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It's December 6th, 2001, four days since the largest bankruptcy filing in American history. Jeff's skill is in New York City. He sits shirtless in a dark room with wires attached to his fingers. There's a two wrapped around his head, another wrapped around his chest. His mouth is dry, his heart races. He closes his eyes desperate to remain calm. You ready to begin, Mr. Scilley? Yes. Scilley stares at the man sitting across from him. His name is Paul Meiner, formerly chief polygraph examiner with the Federal Bureau of Investigation. Let's start with an easy one. Is your name Jeffrey Scilley? Yes. Mr. Casually marks the scrolling polygraph chart with his pen. His face is completely expressionless as he asks the next question. Are you concerned that you might fail this test? Scilleying swallows hard. Yes. Meiner sits in silence. After what feels like a full minute, he resumes. Mr. Scilley, while President of Enron were you aware of any improper financial arrangements concealed from the Board of Directors? No. While President of Enron did you ever take money for yourself without the Board's approval? No. As President of Enron, did you ever intentionally deceive the Board or the company's investors with the use of misleading accounting documents? No. Meiner concentrates as he marks up the test results. Scilleying looks down at his hands and tries not to make too big a show of wiping the sweat off his face. Meiner gives Scilleying a curt smile. Thank you very much, Mr. Scilley. Meiner begins to wordlessly remove the various sensors from Scilleying's body. Wait, did I pass? I need to speak to your lawyers. They'll be in shortly. Scilleying reaches for his shirt. Meiner leaves abruptly, and Scilleying can't tell if that's a good sign or a very bad one. He still can't believe that Enron is bankrupt, and that people want him to answer for it. His lawyers asked him to submit to this lie detector test to prove he wasn't hiding anything from them. Scilleying is bitter. Yeah, I'm the guilty one. I'm guilty of pumping billions of dollars into the American economy, guilty of saving the energy business. Two of his lawyers enter as Scilleying finishes buttoning his shirt. One is smiling. You passed, Jeff. You told us you were telling the truth with no attempted deceive. Congratulations. Scilleying lets out a deep sigh. Oh, thank you, God. So on to more pressing business. Scilleying has a meeting in Washington tomorrow with the Securities and Exchange Commission. He figures he'll get past them, just like he got past this lie detector. Scilleying stands tall. He feels invigorated. The company he built is now on trial, and he intends to defend it with all he's got. Despite what his enemies may say, he did nothing wrong. He leaves the polygraph room behind, confident that he can prove Enron's innocence to the world. The American scandal is sponsored by the new ABC drama Alaska Daily. When an indigenous woman goes missing in Alaska, it sparks new questions about other missing and murdered indigenous women. And that's where the thrilling new ABC drama Alaska Daily begins, and where it's headed, will have you on the edge of your seat. Two time Academy Award winner Hillary Swank stars as Eileen, a veteran reporter who joins a team of local journalists working to bring the truth to light. From Academy Award winning screenwriter Tom McCarthy, Alaska Daily premieres Thursday, October 6th on ABC, and streams next day on Hulu. If you're into true crime, the Generation Y podcast is essential listening. We started this podcast over 10 years ago to dissect some of the craziest and most notable murders, crimes, and conspiracy theories together, and we'd love for you to join us. Follow the Generation Y podcast on Amazon Music or wherever you listen to podcasts. From Wondry, I'm Lindsey Graham, and this is American Scandal. Distrusted by the banks, abandoned by shareholders, and Ron's history of deception finally caught up with it on December 2nd, 2001, the day it declared bankruptcy. Soon after, both investigators and Enron's disgraced executives acted fast. Law enforcement officials worked to ascertain just what crimes the company had committed, and who to hold accountable. Meanwhile, Enron's most prominent leaders were looking for ways to turn the tables on their accusers. The outcome of this decisive legal battle would determine the personal fate of Andy Fastau, Jeff Skilling, and Kendall A. Thousands of jobs and billions of dollars hung in the balance. This is Episode 5, The Reckoning. Just after 9 a.m. in early December, Sharon Walkins arrives at Enron headquarters. She squeezes past local news crews as they set up tripods. She takes a moment to gaze at the various cameras trained on reporters, standing patiently with their microphones in hand, ready to go live. Walkins shakes her head. She never thought she'd live to see the day when the downfall of a corporation would attract the same level of coverage as a natural disaster. She enters Enron's main lobby. She expected a grim scene, but nothing could have prepared her for this. Shell shocked former employees, head towards the doors in a mass exodus. Their personal effects piled into cardboard boxes. Many of them have put their boxes on the seats of $800 office chairs they're wheeling out like shopping carts. Man and women weep openly. The layoffs have begun. Walkins isn't sure where to go, what to do, or who to talk to. She's waiting for the elevator when a man approaches. She recognizes him, but can't remember from where. As they step into the elevator, he reminds her that he's one of the company's lawyers. Now that Enron is bankrupt, he says with a smirk. These lawyers are the only ones with job security. Walkins wonders exactly what that means for her. As the doors open to her floor, he tells her not to worry. Her job's safe for another month at least. Walkins asks why. Man raises his eyebrows as if he's just been asked the dumbest question in the world. Enron still needs her, he says. She'll probably be asked to appear in court as lawsuits against Enron begin to land in the coming weeks. After all, you're the one who tried to warn lay the company was in danger, right? You're famous now. It's January 10th, 2002. Prosecutor Leslie Caldwell is dressed in an all black suit, her close cropped dark hair combed neatly to the side. She walks down a narrow, dimly lit hallway at the SEC building in Washington. She's running the government's Enron Task Force. FBI director Robert Mueller personally recommended her for the job. For a long time, he's admired her direct, practical, but aggressive approach to pursuing the truth. And she's skilled in breaking down intricate acts of accounting fraud. Enron is her biggest case yet and on the grandest stage possible. Caldwell enters the SEC conference room. It's packed with officials from various federal investigative agencies. As Caldwell makes her way to the head of the table, those in the room quiet down. She sits down and begins. Thank you all for coming. There's a lot to sort through when it comes to Enron and we still got more questions than answers. We have to assume they'll attempt to hide as much as they can so we need to work fast. Since the SEC has been looking at Enron the longest, I'd like to hear from them first. Caldwell nods toward the SEC official at the end of the table, giving him the floor. Well, progress has been slower than we like that for sure. We've been digging into Enron for months now, but it's very possible that we just scratched the surface. Fastout refuses to testify and without him it's going to be very tough to connect all the dots. Caldwell makes a note. So fastout is the priority. We need him to talk. Absolutely. But I do need to warn you all of something. This is just our initial view. But there may not be a criminal case here. Admittedly, what we are saying is limited, but we just don't see the criminal angle yet. We see it more as a disclosure case. Caldwell considers this, that FBI Special Agent Joe Ford interjects. Well, frankly, I think it's highly unlikely there's no criminal case given the speed and severity of Enron's meltdown. Caldwell nods. I agree. The magnitude strongly suggests there is a criminal case here, but obviously that doesn't mean anything until we can prove it. So we'll keep digging. Looking on their side is going to slip up and when they do, we'll be ready. In Los Angeles, reporter John M. Schweiler with the Wall Street Journal types as fast as he can. He cradles his phone's handset against his shoulder, trying to keep up with a voice on the other end of the line. He's not sure who he's speaking to, but the man knows his stuff, claiming to be an associate of Andy Fastout. The informant wants to remain anonymous, and that's fine with M. Schweiler. After publishing, he'll check all the facts with official sources willing to go on the record. So for now, M. Schweiler listens as the man comments on recent developments, especially as they relate to Enron's defense of its special purpose entities. The anonymous source is in sense that skilling lay and the others are acting as if they didn't know what Fastout was up to with LGM. Skilling knew he was involved from the start, the man says, and it wasn't just them. This was all vetted by the General Counsel's office, and Anderson, too. According to this man, Anderson was Enron's closest and most important business partner. The accounting firm even sometimes helped Enron bend and break rules. Technically, Mark to Mark at accounting is a perfectly legal practice that allows a business to book profits from a deal before actual revenue has come in. But the thing about Mark to Mark at though is that it's not legally applicable to every deal. When Enron asks for ways around this for its broadband division, Anderson signed off. Any Anderson account into objected was replaced by one willing to play ball. That's probably in part why Anderson employees engage in a mass shredding operation just as the SEC began to close in. M. Schweiler takes it all in. It certainly does seem like Arthur Anderson was more deeply involved with Enron than he realized, and he doesn't need the anonymous source to spell out exactly why the shredding operation was a disastrous blunder. One, it just looks extremely suspicious, and two, the SEC considers all accounting documents related to Enron to be evidence and to legal to destroy evidence. Both companies are now in very deep water. At home in Houston, Jeff's skilling thinks about how he and Cliff Baxter have had their ups and downs. Baxter was an Enron VP in corporate development and briefly in charge of the company's North America division. For a time, Schilling considered Baxter Enron's greatest dealmaker until everything changed. Schilling moved higher in the company and Baxter, a friend and in many ways and equal, resented being told what to do. The men clash frequently. Finally, Baxter just quit, three months before Schilling did too. Since then, Schilling's thought a lot about the past and mistakes he had made with Baxter. Recently, they've been on good terms again, and Schilling is thankful for that. He needs all the friends he can get these days. It's mid January, and Schilling emerges from his study. He just got off a tough call with his lawyers, but can't help but smile at what he sees. His wife is in the kitchen, taking plates out of the dishwasher and setting them in the cupboard, assisting her as Cliff Baxter nods at Schilling. Hey Jeff, from back of the set I can hang out for a bit while you're on the phone. Hey, yeah, yeah, of course. Sorry, I thought I heard you out here, and I would have come out sooner, but... Oh, don't worry about it. Seriously, I was just in the neighborhood. I felt like saying, hi. Can we talk? Sure. Let's head out back. Schilling and Baxter walk out to Schilling's screened in porch. Schilling pulls an extra patio chair over and they sit down. Schilling's not sure who's supposed to speak first. It's a little unusual that Baxter just popped in like this, but Schilling's not going to complain. He's happy to see him. He turns to Baxter. How are you holding up? Baxter frowns. He picks up the laces of his shoe. Not too great. All these attorneys coming out of the ward work to sue Enron. Now we're getting trash in the press. I mean, I've got kids. You've got kids. I know. I know. Well, I'm not giving up a penny. I'd rather pay my lawyers and fight this to the death. I've been out for almost nine months. I was just about to buy a boat. Today the lawyers call me, say the boats, a no go. It would look bad. Yeah, ridiculous. Baxter's size. You know, Jeff, I think I understand why my father was the way he was. He was just a good guy, trying to get by. Schilling has taken a back. In all the years he's known Baxter, the man has never referred to his father as a good guy. If Baxter talked about his dad, he did so only to dismiss the man as a drunk or worse. But Baxter continues. I understand what it's like to battle the world now. I don't think I realize how bad the world could be. But I bet my father knew that. Jeff, we just don't deserve this. We're good people. A no cliff. A there, man. Can you believe this is a, even allowed to happen? Schilling doesn't know what to say to that. He just stares out across his yard. For a moment, the two men sit, content to look at the gold and magenta Texas sunset. Baxter shakes his head. And when he speaks again, it's barely above a whisper. You know what? This is like, it's a beautiful day. The sun is shining and you walk out of your house and the temperature is perfect. And all the kids in the neighborhood are riding bikes and throwing baseballs and the adults are chatting over fences. It's just one of those great, great days. And you're talking with the kids and throwing ball and waving to your neighbors and then all of a sudden, your next door neighbor comes up to you and says, you're a goddamn child molester. Just like that. And then turns around and walks back into his house and closes the door. The neighborhood just goes silent. All the neighbors heard it. All the kids heard it. You're going, wait a minute, wait a minute, one minute, one minute ago, it was as good as it could get. And then all of a sudden, you're a child molester. The actor closes his eyes and opens them again. He brushes something from his face and stands. Suddenly, he seems ready to leave. He looks down at skilling. Jeff, for now on, it doesn't matter what we say. This will never wash off. Skilling frowns. He knows it can't be that bad. He searches for encouraging words, but Baxter turns his shoulder. See you around, Jeff. The same watches as Baxter walks away. The talk is giving him a lot to think about. He stays in his chair for a long time, till the sun slips below the horizon. He reflects upon Baxter showing up at his home, out of the blue, and departing just as abruptly. Suddenly, Jeff's skilling feels scared, but he doesn't know why. What if your family was the victim of a home invasion, or you woke up in the morgue, or you were seriously injured, miles from help? What would you do? This is actually happening. Ask our listeners this very question, while we bring you captivating real life stories of trauma and perseverance. This is actually happening, brings listeners extraordinary true stories from the people who lived them. You'll hear stories about conflict, turmoil, or threats that dramatically alter the course of someone's life. Each episode is an exploration of the human spirit, and how survivors manage to overcome hardship and move on with their lives, even thriving afterward. The new season of this is actually happening, is available ad free only with Wondry Plus, and if this new season isn't enough, you can listen to more than 120 exclusive episodes available only to Wondry Plus subscribers. Join Wondry Plus on Apple Podcasts or on the Wondry app. Andy fast out drums his fingers on the wooden conference room table. He's in a law of his in Houston, surrounded by attorneys. He looks at each one, sizing them up, trying to sus out who can be trusted and who can't. Three of the lawyers are on his actual defense team. The rest are from Wilmer, Cutler, and Pickering, the firm hired by Ken Lay to get to the bottom of Enron's many special purpose entities. Fast out a sure lay sees this as a sensible way to help clear his own good name. But fast out views things differently. In his opinion, this committee is just a way for Lay to throw fast out under the bus, again, but he's not about to give them the satisfaction. Still, his lawyers told him it would be best for him to cooperate at this stage, so that's what he's doing here today. He's still operating. The committee will ask questions and fast out will answer to the best of his ability. Soon the Inquisition begins. But before Chuck David out with Wilmer, Cutler, and Pickering finishes even his first question, fast out cuts him off. Is this interview privileged, even though I'm a former employee? David out confirms that Enron considers the interview privileged. What fast out says in this room cannot be disclosed to the outside world without fast out permission. Fast out then gestures for David out to resume. First, David out asks for an explanation of Chukko. Fast out suppresses the smile. He came up with that, named after Chubaka, Han Solo's co pilot. But of course he's not about to say that out loud. Instead he says, I'm not really familiar with the details of that. Next question is about the leaders of Chukko, but luckily his lawyer David Gerder jumps in. And he's not going to answer any questions about who came up with the idea of making an Enron officer the manager of Chukko, he says. Fast out keeps his expression neutral, but he's overjoyed. Gerder is worth every cent. David out next delts into Chukko's transactions with Enron. Enron had sold the company, but bought it back in 2001. Was fast out involved in the repurchasing discussions? No, of course not. Fast out replies. For him to get involved in the discussions personally would have been inappropriate. Next when David out calmly opens a manila folder lying flat on the table and pulls out a three page handwritten document. Fast out forces himself to maintain eye contact as panic begins to rise. Fast out is asked if he recognizes the document. He should. It's a note from Enron Finance Executive Michael Copper. It's addressed to Andy. And it's all about Enron's repurchase of Chukko. David out his eyes narrow in accusation. Fast out looks at Gerder. Gerder says, I need a moment to confer with my client. Out on the hallway in an urgent whisper Gerder shares the next play. It's pretty simple. Fast out is not going to answer any more questions. The interview is over. Gerger will go back in and make a statement on Fast out's behalf. What's the statement Fast out asks? Gerder posits for a moment to think and says, Andy did not prepare the accounting documents regarding the transactions. Andy was not responsible for Enron's accounting. Fast out nods. That works for him. An Enron headquarters can lay quietly eases himself in the plush office chair at the head of the table. He watches as the lawyers and accountants continue to file into the conference room. Apparently what is about to happen is a very big deal. He doesn't understand why though. This is just his will, Mercutler investigative committee interview. He wonders what they expect him to say that he hasn't said already. He simply can't grasp why his explanations aren't good enough for the world. Enron was a great company and while he was in charge, it had a great CEO. He did his best to fight for the company right up until the end. Now people are saying he was crazy for thinking Enron could be saved, but in his opinion, it's the world that's gone crazy. Even Bill Powers, the head of the committee is there. As far as Lay knows, Powers hasn't personally participated in any of the interviews until now, but Powers is now asking that the conference room door be closed. Next, he says it's very important that they all get their facts straight. Law suits are flying. It's only a matter of time before Lay is asked to appear in court. It's time to know what Lay did and did not know about Enron and the lead up to the bankruptcy. Lay offers an agreeable smile and nods before asking Powers to begin. First Powers asks about the Raptors. This power sees it is quite clear now that Andy Fasdow's Raptors were off book entities constructed with the express purpose of hiding about a billion dollars in losses. Can I have one thing to ask Powers says? Did you think the Raptors were real economic hedges? Laysquins. A strange question. He asks Powers to repeat it. The Raptors. Did you believe they were real economic hedges that protected Enron against loss? In other words, did Lay really think they were a standard and perfectly legal way to help Enron instead of just a means to conceal loss and stuff Fasdow's pockets? Lay just shakes his head. He really doesn't understand what kind of person they think he is. Well, of course I thought they were real hedges, he replies. He understood the Raptors to be a hedge for LJM. If LJM lost money, the Raptors would be there to soften the blow. Lay takes note as several of the lawyers shift uncomfortably. They don't believe him. Very well, Lay thinks. I'll explain it to them then. He begins with a history lesson. In the beginning Enron was just your simple run of the mill pipeline company. But then the wholesale energy market really started to grow. Naturally Enron expanded. It did business in India and Brazil and by 1998 they tried to get into the water business. The point is, lay continues, we had trouble financing our rapid growth. So to persuade banks that the company was solid, we moved money losing operations off the balance sheet. We did this so we could continue focusing on rapid growth. The lawyers began asking questions from all sides. Did you know about the profits Fasdow was making from LJM? Lay shakes his head. I never asked Andy about his compensation. He'd already told me that he would actually prefer not to be involved with LJM and was simply doing it to help Enron. The committee returns to the Raptors once again. Plus, LJM throws up his hands. It's possible he didn't fully understand the logic of the Raptors. He thought he did, but maybe he didn't after all. He's asked how he could possibly have failed to notice that at one point the Raptors owed Enron $175 million that couldn't be paid and which wasn't reported. The committee asks Lay how Enron could report Raptors were generating $500 million in profit even though the value of the investment was plummeting. How could he not know that? The meeting has taken a mean turn. Lay feels like he's being bludgeoned with questions. He thought Wilmer Cutler was here to help. He was told to bring them in so they would conduct an investigation that would clear everything up and vindicate Enron once and for all. He thought they were here to aid him in the PR war, but they're being so hard on him. Takes every ounce of resolve he has not to simply put his head in his hands and beg them to stop. He feels confused. Can't thank straight. All these years he was certain he was a good leader and a good man. For the first time he truly grasps that many people don't share that opinion of Ken Lay. Power says that he'll end the interview now, but before he does he has one last question. Ken do you still think the Raptors were real economic hedges? Lay looks down before applying. No, of course not. This evening and Ken Lay is sitting at home in his study, lost and thought. His phone rings. He picks it up and hears the voice of Tom Roberts, one of his lawyers. Roberts says that in order for the bankruptcy to proceed, Lay must formally resign once and for all. The creditors say Lay is too big of a liability. He needs to relinquish the title of Chairman and CEO by the end of the week. Lay processes the information. He suddenly feels very old and tired. OK, he says, I guess we need to hold a board meeting, right? Make it official? Yes, that needs to be scheduled. Roberts says. Lay sighs. His next words come out quietly. Tom, will you pray with me? Pray for the company and for all of us. There is a long pause at the other end of the line. Finally Roberts says, all right? Lay then closes his eyes and remains silent for several moments. Then he opens his eyes again. Thank you, Tom. Thank you. On January 25, 2002, Deputy Constable Scott Head with the Fort Bend, Texas County Police Department drives east on Palm Royale Boulevard. It's 2.15 a.m. Constable heads scans each side of the street on alert for anything unusual. So far, nothing stands out. As he's about to head back to the station, though, he spots a black Ford or Mercedes on the side of the road. Slows down. Something about the car doesn't look right. It's just sitting there between two medians. He pulls off, picks up his flashlight, and cautiously approaches the vehicle. As he nears the car, he hears the engine running. He points to flashlight inside the car and sees a man in the driver's seat. At first glance, he looks like he's in his early to mid 40s. He's in pajamas, and as Constable head gets closer, he sees the man is slumped over, blood dripping from his temple. In his hand is a magnum revolver. Constable head recognizes the dead man. He's cliff backstair. It's February 14th, Valentine's Day, 2002, and Sheren Watkins is in Washington, D.C. She stands in the doorway of the Congressional Committee room and tries not to blink as camera flashes go off inches from her face. As she waits patiently for a security guard to pat her down, she reflects. It's been just over a year since Cliff Backster anguished over the unfolding Enron scandal killed himself. She may not have known Backster well, but she still can't believe he's gone. He was only 43 years old and left behind a wife and two children. In his suicide note, he asked for forgiveness. Watkins follows the security guard to where she'll be sitting for most of the day. She's not entirely comfortable with the role she's been cast in for these congressional hearings focused on Enron's crimes. The people want her to be the Enron scandal's virtuous whistleblower. They want lay to be the fiendish puppet master cloaked in shadow. They want skilling and fast out to be the unfeeling monsters deployed to do lay's evil bidding. They want this to be simple, but it isn't. Skillings a great example. In the beginning, many of his ideas were genuinely innovative. Plus, he has to be taken the loss of his friend Backster hard. Watkins knows the two men were close. Then there's fast out who is certain to be brought up on serious criminal charges any day now. Fast out is unquestionably a crook, but he wasn't always that way. Watkins will never forget that it was fast out who first saw true potential in her. He was the one who brought her to Enron nine years ago and put her in a position to realize the career of her dreams. Many of the legislators in this room today are eager to be seen on television, berating and humiliating Ken Lay and his associates. Still a campy deny that many of these same legislators were all too happy to accept Lay's campaign money just a few years ago. None of this is simple. Watkins arrives at her seat. She knows in a few days, skilling and McMahon will join her in giving testimony, but they're not going to enjoy it. Neither man will probably even look at her. This is sure skilling believes none of this would be happening if it weren't for her. McMahon who took over Enron after Lay's departure has obviously come to feel the same way. She doesn't know when exactly McMahon turned against her or why, but he's not the man she wants new. Post bankruptcy, many rank and file Enron employees saw their entire retirement plans wiped out. Even some higher ups are suffering. Vice presidents and above who opted for the deferred compensation offered to top executives now can't access their money. He count is frozen, but McMahon has made it very clear that that is not his problem. Last time they spoke, he told Watkins that executives were always well compensated, and if they're struggling now for whatever reason, then it's their own fault. They should have saved better. Good morning. This hearing of the oversight and investigation subcommittee of the Energy and Commerce Committee will come to order and the chair recognizes himself for an opening statement. I wish we could get caught. We're such a crooked company. Of all of the words in the now famous memo our witness sent to Kenneth Lay in August of last year, these might be the most chilling. Sharon Watkins nods along to the congressman's words. She sits at a long dark wood table, a microphone in front of her. She is the sole witness today before the House Energy and Commerce subcommittee. This Watkins, thank you for your help, welcome to your testimony. Chair recognizes the gentleman from Florida, Mr. Deutsch, for his opening statement. Thank you, Mr. Chairman. I want to thank you, Ms. Watkins, for coming here today. Ms. Watkins, you mentioned in your interview with committee staff that when you met with Mr. Lay to discuss your memo, you felt like the child who tells the Emperor that he has no clothes. Watkins straightens in her seat. She leans forward into the microphone and speaks directly. Yes, I do believe that Mr. Skilling and Mr. Fastow, along with two very well respected firms, did dupe Kenlay in the board. The saying around Inron was that heads, Mr. Fastow wins, tails, and Ron loses. And I was highly concerned that not only had the Titanic at the iceberg, but we were already tilting. The Jeff Skilling has no opportunity to respond until he joins Watkins and Jeff McMahon before a Senate subcommittee, 12 days later. Mr. Chairman, distinguished senators, my name is Jeff Skilling. I worked at Enron for 10 years, spending my last six months there as CEO. I left the company in August of 2001. As I did when I appeared before Congress, I want to apologize to all of those affected people for what Enron has come to symbolize. But before we start, there are a few things I think this record should reflect. I will not respond to all the outrageous things said about me in this process because some have been so silly that they merit no response. Skilling turns towards Watkins and glairs at her with contempt. Then he turns back to the microphone. I never dupe Kenlay. I heard Ms. Watkins testify to her opinion. I have no idea what the basis is for that opinion. The entire management and board of Enron has been labeled everything from Hucksters to criminals with a complete disregard to the facts and evidence assembled. These untruths shatter lives and they do nothing to advance the public understanding of what happened at Enron. The framers of the Billorites are watching. Watkins wins at Skilling's grandstanding. She wishes she could respond to say something. It was glad to hear Senator Barbara Boxer of California bring up a challenge. Mr. Skilling, Senator Cleelan gave you a chance to get a softball. If I might say your answer stunned me. This was your chance to tell us what went wrong in the company. How you might do something different. I want to tell you if you look at Ms. Watkins testimony, she says it in a sentence. My understanding as an accountant, she says, is that a company could never use its own stock to generate a gain or avoid a loss on its income statement. Did you, is that true? Were you aware of that? I am not an accountant. I didn't ask you that. Is her statement true? I think I'd have to be an accountant to know if it's true. I don't. Wait a minute. You have to be an accountant to know that a company could never use its own stock to generate a gain or avoid a loss on an income statement. What was your education, Mr. Skilling? I know I read. It was pretty good. What? I have a master's in business administration. A master's in business administration. And yet you didn't know the simple fact. Is that correct? You're saying you were ignorant of that fact that Ms. Watkins has told us. Well, I'll give you two. I'll give you two. I'll give you two. Those of us up here understand this very clearly. Okay, well, we'll just just ask a couple of minutes. Let me give you. You're saying you should generate a gain or avoid a loss and you're saying, in getting your master's in where did you go to school? Harvard Business School. Okay. In Harvard Business School, you did not know this. Is that correct? I did not know that there is an absolute prohibition on it. Watkins listens as Skilling's stammers and makes excuses. Senator Boxer has just eviscerated him publicly. Watkins actually feels bad for him as she watches Skilling's eyes water. With this uniliation, there will be little left for him to do except go home, continue to pay his lawyer's tens of thousands of dollars and wait for a judge to decide his prison sentence. But in that, he won't be alone. On January 14, 2004, an Andy Fastow sits opposite US District Judge Kenneth Hoyt in room 2025 of Houston's Federal District Courthouse. Fastow runs his hands through his hair. It's much grayer now that it was three years ago. He turns and spots a woman sitting quietly. Her face is difficult to read. Fastow knows that her name is Leslie Caldwell and she runs the Edron Task Force. They have outsmarted his lawyers and went for the low blow by going after his wife. He wonders if they're proud of themselves. The judge speaks, I understand you'll be entering a plea of guilty this afternoon. Yes, Your Honor, Fastow replies. While the bastard didn't give much of a choice, he and his wife Leah had made a little money from an Enron transaction with non existent investors. Back in 97, Fastow needed some outside investors to make a tricky SPE appear totally legal, but he didn't know where to turn. Leah came up with an ingenious solution, he'd put up the money and just make it look like it came from outside investors. Leah, who worked at Enron at the time, helped with a record keeping and the two made money off the deal. Later, they filed jointly and naturally neglected to declare the income. Of course, when the Enron Task Force found out, they threatened the couple with criminal tax charges. What happened next was predictable. He was the one they really wanted, so they said, plea guilty right now and will drop the charges against your wife. Fastow figured they didn't have enough to convict him, so he told them to go to hell. But after Leah was indicted and it became clear the government would likely win. Fastow realized he had to change his tune. His two young sons might grow up with both their parents behind bars. Fastow couldn't allow that. Fastow has returned with a new offer, cooperate, and will ensure Leah does no more than a year. This time, Fastow took the deal. The judge Yammer and Fastow pretends to listen. This is all one big stupid show and Fastow says yes, Your Honor, at the appropriate moments. Then Hoyt says the court finds you guilty and brings down the gavel. It's over. Fastow has just agreed to cooperate with the government's investigation of Enron, surrendering nearly $24 million in assets and served ten years in jail. But he doesn't feel sad. Something inside won't let him feel the impact of this yet, and he's grateful for that. It's clear to him. America needed a convenient scapegoat and decided he'd fit the bill. Fastow looks down at the paper cup of water in front of him. Fastow picks it up, takes a sip, and tries to ignore the fact that his hand is shaking. Jeff Schilling's wrists ache from the handcuffs, but he's not about to ask the federal agents to loosen or remove them. Schilling made a decision when he woke up this morning. No display of weakness, no matter what. He smiles cheerfully at nothing in particular, as the feds lead him through the back door of the courthouse. On the way to room 704, he passes Ben Glissen, Enron's former treasurer. Glissen has traded his suit and tie for an orange jumpsuit. The feds nabbed him too, skilling thanks. But I can't remember what for. He calls out, hey Ben, how you been doing? Listen gives a tentative tight lip smile. Guess I've been better. Scaling wishes him well, then he's ushered into the meeting room to hear the charges. His lawyers are already there. The judge recites Schilling's rights, then the prosecutor runs down the charges. Schilling is accused of manipulating earnings, disguising losses and lying to investors. The maximum sentence for these charges is 325 years. The judge asks for Schilling's plea. Without hesitation, Schilling responds, I plead not guilty to all accounts. Ben Lay can't believe the media turnout on this warm July day, just to see him get indicted. He greets the reporters and their camera people. Good morning everyone, good morning. Can't any statement at this time. Little later perhaps, he'll excuse me please. He's determined to remain a gentleman in spite of this persecution. Being forced to do this perp walk up the courthouse staffs in Houston is slightly embarrassing, but he knows he'll put it behind him in time. He also knows that any day now, the federal officers will realize that they are wrong about him and let him go. They simply don't see the error of their ways, and he forgives them. A special agent gently leads him toward the building by the elbow, as his lawyer catches up alongside him. Alright, can pretty straight forward today. You'll go before the judge. Judge will say that you're accused of deceiving Arthur Anderson lying to the banks and making misleading statements. Well, there's certainly a title to your opinion, but none of that's true, obviously. Of course it's not. I believe you and the jury will too. But until then, we've just got to deal with these formalities. Now, when the judge asks you for your plea, you just say not guilty, and you say it with your head held high. That work for you? Yes, sure does. Oh, yeah, I'm sorry, Kim, but they need you to wait in this holding cell until called by the judge. You're only going to be in here about an hour or so. I'm real sorry about this. Oh, I'll be fine. Don't worry about me. Lay enters the cell and sits down on the bench. There are two prisoners sitting on the other end. He greets them. Hello? Oh, hey, you're that guy. You're the guy. I saw you on TV. You got any investment advice for me? Lay raises an eyebrow, then responds with the politeness of smiles. Later that summer, Sharon Watkins is at home in Houston when she hears a knock at her front door. She checks her watch. The interviewer is here earlier than expected, but that's okay. Watkins is ready to begin. Smiling, she opens the door and shakes hands with the woman from the journal on leadership studies. In the last couple of years, Watkins has grown accustomed to interviews such as this. She's spoken with the New York Times and was even named a person of the year by Time Magazine. At first, she thought she'd grow tired of telling the same sad stories about Enron over and over again. But recently, she's come to view things differently. Enron, it would seem, is rapidly becoming the defining corporate cautionary tale of the century. If interviews like this can help illuminate what went wrong, it perhaps prevents similar crimes from being committed in the future, then she'll do what she can to help. Watkins and the interviewer sit comfortably in her living room. She looks down as the interviewer's tape recorder reels turn slowly and answers the standard questions. She recounts her warnings to lay, her battles with fast how, and what it felt like to go before Congress. Then she's asked, when did she leave Enron officially? Watkins thinks for a second. She left Enron two years ago, but can still remember the details of that day late November with absolute clarity. The interviewer nods and leans forward, eager for her to continue. Watkins says the first thing that comes to mind is the echo her footsteps made as she walked across the main Enron lobby for the last time. The inspirational banners that once hung from the ceiling had been folded up and packed away. The hundreds of computer monitors, formerly manned by an army of traders devoted to Jeff's killing, were now dark. The assets had been sold, only the bankruptcy lawyers remained. Watkins paused at the exit. There was so much potential in that building. Enron really could have been what its leaders pretended it was, if they had just been more patient. If they had played fair, but now, after 17 years, Enron was gone. And even if they all got caught in the end, its leaders made enough to remain millionaires. The rest of the employees would simply have to venture into an uncertain future with her resumes tainted. Watkins wishes she could have done more on their behalf and on her own. She flung open the building's doors on her way to the parking lot. She passed a spot where Enron's giant slanted e logo once stood. It's gone now, sold cheap to a strip mall computer store just off the southwest freeway. Watkins leans back against the couch and the interviewer shuts off the recorder. These days Watkins is determined to pursue new business ventures, determined to make new memories. And in retrospect, that Enron e wasn't on a slant, she realizes. It was just crooked. Eddie Fasdow was released from prison after five years on December 16, 2011, just a week shy of his 50th birthday. He joined a Houston law firm as a document review clerk. He currently tours the lecture circuit as an unpaid speaker on business ethics. On May 25, 2006, Jeff Skilling was found guilty on 19 counts including conspiracy, insider trading, securities fraud, and making false statements. He was sentenced to 24 years in prison but agreed to pay $42 million in exchange for a reduced sentence. He was released after 12 years on February 21, 2019. The monetary assets seized from Skilling were distributed to people victimized by Enron's crimes. Ken Lay died of a heart attack on July 5, 2006. He was 64 years old. Six weeks earlier, he had been convicted on six counts of fraud and conspiracy. It yet be sentenced at the time of his death. Twenty thousand people lost their jobs as a result of Enron's bankruptcy. They lost $2 billion in pension funds and $1.2 billion in retirement funds. Enron's downfall prompted passage of the 66 page public company accounting reform and investor protection act in 2002. After it passed, President George W. Bush said, the era of low standards and false profits is over. No boardroom in America is above or beyond the law. Free markets are not a jungle in which the unscrupulous survive or a financial free for all guided only by greed. In 2013, Andy Fastout appeared before the Association of Certified Fraud Examiner in Las Vegas with a warning. He told the crowd, in my opinion, the problem today is 10 times worse than when Enron had its implosion. The things that Enron did, that I did, are being done today and in many cases they're being done in such a manner that makes me blush and I was the CFO of Enron. Fastout spoke six years after the United States of America suffered its worst financial crisis since the Great Depression. It was brought on by opportunistic Wall Street banks and firms which sold bad securities and fudged the numbers on their balance sheets. None of these company's top executives were ever prosecuted. From Wondry, this is episode five of five of Enron for American Scandal. On the next new series of American Scandal, in 2003 America was at war with Iraq as part of its global campaign on terror. But a former diplomat sharply criticizes the war, making him an enemy at the White House. While the crosshairs are aimed at someone else, the diplomat's wife, covert CIA agent Valerie Plain. If you'd like to learn more about Enron, we recommend the book's Power Failure by Mimi Swartz with Sharon Walkins. The smartest guys in the room, the amazing rise and scandalous fall of Enron by Bethany McClain and Peter L. Kite. Conspiracy of fools, a true story by Kurt Ikemwalt and 24 days, how two Wall Street Journal reporters uncovered the lies that destroyed faith in a corporate America by Rebecca Smith and John R. M. Swiller. This episode contains reenactments and dramatized details. And while in most cases we can't know exactly what was said, all our dramatizations are based on historical research. American Scandal is hosted, edited and executed produced by me Lindsey Graham for Ayrship, Sound Design by Derek Barons. This episode is written by Hannibal Diaz. Our senior editor is Karen Moe. Executive producers are Stephanie Jenns, Jenny Lauer Beckman and her nonmobes for wandering.גדתם Marc Williams films.