEO, Dennis Koslowski, was dragging on interminably in what had initially seemed like an open-and-shut case. 

• The government's case against the Wall Street analyst Frank Quattrone had ended up in a hung jury. 

The government threw the book at Skilling. The former chief executive officer, was said to be the maestro who directed the energy giant's massive frauds, the government charged yesterday in a 35-count indictment calling for $80 million in fines and up to 325 years in prison. Skilling was charged with lying about Enron's failing condition, hiding losses with disguised profits derived from California's energy crisis, and then cashing in with stock sales that reaped him $63 million in profits. Skilling pleaded not guilty. He was freed after posting $5 million in bond.

"Often I hear folks say, mostly on TV, 'Why don't they go after CEOs?' Here we are," said Deputy Attorney General James Comey, "Skilling is the guy." He ran Enron and orchestrated the sweeping and complicated schemes that caused its dramatic fall into bankruptcy in December 2001.

Comey claimed that despite public doubts, the government's indictments of high-ranking corporate executives and the stiff penalties exacted in recent years are serving as a powerful deterrent against white-collar fraud. "Corporate executives and accountants read the newspapers and "respond to painful stimuli. They will change their behavior." Comey did not however offer any evidence in support of his story: it's more a wishful story than a prediction.

Comey is here explicitly trying to use the power of storytelling to remove the need for prosecutions in future. He's trying to change behavior 

When asked whether the government's long-running investigation would finally lead to Enron founder Kenneth Lay, who was CEO before turning day-to-day management over to Mr. Skilling in February 2001. Comey stressed that the government can only go as far as the facts lead. He did not need to mention that Lay was a principal contributor to the Bush election campaign. 

Nor did Comey dwell on the fact that this moment of drama will now be followed by a long and excruciatingly slow legal proceeding that may or may not result in justice. 

The story of Skilling's alleged wrongdoing

Comey did not mention fact that the complaint against Mr. Skilling draws on some novel and untested legal theories, such as characterizing Enron's efforts to "smooth out" its earnings from quarter to quarter -- an earnings-management practice at many corporations -- as a kind of wire fraud.

In the government's story, Mr. Skilling and his accomplices at Enron, including former Chief Accounting Officer Richard Causey, who also is charged in the indictment, are said to have a "one-track mind" focused on meeting Wall Street's earnings expectations, and they concocted a dizzying array of schemes to ensure they did, Mr. Comey said. Given that the same could be said about the financial management of most global corporations, the case is going to turn on: were the schemes was legal or illegal? 

Mr. Skilling's role is said to be pivotal, because it was his "falsely optimistic public statements" about Enron's struggling broadband business that fueled Wall Street's expectations for higher earnings each quarter, he said. But if making "falsely optimistic public statements" was a crime, there would hardly be an executive out of prison, including of course the leaders of the US government itself.

One previously undisclosed scheme that the government revealed was one involving the movement of money among accounts: "Enron executives used to improve earnings figures was to draw from reserve accounts that were created to conceal huge profits Enron made from selling power to California during its 2000-2001 energy crisis". The undisclosed reserves, estimated at $1 billion, also were used to conceal big losses in Enron's energy services division, it says. However, since the use of gains in one part of a business to offset losses in another part of the business is a normal aspect of running a large corporation: again, the question will arise: were those movements of funds legal or illegal?

A stronger part of the government's case against Mr. Skilling concerns charges that Mr. Skilling participating in and aiding illegal partnerships, such as those dubbed "Raptor" and "Nigerian Barge," which were devised to hide Enron's debt and failing assets through complicated off-balance-sheet partnerships. In this area, the government's case will be aided by testimony from Enron's former chief financial officer, Andrew Fastow, whose agreement to cooperate with prosecutors earlier this year was a breakthrough leading to the Skilling indictment. 

Skilling is also charged with insider trading. According to the government story, after setting up these schemes, . Skilling cashed in by selling more than 1 million shares of Enron stock for $63 million in profits, making him guilty of insider trading. However Skilling, Lay and other Enron executives were paid largely with stock options and had programs for redeeming their stocks to generate cash for living expenses -- a factor that may make the government's case more difficult to prove.

Skilling maintains his innocence. "Jeff Skilling has nothing to hide," said the former executive's attorney, Daniel Petrocelli. "He did not steal. He did not lie. He did not take anyone's money ... Jeff Skilling is their scapegoat." 

The fact that Skilling voluntarily gave testimony under oath at the congressional hearings is an indication that he at least believes he is innocent. Other executives took the Fifth Amendment. By giving testimony under oath, Skilling was running the risk that in his testimony he said things that can be shown to be untrue and that he will be pursued for perjury even if, as in Martha Stewart's case, the subject of the untrue statements ends up not being deemed illegal. At the courthouse, Petrocelli said his client had even taken a lie-detector test concerning his work at Enron and had "passed it with flying colors." 

It appears that Mr. Skilling's legal team is looking to portray their client's activities at Enron as essentially the same as the actions of senior executives at dozens of corporations during the 1990s. The charges are really "a general indictment of corporate business" and an attempt to "demonize some normal procedures of corporate activity," said Bruce Hiler, one of Mr. Skilling's attorneys, in an interview Thursday. 

Who is Jeff Skilling? What is his story?

Before he became the most prominent alleged white collar criminal of his era, Jeff Skilling was the quintessential Enron executive. Perhaps no one at the Houston-based energy company so embodied its combustible corporate culture of brains and arrogance as Skilling. Like his Enron boss, Ken Lay, Skilling rose from humble roots to become one of the most celebrated - and later reviled - American executives. His father was a salesman in the rusting American Midwest of the late 1960s, leading the family to resettle repeatedly during his youth. While   Skilling's intelligence earned him a college scholarship, he was also forced to work for spending money while he was there.

Mr. Skilling joined Enron in 1990 after having been a standout student at the Harvard Business School.  Academics came easy to Skilling, and he demonstrated a brash self-confidence well before he had scaled the heights of the business world. When asked during his Harvard interview if he was smart, Skilling famously replied: "I'm fucking smart," according to The Smartest Guys in the Room, a book about Enron's collapse by Bethany McLean and Peter Elkind.

He was a fast-rising star at the consulting giant McKinsey & Co. Skilling  became one of the youngest partners in the history of McKinsey. It was a remarkable achievement at a consulting firm known for its over-achievers. 

When he arrived, Enron was still a relatively staid natural-gas pipeline company. During the 1990s, Mr. Skilling led the transformation of Enron into a global trading colossus that trafficked in everything from energy products and metals to space on the information superhighway and insurance against inclement weather. Along the way, he assembled a team of aggressive young executives, which included Messrs. Fastow and Causey.

In 1997, Mr. Skilling became president, chief operating officer and heir apparent to Mr. Lay, the longtime chairman and chief executive. In February 2001, he ascended to the chief executive post.
However, Mr. Skilling abruptly resigned from Enron six months later, in August 2001. Though he and Mr. Lay, who resumed the chief executive post, insisted that the resignation was for strictly personal reasons, suspicions began to arise that something might be amiss inside the company.

While looking into Mr. Skilling's departure, The Wall Street Journal came across references in Enron's SEC filings to two suspicious-looking entities, which came to be known as the LJM partnerships. These entities did transactions with Enron involving hundreds of millions of dollars, despite the fact that the company's own chief financial officer, Mr. Fastow, ran and partly owned the partnerships. Subsequent disclosures about those partnerships contributed to a massive loss of investor confidence in Enron that pushed the company into filing for bankruptcy-law protection in December 2001.

Many of the ensuing investigations of Enron have concluded that the LJM arrangement was part of a complex array of financial maneuvers, including the use of off-balance-sheet entities to improperly create income and hide debt. This alleged broad scheme of wrongdoing is at the heart of the indictment against Mr. Skilling and Mr. Causey. Many of the specific alleged acts of wrongdoing by the two have been included in prior federal criminal filings in the Enron probe. However, with the inclusion of Mr. Skilling, prosecutors believe that they have reached the top rung of the alleged conspiracy, said one person familiar with the probe, thus implying that Lay was not involved.

The end of the story

Will wrongdoing be punished? Or will the ringleaders go free? However the story eventually unfolds, Enron has already achieved mythic status in the business world and Skilling has become a legend in his own lifetime. The story will resonate for decades. During that time, it will be one of the few instances where a single word - "Enron!" - tells the tale.

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