Skilling’s release sparks Enron memories
Many in Houston couldn’t believe it when company fell
Former Enron CEO Jeff Skilling’s release from prison to a halfway house to finish out his sentence rekindled memories among Houstonians of the heady days nearly two decades ago when Enron was the most admired company in town.
Enron came along at a special time when energy was becoming deregulated and the company, which once reached No. 7 on the Fortune 500 list, profited — for a time — from risky bets on natural gas and electricity trading and energy investments in developing countries. The company got behind the push to build a downtown baseball park for the Houston Astros and bought the naming rights for Enron Field.
Enron’s difficulty attracting the best and the brightest to Houston spurred city leaders to build more parks while its high wages created what was known as the Enron effect, as other companies boosted pay to try to keep up. Stock options turned many Enron secretaries into millionaires.
Many Houstonians bought the myth that Enron was touched by Midas himself, and many couldn’t believe the December day in 2001 when 4,000 people lost their jobs as a last-chance deal to save the company from bankruptcy fell apart.
“Enron went from the poster child of success and ambition to a four-letter word in the space of a year and a half,” said Dan Cogdell, a Houston criminal defense lawyer who represented a low-level Enron executive who was acquit-
ted of conspiring to defraud Enron shareholders. “Now anyone associated with Enron are Satan’s handmaidens.”
The taint of Enron has made Houston a well-known footnote in the history of corporate scandals. Enron’s bankruptcy at the time was the biggest corporate filing — it was eclipsed the following year by WorldCom, the telecommunications company that also became engulfed in accounting fraud — and several Enron executives went to prison for their roles in hiding debt and overstating revenues. That included Skilling, who was sentenced to 24 years in prison and fined $45 million, the harshest sentence of any former Enron executive. In 2013, U.S. District Judge Sim Lake reduced Skilling’s sentence by 10 years.
Former Enron Chairman Ken Lay was also found guilty of financial fraud but died of a heart attack before he was sentenced, which wiped away his conviction.
Halfway house
Skilling is scheduled to be released in February. Until recently, he was living in a low-risk federal prison camp in Alabama, but he has since been moved to an undisclosed halfway house, a typical step to help inmates ease back into normal life. Skilling’s lawyer, Daniel Petrocelli, declined to comment.
Robert Bradley Jr. remembers the good days. He spent 16 years working for Enron, including the last six as Lay’s speechwriter. He was paid well — he doesn’t want to say how well — but like thousands of his co-workers, he found himself out on the street in December 2001 with his belongings. By that time, the value of Enron shares had fallen to less than $1, from a high of $90.75 about 18 months earlier.
In retrospect, there were troubling signs years before the company imploded, said Bradley, author of a new book, “Enron Ascending: The Forgotten Years.”
“We were going to be the MCI of electricity,” said Bradley, recalling an ill-fated effort to mimic the telecommunications giant that took advantage of regulatory changes to build a long-distance telephone network to compete with AT&T, the one-time monopoly. Another red flag was the company’s foray into the electricity business, which involved selling power to sports stadiums and recording all the profits in the quarter the deals were booked, rather than as the earnings were generated over time, he said.
‘We didn’t want to hear it’
Enron got into the broadband business too, buying and selling space on fiber optic networks, a venture Enron executives predicted would earn the company billions. It turned out that executives assigned exaggerated values to the trades to boost profits.
One of Bradley’s employees, a new hire, called attention to the suspicious financial practices, Bradley recalled. But Bradley couldn’t believe it. Neither could other longtime employees
“Since we all owned a lot of Enron stock,” Bradley said, “we didn’t want to hear it.”