Now It's Skilling's Turn Why Enron's ex-CEO will "fight this thing until the day I die."
By Bethany McLean; Peter Elkind

(FORTUNE Magazine) – In the aftermath of Enron's bankruptcy, Jeff Skilling, who as Enron's president had masterminded the company's transformation into a new-economy powerhouse--and served as its CEO for six tumultuous months--alternated between public bristle and private despair. He was crushed by the suicide of his closest friend, former Enron executive Cliff Baxter, spent hours brooding alone in dive bars, and took antidepressants. At one particularly low point, he confided to friends, "I view my life as over. Depending on how it plays out, it may reach a point where it's not worth sticking around."

Over the next two years, as the investigations dragged on, Skilling's despair seemed to fade. He sought to blame others--in particular Rebecca Mark, who spent billions building power plants, and former CFO Andy Fastow--for the heavy debt that contributed to Enron's collapse. "Rebecca poured gasoline all over the balance sheet, and Andy lit the fuse," he told friends. He knew the Justice Department was still gunning for him, but the prospect made him even more defiant. "I'll fight this thing until the day I die," he'd say.

Now, Skilling will get his fight. On Feb. 19 the government unsealed a 42-count indictment against him and former chief accounting officer Rick Causey, alleging conspiracy, fraud, and insider trading. If convicted, he could spend decades in prison; the government is also seeking the forfeiture of more than $60 million plus his newly constructed Houston mansion. The 57-page indictment paints a picture not of a man who was devastated by Enron's collapse but rather of one who deliberately deceived Enron's investors to line his own pockets.

In the large gap between how Skilling has represented himself and how the government has described him lie important clues both to Jeff Skilling's upcoming defense and the nature of the crimes that were committed at Enron. Skilling's trial--and it seems certain there will be one--will shed important light on the man himself, but it will also be about the extent of an executive's responsibility. Almost from the beginning a constant refrain about the Enron case was that it would be difficult, if not impossible, to prosecute the top guys. The main reason was that they could argue that they had properly relied on accountants and lawyers to bless specific deals. That is at the heart of Jeff Skilling's defense. "Show me one fucking transaction that the accountants and the attorneys didn't sign off on," he'd privately rant.

That argument, of course, makes a mockery of common sense. In the big picture Enron was clearly a massive fraud. All those accounting manipulations in the gray area added up to financial statements that bore no relationship to financial reality. Indeed, in the Skilling indictment the government paints a portrait of a company that engaged in numerous schemes to report not the earnings that Enron actually generated, but the ones that it had promised Wall Street. Will Skilling's high-powered legal team be able to successfully argue that he bears no responsibility for that because his advisors signed off on the dirty details?

To be sure, the government's case against Skilling doesn't hinge solely on this broad indictment of Enron's operations. There are also damning specifics, including some for which even the "accountants signed off" defense won't fly. For instance, the indictment alleges that Skilling and Causey had secret agreements with Fastow that ensured that an outside partnership the CFO ran would make a profit on certain deals it did with Enron. If such arrangements did exist, it would make Enron's accounting blatantly fraudulent. Skilling and Causey both deny the existence of such deals--and it may ultimately come down to their word against Fastow's.

So if Jeff Skilling is the evil architect of Enron's fraud, how could he be so shocked and devastated by the company's inevitable failure? The likely answer is that Skilling so personally identified himself with Enron--at one point he proclaimed "I am Enron!"--that to accept his role in its failure is something he cannot face, not even two years later. That may be why Skilling is so intent on fighting.

And there's the last Enron question, the one still on the minds of former shareholders. What about Ken Lay, Enron's former CEO and chairman? The conventional wisdom is that Lay, who was at best a disengaged CEO in Enron's final years, will be able to use his ignorance as an excuse. But as Linda Thomsen, the SEC's deputy director of enforcement, put it when asked about Lay on CNBC after the indictment, "The investigation is ongoing and continuing and vigorous.... We are not finished."

BETHANY MCLEAN AND PETER ELKIND co-authored The Smartest Guys in the Room, about the Enron scandal.