When Jeff Skilling, the former Enron CEO, was convicted on 19 counts, the headline of the Houston Chronicle read “Guilty! Guilty!” Skilling was subsequently sentenced to 24 years in prison and is scheduled to be released in February 2028. Skilling had been a wealthy executive who went too far in pursuit of profit and caused financial pain and devastation to thousands of investors and with his decisions at the helm of Enron. Few people rose to his defense in light of the damage Skilling caused. So where is Skilling today? He sits in a prison in Littleton, Colorado.
Reflecting on this blog now, I probably should have chosen a company or figure other than Skilling as he has literally fallen off the face of the earth after his trial. He hasn’t had the opportunity (yet) to redeem himself or participate in further unethical behavior. I suppose one person I could have chosen worse than Skilling could have been Kenneth Lay due to the fact that he passed away in 2006. So, it is really difficult to assess whether these individuals have changed. For that matter, it is impossible to determine whether Enron has changed as it does not even exist anymore! I suppose one thing I can look at is whether other companies have reacted to the Enron scandal and the actions that Skilling, Lay, and Fastow took. Overall, I would say that companies are more wary of their actions and the behaviors of their employees. Sarbanes-Oxley is a big reason for this but more so is the harsh penalties imposed on the corrupt Enron executives. Their demises were nothing short of epic. It is not like they inflicted physical harm on anyone, which is what I usually associate with long jail term sentences. Rather, they manipulated financial documents and made false statements to investors and auditors.
Regardless, the justice came down hard on these guys and that is why the business world is scared (FOR NOW). Everyone is checking themselves to make certain they don’t get caught and don’t suffer the same fate as Enron. If you look at the Enron executives, their entire lives were destroyed. Lay died during the trial, Skilling is in jail, and Fastow served a lengthy sentence. It’s unreal. I’m not saying they shouldn’t have been punished but some people think they were punished way too harshly. Take University of Illinois law professor Larry Ribstein’s take on the case:
“There was nothing they should have been prosecuted for criminally. There was enough question as to whether there were misrepresentations of a nature for even an SEC action, but shoehorning this into a criminal prosecution was improper. There were some very bad business judgments. But in this country you don’t go to jail for bad business decisions, period.”
(Link to blog/article: http://fuelfix.com/blog/2011/11/28/skillings-fall-was-nothing-short-of-epic/)
I do think that Skilling has served his time however. He has already served 7 years in prison. In February 2011, his youngest son, a college sophomore, was found dead in his apartment in Santa Ana, Calif. His father was not allowed to attend his funeral.
Lastly, what does their harsh sentencing really accomplish in the grand scheme of things? The court gave them brutal punishments to make an example and deter others from similar behavior. However, time has a funny way making people forget things. In the short term, people remember Enron and the severity of its corruption. But in 5-10 years, the impact of Enron will be felt less and less. Executives will think they will be able to get away with certain things and another big scandal will erupt. It’s a vicious cycle.