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Former Enron CEO Indicted For Fraud, Illegal Profiting

By Kurt Eichenwald

The New York Times -- HOUSTON

Jeffrey K. Skilling, the former chief executive of Enron, a once-staid pipeline business that he transformed into a global energy-trading giant, was indicted on Thursday on charges that he conspired to disguise the company’s troubled financial performance while profiting from sales of stock inflated by false earnings reports.

Skilling, who pleaded not guilty at an arraignment here, is the highest-ranking Enron executive to face criminal charges in the wake of the company’s collapse more than two years ago. He was charged with 35 counts of fraud, insider trading and conspiracy.

The range of accusations -- from outright criminal violations that significantly affected reported profits to more subtle earnings management techniques widespread in corporate America in the 1990s -- depict Enron as a struggling enterprise that grew deeply dependent on accounting manipulation to maintain its image as a financial powerhouse that turned in reliable performance.

Indeed, prosecutors have assembled a case that appears to depend not so much on the specific effect of any one accusation but instead on the overall impact of a range of activities over many years. In quarter after quarter, Enron is portrayed in the indictment as struggling to find another one-shot technique to lift its earnings to meet or exceed Wall Street projections, helping the stock price continue what had been an almost uninterrupted climb over more than a decade.

With the indictment Thursday, 29 people have been charged with crimes related to the collapse of Enron, including 20 former executives. Of those, nine have pleaded guilty, including Andrew S. Fastow, Enron’s former chief financial officer, who structured a series of off-the-books partnerships that were used to manipulate the company’s financial performance. The Skilling charges were added to an already filed indictment against Richard A. Causey, Enron’s former chief accounting officer.

Skilling, 50, surrendered just before 7 a.m. Thursday to agents at the Houston field office of the FBI. Agents then led him in handcuffs to the federal courthouse, where he appeared before Magistrate Judge Martha Crone. After his plea, he was ordered released on a $5 million bond and surrendered his passport.

As part of the charges, the government will seek forfeiture from Skilling of $66 million worth of cash and real estate. It also will seek assets worth $6 million from Causey.

Prosecutors hailed the charges as a demonstration of the strength of their pursuit of wrongdoing at Enron.

“The indictment of Enron’s CEO shows that we will follow the evidence wherever it goes -- even to the top of the corporate ladder,” Christopher Wray, an assistant attorney general, said at a news conference in Washington.

But, in the first salvo of what is sure to be a long-running legal battle, Skilling’s lawyers lashed out at the prosecution, saying that the charges were the result of a predetermined effort to indict their client that was set in motion when the Justice Department created a task force to investigate the company’s collapse.

“From the moment the Enron task force was designated, there was a decision to go after Jeff Skilling and demonize this company,” said Bruce Hiler, one of Skilling’s lawyers. “The government’s role is to investigate cases, not to create cases.”