An Enron innocent: She fought fraud charges and won!
Sixteen former Enron employees have pleaded guilty to defrauding investors. Another one went to trial and was convicted. Enron CEOs Jeff Skilling and Ken Lay are currently confronting witnesses as they fight charges that could put them each away for decades. Five more Enron officials are slated to be retried later this year.
That's what makes Sheila Kahanek, 40, so remarkable. Kahanek, a CPA who worked in the international and broadband divisions from 1998 through September 2001, is the only former Enron employee who has fought charges of fraud in the courtroom and won. She was fully acquitted last year of charges she helped coordinate a deal in which Enron fraudulently "leased" Nigerian barges to Merrill Lynch in an effort to artificially inflate its profits. Three Merrill executives and one Enron employee tried with her were convicted.
Reached by phone, Kahanek had plenty to say about life after Enron, the Lay and Skilling trial, and her winning defense strategy.
Are you following the Lay and Skilling trial?
I'm following the trial very closely, but not for the reasons you might think. I spend most of my time comparing and contrasting my experience with the Lay and Skilling trial. The main thing I find myself focusing on is that the presumption of innocence is not there, and that is identical to what I experienced. There was prosecutorial gatekeeping of witnesses.
What do you think ought to happen?
I think it is important, as an American, and as someone who has been through the federal justice system, not just for Lay and Skilling, that they get a fair trial. It is going to be very, very challenging for them. The government has a lot of odds in its favor. The negative publicity has been overwhelming, particularly the negativity in Houston. Most important, the prosecution has control over witnesses. That is one of the strongest things the prosecution has in its favor.
Do you think Lay and Skilling knew about the problems?
I don't know. I had seen Lay maybe one or two times. I would like for the jury to make that decision based on all of the evidence. Witnesses should be able to provide testimony without fear of prosecution. Then the jury should be the ones to decide whether or not they are being truthful.
Do you regret going to work for Enron?
No, I don't. There were a great number of fantastically smart people. People want to focus on the tragic stories of people who lost so much. But people should also remember the good things at Enron. It was an intellectually stimulating environment, and motivating, without a doubt. I worked with a lot of great people and had a lot of positive friendships there.
How have people been treating you?
People have really been great. People say, "Oh my gosh, Sheila, that could happen to any of us, what happened to you" — mid-to-low-level professionals being prosecuted, having to go through what I went through. People realize that what happened to me could happen to anyone in corporate America. The day of the acquittal I found out how many voice mails my answering machine could hold. I haven't wanted for opportunity. A lot of people respected my courage to fight in the face of such insurmountable odds.
What impact did the charges have on you, financially?
It was devastating. I lost my job. Enron was a bankrupt company that wouldn't be paying my legal bills anytime soon. I didn't make millions like many of the Enron executives you hear about. I lost my stock options and value in my 401(k). I knew from the start I would be working on my case full-time. Other people don't have the insight into my case that I had. I wanted to investigate my case myself, find out who, what, when, and where. I was able to give a lot of insights into witnesses, motives for being untruthful. I knew what I had would have to sustain me through the trial. So I set up a war room in my house. I bought a $10 piece of bathroom paneling that would serve as a makeshift whiteboard and borrowed an ancient printer from a friend. I sat in my home office 10 to 14 hours a day for a year compiling evidence on Excel spreadsheets. Ironically, my tax dollars were spent paying for the prosecution's salaries. And unfortunately, even if you prevail, it is virtually impossible to recoup legal damages.
The defense attorneys for Lay and Skilling have complained that the prosecution is scaring witnesses away from testifying for their clients. Did this happen to you?
It was extremely rare if you could get someone to return a call, much less answer your questions. Prosecutors have absolute power in deciding whom to indict, regardless of what the law says concerning the not-so-grand jury. It is an unfortunate reality that most people will not risk their freedom for that of another, particularly if they have a spouse or children.
So weren't you tempted to plead guilty and limit your losses?
Absolutely not. Dan [her defense attorney, Dan Cogdell] and I got that clear from the start. A plea deal was not an option. It wasn't an option. I had to know I fought for what was right. I had to be able to look myself in the mirror and know that I never compromised myself or the truth. Every day I had to dig into myself and find the strength to fight another day. I have asked a number of people with children: Would you stand up and fight if it meant you might not see your kids for 24 years, when you can take a deal for five years? No one has said absolutely that they would fight it. Someone told me: "When you have children it is not about you anymore."
Some people have said the Merrill Lynch executives were convicted because they were New Yorkers with New York lawyers tried in Houston. You're a Houston native and you chose a Houston attorney.
I believe there will be a certain hometown element in any trial. But the other Enron defendant lived in Houston and had Houston legal counsel. The bottom line is that jurors are smart people who want to do the right thing. But I feel that jurors do have to relate to the person they are hearing from and understand the points that are being made. Those [New York] attorneys were some of the brightest I have ever seen. But Dan was my kind of guy. Dramatic. I knew he would stand out. He once shocked himself with a cattle prod in front of a jury to make a point. He was as passionate about my innocence as I was. He cried when the verdict was read. He knew I was innocent. He was extremely effective at presenting highly complex information in a way that is easy to understand. One of his most memorable themes was "zero." He drew a large red zero on a flip chart almost the full height and width of the flip chart and filled it with our key points: the number of documents Sheila signed relating to this deal: zero. The number of times I met with Fastow: zero. The number of times I met with Merrill Lynch: zero. The compensation I received from this deal: zero. The authority I had over the deal: zero. That was the basic concept that he hammered home. He got louder each time he said "zero."
What advice do you have for the defense teams?
Winston Churchill said, "If you're going through hell, keep going." You have to look and listen to the witnesses. Does the hard evidence support or contradict their testimony? Make clear and succinct points through the government's witnesses. Get in as much hard evidence as possible. I believe that jurors give significantly more weight to hard evidence than to testimony, particularly if that testimony is coming from someone who is trying to reduce prison time.
Has this experience changed the way you work? Are you more careful about things now?
I'm just as vocal as I have ever been. But I will try to be more aware of things going on around me. My advice to people in the business world is to not always believe you are being told everything. Make sure your positions are known and challenge authority. Whether you are an employee, an employer, or, most importantly, a prosecutor, or a judge: Do the right thing.
How has this changed you?
It has educated and changed me. As a citizen, I am greatly concerned about our justice system. I was naive. I thought our legal system was based on a search for the truth, but I've learned that it is based more on controlling the truth. I have witnessed the compromises people are willing to make to protect themselves even if it means sacrificing the truth and the life of another. I've also realized the importance of family and true friends. I am more appreciative and less judgmental about others. I have spent a lot of time practicing forgiveness. You have to forgive and move on. You have to do it for yourself. I read a book by [Harold] Kushner: When Bad Things Happen to Good People. His point is not to ask, "Why did this happen to me?" but "What am I going to do about it?" To pick yourself out of the fetal position is a tough thing. But you've got to go and fight that fight.
Aren't you angry?
It is natural to be upset when you have been through what I've been through. I've experienced things that have shattered my perception of the legal system. I lost a year of my life. I lost my faith in the government. I have seen the dark side of human nature, the side that is willing to sacrifice the life of another for their own through speaking untruthfully or not speaking at all. It has been heartbreaking, to say the very least. I'm not too upset at the people who testified against me so that they could see their children grow up. I don't feel like they had any other choice. I pray that my experience was an aberration, but I fear that it is more commonplace than Americans realize. I continue to try to practice forgiveness on a daily basis. I am not saying I am completely there yet, but I have come a long way.