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| Jeffrey Skilling |
Jeffrey Skilling worked for 'Enron' for 20 years, but he was CEO for just six months, quitting 4 months before the company's collapse in 2001 when thousands of workers lost their jobs and retirement savings.
There is absolutely no doubt that Jeffrey Skilling was one of the greediest bosses of a gang of narcissistic thieves who ran one of the biggest and, most damaging, rackets in US history, but, mysteriously neither he, nor any of his criminal associates, was charged under the US federal Racketeer Influenced and Corrupt Organizations Act, 1970. This legislation provides prosecutors with the power to seize all stolen assets prior to a racketeering case coming to trial, and to send those convicted under RICO to prison for 20 years per racketeering count.
The fact that the bosses of the 'Enron' racket had also sought to obstruct justice by using some their ill-gotten gains to infiltrate US politics, explains why federal prosecutors were reluctant to invoke RICO.
Classically, the 'Enron' racket was operated behind a mystifying labyrinth of legally-registered corporate structures engaged in lawful, and/or unlawful, enterprises. This labyrinth was maliciously constructed (with the assistance of an echelon of attorneys and accountants) as the result of a conspiracy to perpetrate fraud and obstruct justice. In simple terms, the value of shares in the 'Enron' company was inflated, and maintained, by off-loading chronic, and massive, trading losses onto hundreds of other insolvent companies, which gave 'Enron' the appearance of being a thriving and valuable enterprise, when it was, in fact, insolvent and effectively-worthless.
When faced with exposure and collapse, insiders like Jeffrey Skilling and his predecessor, Kenneth Lay, dumped their own 'Enron' shares at the inflated price. Thus Skilling and Lay were charged with securities fraud, conspiracy, insider trading, lying to auditors, etc.
The pair were convicted in May 2006 by a jury in Houston, Texas and sentenced to long prison terms, but Lay died in July 2006 of a heart attack (after claiming that he'd become a 'Born-Again Christian').
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| Jeffrey Skilling |
Skilling, who has been in prison since 2006, has now agreed to stop appealing against his conviction and, in return, he has had his 24 year sentence reduced to 14 years. He is now due to be set free in December 2020.
The agreement between Skilling and federal prosecutors also allows more than $40m (£26m) seized from him to be finally distributed to the victims of the 'Enron' racket.
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| Andrew Fastow |
'Enron's' former chief financial officer, Andrew Fastow, testified against both Skilling and Lay and was sentenced to just 6 years in prison. He was released in December 2011.
David Brear (copyright 2013)
What lessons can be drawn about Herbalife from the Enron fraud?
ReplyDeleteThis is a very good question which probably requires a full article to answer.
DeleteIn brief, the 'Enron' and 'Herbalife' frauds are remarkably similar, in that they both survived for many years by hiding in plain view.
Right under the noses of a flock of dunces with diplomas (i.e. legally-qualified US regulators, financial journalists, politicians, economists, law enforcement agents, etc.), the market price of shares in both these effectively-valueless corporate structures were maliciously inflated, and maintained, by the constant repetition of mystifying lies and by the withholding of key information.
In both cases, the fabulously-wealthty racketeers behind 'Enron' and 'Herbalife' were assisted by echelons of co-opted attorneys (some of whom were former US regulators), accountants, stockbrokers, bankers, economists, financial journalists, politicians, etc., and it became against the interests of everyone concerned (particularly, major investors) to face the truth in private, let alone blow the whistle in public.
However, in reality, 'Enron's' massive trading losses were merely being off-loaded onto an expanding labyrinth comprising hundreds of legally-registered corporate structures, which (to casual observers) gave 'Enron' itself the appearance of perpetual expansion and prosperity.
Similarly, 'Herbalife's' massive trading losses have been off-loaded onto an endless-chain comprising millions of ill-informed persons arbitrarily defined in their contracts as 'Independent Distributors,' which (to casual observers) has given 'Herbalife' itself the appearance of perpetual expansion and prosperity.
Interestingly, just as in the case of 'Enron', there are far too many intellectually-rigorous, and independent, observers who now know exactly how the 'Herbalife' racket has functioned. Thus, making it an inevitability that it will eventually collapse.
David Brear (copyright 2013)