Thursday, February 02, 2006

Annals of Questionable Defense Strategy

by Tom Bozzo

I'd initially missed this part of the opening argument by Jeff Skilling's attorney:
...Jeff Skilling's attorney, Daniel Petrocelli... earlier in the day told the jury that the ex-Enron CEO had no reason to commit the alleged fraud and conspiracy.

"What is Jeff Skilling's motive?", asked Petrocelli.

Although the indictment against Skilling states he committed crimes for money and prestige, "In 1999 he had more money than he ever dreamed of having," Petrocelli said.
My jaw dropped. In a case of a massive investment fraud, could a "how could my rich client possibly have wanted more money" defense possibly work?!

One way I like to sum up the Miracle of the Market Economy is that no matter how much money you have, the Market provides a means of separating you from it. Those twelve-cylinder Mercedes and BMW sedans a little too common? Get a Bentley or Rolls! (*) Missing Concorde? A G550 will have you forgetting it in no time. (**) Have a few hundred million bucks burning a hole in your pocket and hate the crowds in the QE2's first-class dining rooms? You can have your own ocean liner!

It's hardly a new observation, but the inequality of wealth between the rich and the super-rich is gaping even by the standards of U.S. wealth inequality — leading to one of my favorite Onion headlines, "Widening Gap Between Rich and Super-Rich Threatens American Dream." And it's very expensive to keep up with the super-rich.

There's ample evidence that the Enron bigwigs were engaged in major lifestyle upgrades as they passed into the ranks of the super-rich, as the Washington Post reported in 2002:
It wasn't enough for Lay to have one house in Aspen, he had to have four. It wasn't enough for former Enron president Jeffrey Skilling to hike in the Rockies, he wanted to scale glaciers in Patagonia...

Only a few years ago, Skilling, Fastow, and Michael Kopper -- Fastow's lieutenant in the Enron scandal, according to conclusions drawn in the Powers report -- all lived within walking distance of one another in the quiet upper-class neighborhood called Southampton Place, which borders Rice University. It is a nice neighborhood, with houses that go for around a half-million dollars, but all on small lots, with alley parking in the back. Skilling lived in a simple, square brick house with his wife and three children...

This was before they all began upgrading their lifestyles. Before Skilling divorced his first wife in a messy, contentious battle and took up with an Enron secretary whom staffers called "Va Voom" behind her back... Before Enron's stock took off, and everybody made tons of cash.

And before all three men -- Skilling, Fastow and Kopper -- bought new properties, tore down the existing structures, and started building their dream houses. Once again, all in the same neighborhood. The neighborhood where the rich live in Houston. The neighborhood where Lay lives. River Oaks.

So now Skilling resides in a mammoth Mediterranean-style home with a tile roof, and he's engaged to Rebecca Carter (the one known as Va Voom), who under Skilling was promoted to executive secretary to Enron's board of directors at a salary of $600,000....
Yep, it's inconceivable that Skilling could have been interested those tens of millions of dollars.

(*) The market does sometimes get ahead of itself. Mercedes moved fewer than 300 of its $300-400,000 Maybach sedans worldside in 2005, far below expectations when the ultraluxury model was launched.

(**) And my money is on the next civilian SST being a bizjet aimed at corporate titans for whom a G550 isn't enough.
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