Talking to Chuck
Newcomers to this trial, such as me, were surprised that a taped telephone conversation between former Enron chief executive Jeffrey Skilling and his stockbroker was presented by Skilling's defense during Thursday's testimony.
It was no surprise that Skilling would be talking to his broker -- he held a lot of Enron stock. When he left the company in August 2001, he held 940,000 shares. At that point, trading at just over $30 per share, his Enron stock was worth about $28 million. When the stock was flying high at $70, $80 per share, his Enron holdings pushed his net worth to about $100 million. It made sense to sell some shares now and again to pick up a little -- well, more than a little -- liquidity.
What was surprising was how the call -- made on Sept. 6, 2001 -- sounded.
The conversation sounded like an exchange that might have occured between a grandma who wanted to buy a couple of shares of Microsoft and the just-out-of-college broker who happened to have the call routed to him by the operator in Bangalore.
On the call from Skilling to his broker, Glenny Ray of Charles Schwab, Ray sounded nervous and almost as if he barely knew Skilling. Perhaps he was rattled by the size of the order: Skilling wanted to sell 200,000 shares, which would have come out to about $6 million.
Ray testified for the prosecution in March and is a middle-aged man with years of experience in the field. But on the call, he's explaining stock techniques such as the "costless collar" (a hedge) to JEFF SKILLING, who pioneered some of the most exotic financing of the era. It is to Skilling's credit that he didn't snap, "I know what a costless collar is! I'm Jeff Skilling!"
Instead, when Skilling asked Ray how the numbers on that collar would work out, according to the recording, Ray said, "That's not my area of expertise" and told Skilling he would be called by "a guy named 'Angel.' I forget his last name. I think it's Gutierrez," Ray said.
A "guy?" What confidence that must have inspired in Skilling.
The underlying question is: What was Jeff Skilling -- at one point worth $100 million, at one point the darling of Wall Street, at one point a business mag coverboy -- doing at a discount brokerage like Charles Schwab? No disrespect to Chuck, but he's for people like you and me.
If you're Skilling, you should have a personal broker devoted solely to your portfolio. You should have his cell number, the number to the phone by his hot tub, the number at his winter house in Aruba. He should sound like he knows you when you call.
By Frank Ahrens |
April 16, 2006; 4:03 PM ET
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Posted by: pcb | April 17, 2006 12:59 PM
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hi frank,
not to exonerate skilling but generally options are handled by a company designated by the company. if skilling was selling option-based stock in what's called a same-day sale, he'd have to deal w/whatever broker enron had signed up to manage its employee stock options program. otoh, if skilling was selling stock he owned outright, then you're absolutely right, it is crazy that he had his account at schwab.
but even if skilling was doing a same-day sale of option-stock, it's crazy that he didn't get the royal treatment from schwab. to paraphrase 'animal farm', some animals are more equal than others, and when a broker is handling a large company's options plan, it's the norm that the top executives get *very* special treatment.
btw, i'm enjoying your coverage and hope wapo keeps a spotlight trained on this story.