HOUSTON, Feb. 19 (UPI) -- Former Enron Chief Executive Officer Jeffrey Skilling pleaded innocent Thursday to federal charges that he overstated earnings figures at the company and misled regulators before the collapse of the giant Houston energy company.
Skilling, the highest-profile Enron official indicted in the investigation, was the architect of the company's spectacular growth during the 1990s, and his lawyers charged that the government was making him a "scapegoat."
Daniel Petrocelli, one of Skilling's attorneys, told reporters outside the courthouse that his client has passed a polygraph test and that the government has no case.
"He passed with flying colors, with no hesitation, and the government knows it," he said. "They know they don't have a case against this man."
Skilling, 50, was charged along with former Chief Accounting Officer Richard Causey with not only artificially inflating Enron stock prices to meet performance goals from 1998 to 2001 but also with enriching themselves at the same time.
Skilling received $200 million from the sale of inflated Enron stock and options, clearing an $89 million profit on top of his $14 million salary, according to the indictment returned by a federal grand jury Wednesday.
Petrocelli said Skilling was asked during the lie detector test if he was aware of any improper financial transactions that were presented to or approved by the company's board of directors and "he passed with flying colors."
Petrocelli said prosecutors were informed of the results in a meeting this week, claiming they turned "a blind eye" to the findings by a respected polygraph examiner.
"I guess they need a scapegoat and Jeff Skilling is their scapegoat, and now they want to take this man away from his three children, his family and friends here in Houston, and put him in jail for the rest of his life," he said.
Federal investigators have indicted 29 defendants in their investigation of the scandal that cost shareholders and pension funds millions of dollars and more than 4,500 employees their jobs and retirements. Nine defendants have been convicted.
The only executive higher than Skilling, Chairman Ken Lay, is under investigation but has not been charged. He has denied wrongdoing.
Deputy Attorney General James Comey was asked about Lay during a Washington news conference, but he refused to address the former Enron chairman specifically.
"We have been working like crazy to find the facts and punish those who are guilty, and we're not going to stop doing that," he said. "Folks have to understand our burden and it's the way we want it and we are meeting that burden."
Former Chief Financial Officer Andrew Fastow, who worked closely with Skilling, pleaded guilty Jan. 15 in a plea bargain. He is expected to cooperate with the government in the investigation of Skilling and others at Enron.
Skilling surrendered to FBI agents early Thursday and was later led away in handcuffs for the court appearance where he entered his not guilty plea. He was charged with conspiracy to commit securities fraud, 20 counts of securities fraud, four counts of wire fraud and 10 counts of insider trading. He posted a $5 million bond.
Causey, originally indicted last month, was also charged in the superseding indictment with conspiracy to commit securities fraud, 20 counts of securities fraud, eight counts of wire fraud, and two counts of insider trading.
"The indictment alleges that Jeffrey Skilling and other Enron executives concocted a massive, complex scheme to give shareholders and the investing public the false appearance of financial strength and security at a time when Enron was, in fact, failing," said Comey. "Our investigators were able to cut through the maze of paperwork and financial trickery to get to the bottom of the scheme and charge Skilling, once the top executive at Enron, with fraud and other crimes that contributed to Enron's collapse."
Between 1999 and 2001, Skilling, Causey and other executives allegedly made Enron appear to be growing at a healthy rate consistent with analyst expectations, which artificially inflated the price of Enron stock from $30 in early 1998 to more than $80 in January 2001, prosecutors said.
Skilling and Causey allegedly set unrealistic and unattainable earnings goals for Enron and when the company failed to achieve those goals, the prosecutors charge they orchestrated a series of "accounting gimmicks" to make up the shortfall between predicted and actual and results.
The government is seeking the forfeiture of more than $66 million from Skilling and $6 million from Causey, Comey said.
Skilling joined Enron in 1990 and served as chief operating officer from 1997 through early 2001. He had been CEO for only six months in 2001 when he unexpectedly resigned in August, months before the company filed for Chapter 11 bankruptcy.
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(Reported by Phil Magers in Dallas.)
