The Thing Is: Enron's 'smart' guy goes head to Fed

Jeff Skilling

When asked during his interview for Harvard Business School how bright he was, Jeff Skilling is reputed to have answered: "I'm fucking smart." Now the word coming from the US is that the "smart" former Enron chief executive officer, who was led in handcuffs to the federal court in Houston on Thursday, is confident he will "beat the rap" on all 42 charges of securities fraud, insider trading and the like brought against him.

The arrest of Skilling makes him the 20th senior executive at Enron to face charges as a result of the energy giant's collapse (see table). Of these, eight have pleaded guilty, including the chief financial officer, Andy Fastow, who dreamt up the famous "raptors" structure of off-balance sheet vehicles that hid Enron's debts.

Another half dozen bankers who advised the evil empire have also had their collars felt, although some of these charges relate to actually ripping off the banks for their own benefit, rather than to conspiring with Enron.

But Skilling, who was charged along with Enron's chief accountant, Richard Causey, is the biggest fish hooked by the Federal investigators so far. The indictment portrayed the pair as the "principal architects" of the financial and accounting frauds which brought Enron's collapse in December 2001. This raises the question of whether the Feds will go after Kenneth Lay, the chairman, who was a close friend of, adviser to and fundraiser for President George Bush.

Skilling was always seen as the brains behind the transformation of Enron from an energy company that built and ran gas pipelines to a fast-moving trading company which would make a buck out of all sorts of weird pseudo-financial products, from weather futures to broadband cable contracts.

He first became involved with Enron when he was a consultant at McKinsey and was brought in to advise the group. He stayed on as chief executive and then abruptly resigned 12 weeks before the collapse, but not before he called a troublesome shareholder an "asshole" in an investor meeting.

However, the prosecutors may have difficulty finding a smoking gun that links Skilling to the deals that brought Enron down. As his lawyer, Daniel Petrocelli - famed for successfully suing O J Simpson for the families of the star's two victims - has pointed out, the Feds have nothing but circumstantial evidence. Skilling rarely used email or gave orders in writing. He preferred to do business mano a mano, with subordinates then doing the paperwork.

This all makes Skilling's indictment a high-stakes game of poker for him and the prosecutors. If he is found guilty, he faces many years in jail and a civil fine of up to $80m (£42m). For the Feds, there is the prospect of letting the big fish in the Enron scandal swim to freedom. We'll soon see how "fucking smart" Jeff Skilling really is.