As noted here, here, here and several other times on this blog over the past couple of years, the mainstream media’s coverage of the Enron-related criminal trials has been spotty at best, shameful at its worst, particularly as it embraced and perpetrated the Enron Myth in reporting on the trial and sentencing of Jeff Skilling. Thus, this Ayn Rand Institute press release of yesterday caught my attention:

The Media’s Mistreatment of Jeff Skilling
Irvine, CA–Upon hearing the news that former Enron CEO Jeffrey Skilling was sentenced to 24 years, most Americans, trusting the newspaper articles and books they have read on Enron, think that justice has been served. But, said Alex Epstein, a junior fellow at the Ayn Rand Institute, “Jeff Skilling has not gotten justice, and the media bear a major portion of the blame.
“Few Americans know that during Skilling’s trial, the prosecution came nowhere near proving its central allegation that Jeff Skilling engineered a conspiracy to defraud investors. Few know that Skilling, upon leaving Enron five months before its collapse, destroyed no documents, nor did anything else resembling a criminal cover-up. Few know that the prosecution, unable to prove a conspiracy, spent huge swaths of the trial taking pot-shots at Skilling with issues not even mentioned in the indictment, such as the failure of Skilling, a multi-millionaire many times over, to disclose a failed $50,000 investment to Enron’s board.
“The media’s misportrayal of the case against Skilling long predates the trial. Ever since the fall of Enron, most of the media have treated as fact every conceivable smear against Skilling made by ax-grinding prosecutors or ex-Enron employees, while treating as absurd Skilling’s claim that he neither engineered a conspiracy nor lied to investors.
“There can be no doubt that the media’s treatment of Skilling contributed to his conviction for a phantom conspiracy–and to the outrageous 24-year sentence that he has now received. And the mistreatment of Skilling is part of a broader trend: the trend of treating businessmen as guilty until proven innocent. Our journalists and intellectuals, accepting the idea that the pursuit of profit is morally tainted, assume that whenever anything goes wrong in business, it is the result of crooked behavior by greedy, rich CEOs–and slant their coverage accordingly. This practice is putting numerous innocent men in jail, and instilling terror throughout corporate America.
“During Skilling’s appeal, let us call for the media to start treating Skilling–and all businessmen–fairly.”

The mainstream media’s slanted coverage of Enron in general and Skilling in particular is a subject that is ripe for examination. We have not heard the last of this issue.

Former Enron CEO Jeff Skilling was sentenced on Monday to spend most of the rest of his life in prison for causing Enron’s bankruptcy and resulting loss to investors.

However, Skilling was neither prosecuted nor convicted for that crime.

Skilling began working at Enron in 1990 as the sole employee and head of a wholesale division, was made president and chief operating officer of Enron in 1997, and was eventually elevated to CEO in February 2001.

During his tenure, Enron grew into an international, multi-billion dollar corporation with earnings that rose from a couple of hundred million dollars in 1990 to $1.6 billion in 1998, of which his trading division produced over half.

By 2000, Enron’s revenue had risen to $100 billion and, as of August 23, 2000, Enron’s stock price peaked at $90 per share.

Skilling resigned about a year later, by which point the stock had declined 51% in a troubled post-bubble market for energy and broadband companies. But from January 1999 until he resigned in August 2001, Skilling increased his stock holdings in Enron by over 250%.

After listening to Enron”s October 23, 2001 conference call with market analysts, Skilling called Enron chairman Ken Lay and asked to return to the company. On the heels of revelations about former CFO Andy Fastow’s embezzlement of millions from the company, Enron was caught in the beginning stages of losing the trust of the marketplace, and Skilling believed that his return would send a strong signal to the market of his confidence in the strength of the company.

The company declined Skilling’s offer, at which time Skilling attempted to arrange a liquidity infusion — including most of his net worth — to stem the company’s death spiral. The efforts failed and Enron filed a chapter 11 case on December 2, 2001.

So, if Skilling wasn’t convicted of causing Enron’s failure, then what is it that he is being thrown in jail for until he is in his mid-to-late 70’s?

For allegedly lying about Enron’s financial condition (and one throw-in count of insider trading). But even though Skilling’s alleged lies may have changed the identity of the investors who ended up holding the bag when Enron failed (a group that included himself, by the way), they did not cause Enron’s failure.

And it goes without saying that Skilling was given no credit whatsoever during his sentencing for contributing to the creation of enormous wealth for investors in many valuable markets.

So, make no mistake about it — Jeff Skilling was not sentenced yesterday in regard to the crime for which he was prosecuted and convicted. Rather, he was sentenced for causing Enron’s failure.

There is a big difference between those two crimes, and a quasi-life sentence for Skilling fails to distinguish between them.

Former Enron CEO Jeff Skilling’s sentencing hearing is Monday afternoon, so it’s a good time to provide some links that will provide a basis for an objective evaluation of Skilling’s case as a counterbalance to what the mainstream media typically serves up.

By now, we all know the myth — Enron was merely an elaborate financial house of cards that a massive conspiracy led by the greedy and lying Skilling and the late Enron chairman Ken Lay hid from innocent and unsuspecting investors and employees.

The Enron Myth is so thoroughly accepted that otherwise intelligent people reject any notion of ambiguity or fair-minded analysis in addressing facts and issues that call the morality play into question. The primary dynamics by which the myth is perpetuated are scapegoating and resentment, which are common themes of almost every mainstream media report on Skilling and Enron.

The power of the Enron Myth and the real presumption in the criminal case against Skilling are such that an objective jury probably could not have been found in Houston and the jurors who did serve dispensed with critical thinking skills when confronted with the biggest business conspiracy even alleged in the history of federal prosecutions.

Given the power of the Enron Myth, the jurors were content with a prosecution that cast Skilling as a liar about Photofete and his one sale of Enron stock after he left the company, and ignored the paucity of evidence of any massive conspiracy or even the true reasons why Enron collapsed.

That same view has been readily embraced by a wide-range of societal forces, such as publicity-seeking politicians who don’t allow facts to get in the way of demonizing unpopular entrepreneurs for political gain, government prosecutors who improperly expand the reach of criminal laws to further their careers, supposedly “objective” journalists who work literally hand-in-hand with the Enron Task Force or who simply perpetuate the myth in spite of the facts, competing businesspeople and lawyers seeking to profit from Enron’s demise, and a general public that finds it easy to resent wealthy businesspeople, particularly after the bursting of a stock market bubble.

The myth is so pervasive and accepted — why bother with the truth?

The carnage of the Enron Myth is now piled high — the destruction of Arthur Andersen, the death of Ken Lay, the outrageous prosecution and imprisonment of the four Merrill Lynch executives in the Nigerian Barge case, Richard Causey, Kevin Howard, Christopher Calger, the NatWest Three — the list goes on and on. In the wake of such destruction of careers and lives, the public is even less willing to confront the vacuity of the myth and the destructive dynamics by which it is perpetrated.

In fact, any challenge to the myth is now commonly met with derision and appeals to even more resentment over the Enron failure.

As has been chronicled on this blog, it is far more likely that the truth about Enron is that no massive conspiracy existed, that Skilling and Lay were not intending to mislead anyone and that the company was simply a highly-leveraged, trust-based business with a relatively low credit rating and a booming trading operation.

Although there is nothing inherently wrong with such a business model, it turned out it to be the wrong one to survive amidst choppy post-bubble, post-9/11 market conditions when the markets were spooked by revelations of the embezzlement of millions of dollars by the company’s CFO and his relative few minions.

That Jeff Skilling did not predict that Enron would fail under those conditions does not make him a criminal. Unlike his main accusers Andy Fastow and Ben Glisan, Skilling didn’t embezzle a dime from Enron.

Did he tirelessly advocate this highly-leveraged but innovative company that was dealing with difficult post-bubble market conditions during 2001? Sure, but since when is it a crime for a CEO to be optimistic — even overly-optimistic — about his company?

Beyond the shattered lives and families, the real tragedy here is that the demonization of Skilling has distracted us from examining the tougher issues of what really caused Enron’s demise and understanding the how such a company can be structured to survive in even the worst market conditions.

It’s a lot easier just to throw a good and decent man such as Jeff Skilling in jail and throw away the keys, but examining objectively what really occurred at Enron is far more likely to result in real justice.

Here are some links to prepare you for the Skilling sentencing hearing:

Peter Henning analyzes the Skilling sentencing issues here, while Doug Berman provides a handy archive on Enron-related sentencing issues;

The trial penalty issue in the Skilling sentencing is explained in this Ellen Podgor post, while this post previews the Skilling appeal issues;

Larry Ribstein places the Skilling sentencing in the perspective of the government’s purchase of testimony with pleas and questions the legitimacy of this policy;

Skilling’s fascinating testimony during his trial is summarized here and here, and

Finally, Skilling’s legacy of beneficial risk-taking, and what might have been had Ken Lay made a different decision in 1997.