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Financial Collapse of Enron Corp
Subcommittee on Oversight and Investigations
Mr. Jeffrey K. Skilling
OPENING
STATEMENT OF JEFFREY SKILLING Good morning Chairman Greenwood
and members of the Committee. My
name is Jeff Skilling. I worked for
Enron for over 10 years, leaving in August of 2001 after being CEO for six
months. During my time at Enron, I was immensely
proud of what we accomplished. We believed that we were changing an industry, creating jobs,
helping resuscitate a stagnant energy sector, and, by bringing choice to a
monopoly-dominated industry, were trying to save consumers and small businesses
billions of dollars each year. We
believed fiercely in what we were doing. But today, after thousands of
people have lost jobs; thousands have lost money - and, most tragically, my
best friend has taken his own life, it all looks very different.
As proud as I was of what we tried to accomplish at Enron, as I sit here
today, I am devastated by, and apologetic about, what our company has come to
represent. I know that no words can
make things right. Too many have
been hurt too much. I am here today, because I
think Enron's employees, shareholders, and the public at large have a right to
know about what happened. I have
done all I can to help this investigation.
I have testified for two days at the SEC - spoken on three occasions to
the Special Board Committee - and have spoken to the staff of this
Committee. I have not exercised my rights to refuse to answer a single question
- not one. And I don't intend
to start now. So, let me first talk
about Enron and its demise. First, contrary to the
refrain in the press, while I was at Enron, I was not aware of any
inappropriate financing arrangements, designed to conceal liabilities,
or overstate earnings. The
off-balance sheet entities or SPE's that have gotten so much attention are
commonplace in corporate America; and if properly established, they can
effectively shift risk from a company's shareholders to others who have a
different risk/reward preference. As
a result, the financial statements issued by Enron, as far as I knew,
accurately reflected the financial condition of the company. Second, it is my belief
that Enron's failure was due to a classic "run on the bank:" a liquidity
crisis spurred by a lack of confidence in the company.
At the time of Enron's collapse, the company was solvent and highly
profitable - but, apparently, not liquid enough. That is my view of the principal cause of its failure. Now, let me address some of the
questions about my specific involvement in these events. First, I left Enron on August
14, 2001 for personal reasons. At
the time I left the company, I fervently believed that Enron would continue to
be successful in the future. I did not
believe that the company was in financial peril. Second, similarly, I did not
"dump" any stock in Enron because I knew - or even suspected
- that the company was in financial trouble.
In fact, I left Enron holding almost the same number of shares that I
held at the beginning of 2001: On
January 1, 2001 - the start of my final year at Enron -- I owned approximately
1.1 million shares of Enron. On
August 14, the day I left, I owned about 940,000 shares.
Indeed, in June of that year, I terminated an SEC-sanctioned stock sale
plan, and elected to hold on to more Enron shares. Third, with regard to the
so-called LJM Partnerships, the Powers Report criticizes me for supposedly not
taking a more active role in reviewing the conflict of interest arising from the
involvement in those partnerships of Enron's then CFO.
I believed at that time that there were adequate controls in place
- that the controls were being complied with and that I was discharging - to
the full extent of my mandate - my obligations to the Board with respect
to this process. Fourth and finally, the Powers
Report also criticizes me for supposedly "approving" the restructuring of
certain hedging transactions. The
Report then suggests that "if the account of other Enron employees is
accurate," that transaction "was designed to conceal" losses on some of
Enron's investments and that I may have withheld information from the Board
about that restructuring. I can
state here today that I did not have any knowledge that that transaction
was designed to conceal losses, and I did not
do anything to withhold information from the Board. Ours was a company that
emphasized creativity, but always in a manner that relied on the advice of the
best people we could find - both those inside the company and the lawyers and
accountants outside the company who advised us. With that, Mr. Chairman, I am prepared to answer any questions that you may have.
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