The complaint details occasions in which EBS [Enron Broadband Services] executives allegedly misled investors by painting a rosy picture of the division's prospects, despite their knowledge of actual difficulties. Mr. Skilling was present at some of those meetings and participated actively, according to attendees and, in some cases, documents reviewed by The Wall Street Journal.
Mr. [Kenneth] Rice, along with the others, was charged with defrauding the investors while reaping millions of dollars in Enron stock sales. He is the person closest to Mr. Skilling to have been indicted in the continuing government investigation into the collapse of the onetime energy-sector highflier. Mr. Rice, who resigned from Enron before Mr. Skilling left in August 2001, worked with Mr. Skilling for more than a decade and was one of a handful of company officials who accompanied the chief executive on so-called mighty man adventure vacations to Mexico, South America and Australia.
That these dickless wonders committed fraud is hardly doubtful:
Earlier, in July 2000, Mr. Skilling, in a recorded conference call, told analysts that the broadband division was experiencing "breakout performance" in the content-service business and that the Blockbuster contract could be valued "well over $1 billion."
What listeners had no way of knowing was that the venture struggled from the start. Enron soon set up an off-balance-sheet partnership, called Braveheart, to convert into earnings a portion of the value supposedly embedded in the fledgling content-services business. The company realized more than $110 million in profit in late 2000 and early 2001, essentially with money borrowed from a Canadian bank, even though the actual underlying venture with Blockbuster had revenue, during its brief life, of only a few thousand dollars. Enron reversed those gains during the third quarter of 2001, contributing to the erosion in investor confidence that led to the company's downfall.
Later in that same July 2000 call, Mr. Skilling lauded the capabilities of Enron's fiber-optic system, claiming that it, alone, was able to deliver movies-on-demand for Blockbuster. In the conference call, Mr. Skilling said the ability to deliver "television-quality video ... is something that our entire network is devoted to." He said Enron's unique software could "control the signal ... all the way to the end user. We believe at this point we're the only people that could provide this comprehensive service to Blockbuster or anybody for that matter.... That's kind of our space, and that's the one that we want to dominate."
Whether this was hyperbole common to the technology firms at the time or constituted fraud is something prosecutors will have to decide. Even as the broadband business was collapsing, Mr. Skilling sought to allay investor concerns. "EBS is coming along just fine," he said in an earnings conference call on March 23, 2001. "We're in a situation where we clearly have a surplus in supply, and we have real fast declining prices, so that's good. In fact, that is better for us as time goes on. So EBS is looking good."
Shortly after Mr. Skilling resigned [four months later in August 2001], Enron shut down the entire broadband business and wrote off most of its investment.
Lying on this scale is no longer lying. The garbage that flowed so effortlessly from the lips of Jeffrey Skilling represents something much bigger and more harmful than lying, because it simultaneously destroyed the livelihoods and retirement savings of thousands of Enron employees — and helped to put another dickless wonder, a Texas governor who suffers from the same susceptibility to ersatz manhood (fake ranch, borrowed military uniform, etc.), into the White House.
