Monday, June 19, 2006

The Mountain Man from McKinsey

Vince: I was in the jungle—the bush we called it—for approximately nine months...

Sheldon: Nine months! That must have really been something!

Vince: It was. I saw things... They have tsetse flies down there the size of eagles.

I thought of that exchange from “The In-Laws”—the original, funny Peter Falk version, not the newer, un-funny Michael Douglas version—while reading about now-convicted former Enron President Jeff Skilling’s alleged Mountain Man adventures in this weekend's Wall Street Journal.

In "The In-Laws," Falk plays an elusive CIA agent (Vince) whose bizarre behavior and mysterious absences begin to worry the family of a nerdy dentist (Sheldon), played by Alan Arkin, whose daughter is going to marry Falk’s son.

(Among the many great lines is Falk telling a cab driver who asks about his CIA career, “Are you interested in joining? The benefits are terrific. The trick is not to get killed. That's really the key to the benefit program.”)

And what reminded me of that movie while reading the Journal story on Skilling's recent trial is when I came across the laugh-out-loud portion of the article, which begins (and I am not making this up):

To prepare for the rigors of the trial, Mr. Skilling said he wandered through the Utah wilderness for two weeks…

Now, the story itself is not strictly about Skilling’s account of roughing it in Utah—that is meant to be, I think, a compelling sub-plot of the larger story, which is what Skilling now claims did him in, as revealed right in the headline itself:

In New Interview, Skilling Says He Hurt Case by Speaking Up

In other words, what convicted Jeff Skilling, we are told, was Jeff Skilling’s big, honest mouth.

The surprise, I think, is not that Jeff Skilling is coming up with a new spin on his own conviction—he’s been all doe-eyed about the Enron collapse since Day One, claiming shock and surprise while trying to justify himself, his actions and his career, both in court and on camera ever since he left the controls and parachuted safely to the ground just as the plane was about to go into a death-roll.

No, the surprise is that this piece of so-called reporting is by no less than John Emshwiller, the Journal reporter who worked the Enron story as that company was unraveling in no small part due to Skilling’s failure to build an “asset-lite” energy empire that could withstand margin calls.

Alert Enron-watchers may recall that Emshwiller and a colleague turned that reportorial work into a book with a title that was an unwieldy and self-congratulatory as the book itself:

24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America

Despite having that high-minded book title on his resume, Emshwiller does not, I think, distinguish himself in his new story, which attempts to remake Skilling’s downfall from being unethical in business dealings to being too ethical in his pre-trial dealings:

He [Skilling] said that a series of interviews with the Securities and Exchange Commission ended up providing prosecutors with pieces of information that they effectively used against him at the trial. "Stupid me," he said with a laugh, though he added that he still believes speaking out was the "ethical" thing to do.

In other words, ‘If I hadn’t been so darn honest,’ Skilling tells the reporter, ‘I might not be headed to jail.’

What a guy!

Yet Emshwiller swallows it hook, line and sinker—and without the least effort to cast new light on what he had, previously, called “the Lies that Destroyed Faith in Corporate America.”

Now, it is worth remembering that Skilling’s trial defense rested on the notion that no fraud, no crimes, no nothing had occurred on his watch at Enron. Enron’s collapse was instead caused by a renegade CFO and skeptical short-sellers who—how is not clear—helped destroy a company he had quit for “personal” reasons.

It is also worth remembering that while still at the controls of the jet, Skilling had so little use for skeptics of Enron’s “asset-lite” business model either from within the company or without that he lashed out at the only investment analyst on or off Wall Street who had the temerity to question Skilling on a conference call why Enron did not make balance sheets available at the time of earnings reports—by calling Richard Grubman “asshole” instead of answering Grubman's astute question about the balance sheet.

(My apologies to readers accustomed to the “clean language” provision of this blog, but I use the word itself and not a euphemism in order to make it clear precisely what Skilling said and how he meant it.)

Ask any short-seller in America who made money on Enron’s collapse why he or she shorted Enron stock in the first place, and they will probably tell you it was Skilling’s performance on that call in general and his use of that epithet in particular that caused them to begin to investigate the company. It was in fact the “tell,” as Jim Cramer’s home-gamers would call it, of a serious problem going on behind the curtain at a company which Jim Chanos had rightly been calling a ‘hedge fund in drag’ for at least year before it collapsed.

Nevertheless, Emshwiller appears quite taken with Skilling’s new-found humility and creates a sympathetic portrait, with philosophical quotes on life (“better than the alternative”); new-found perspective about jail-time (“A lot better people than I am have been in prison…”); and family (“My children were never going to see me take the Fifth…”).

But he saves the whopper for last, repeating as gospel Skilling’s far-fetched tale of wondering the Utah wilderness like a later-day Joseph Smith as part of his trial preparation:

Mr. Skilling said he wandered through the Utah wilderness for two weeks, hiking up to 30 miles a day, as part of a survival-training program.

Anyone who actually does hike—and by that I mean further than from their apartment building to the nearest Starbucks—knows the idea a former pinstripe-wearing McKinsey-trained Master-of-the-Universe spent two weeks in the Utah high desert “hiking up to 30 miles a day” is about as believable as the notion that Enron was a financially sound company that collapsed simply because a CFO did things he wasn’t supposed to do while some short-sellers blew it all out of proportion.

You live in Morgan Hill, California and work in Santa Clara? 30 miles. Live in Novato and commute to downtown San Francisco? 28 miles. Short Hills to Rockefeller Center? 26 miles. Wellesley to Boston and back to Wellesley? 30 miles.

So if you ever decide to walk from your house in Morgan Hill to your job in Santa Clara in one day—heat and soot and baking sun and all—and if you don’t shoot yourself or beg a passing SUV to run you over as a mercy killing, then you will have walked almost exactly as much as Jeff Skilling is supposed to have walked in a day while on his "survival" sabbatical.

But Emshwiller doesn’t bother to wonder how a middle-aged non-former-athlete could perform such Lance Armstrongish feats—instead, he dutifully reports the rest of Skilling’s tale of Mountain Man derring-do:

He slept on the ground, had no food for the first three days and then dined largely on whatever he could find, including insects. (He recommends caterpillars and grub worms, which "are basically pure fat.")

Three days with no food! Grubs! Caterpillars!

Which brings me back to “The In-Laws”—when Sheldon the Dentist asks Vince about the "giant tsetse flies," and Vince’s wife recalls the pictures Vince had supposedly taken of them.

Unfortunately, Vince tells Sheldon, the pictures were in his coat, and, “I had that jacket Martinized.”

I’d love to see Skilling’s pictures from his Mountain Man adventures. Especially the meals, what with caterpillars and the grubs on the menu.

I suspect, however, they got Martinized.

Jeff Matthews
I Am Not Making This Up

© 2006 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.


Chris Fischer said...

Ok.. I don't find the walking 30 miles over the course of an entire day THAT extraordinary - you don't have to be really outstanding shape to do it, especially considering that you can take breaks and stuff. Heck, marathon runners RUN 26 miles, army recruits march further than that with 60 pounds of equipment.

But the 3 days without any food part makes it laughable. He would have collapsed.

Metroplexual said...

Great film reference. Skilling is a total weenie, he tells lies like most people breathe. I wonder if his 30 mile hikes each day were serpentine? (Serpentine Shel, serpentine!)

Honorable Justice Jorge P. Smythe said...

Loved the original In-Laws.

I bet Skilling saw the Canyonlands episode of Survivorman where Les Stroud gives up after 6 days and decided he could hack the extra days.

JR said...

Serpentine! Serpentine!

cadamyale said...


You have an uncanny eye for the absolutely absurd. Brilliant post. It makes you wonder if this guy had no marketable skills other than pathological liar.

whydibuy said...

You have to wonder how much is Skilling and how much is orchestrated by his attorneys. Usually in such a serious case, the attorneys demand that you say nothing but what they tell you. So, if this honesty posturing and " lone man in the wilderness" ploy was invented by his attorney, you've got to wonder about what kind of counsel he's retained.

SellToWhom said...

I've met John Emshwiller, and remember some of his excellent pieces from the late 90s. He is an experienced professional, and I don't think he would be easily snowed.

bubbles said...

For a different take on Skilling and Lay read this article, it changed my mind:

Barry Ritholtz said...

Actually, insects are primarily protein, not fat.

Aaron Koral said...

So, when CEO's announce that they are leaving their company for "personal reasons", will investors automatically assume that the individual is "Skilling" (i.e., knowingly "cook up" a company's downfall) them? When did the words "personal reasons" become such an unpleasant term for investors? Have investors become so cynical that we automatically assume the worst when a CEO legitimately leaves a company for "personal reasons" (and please don't give me the Cramer home-gamer line about how CEO's give up their family life to get to that corner office at the beginning of their careers). My concern here is how both skepticism and cynicism led investors to question the information provided by reporters, by equity analysts, and even by management at publicly traded companies these days. Have investors become "fed up" and thus, are selling out of the U.S. equity markets to put their money elsewhere? Just wondering...and I might be mistaken!

AltaJoe said...

I love Bubble's link. The assertion of the "But he's guiltier than me" defense postured by the Institute is brilliant. If only Ludwig von Mises was available to defend the Nazi's at Nuremberg...

Regarding Skilling's Utah hikes, it's not 30 miles from the base of Deer Valley to the Stein Erikson Lodge. Yes, its uphill, but the Lunch Buffet is worth the climb.

bubbles said...

AltaJoe you obviously did not understand William Anderson’s article which was posted on Ludwig Von Mises Institute’s web site.

Mr. Anderson is not defending Mr. Lay by asserting "But he's guiltier than me".

Lay-Skilling were convicted on criminal charges based on legal activities. The accounting measures Enron took in order to hide losses, all were activities in and of themselves which can be deemed legal, or, at worst, in the gray area of accounting and securities laws and regulation.

This was not a case of Lay-Skilling stealing from Enron and hiding the money in offshore bank accounts and absconding with their ill-gotten gains. As Mr. Anderson said it was “a case of executives who believed their own hype — and that of the financial press — and failed to apply the fundamentals of sound business practices to their decisions.”

For comparisons Mr. Anderson stated how US government engages in a number of activities to hide losses and deficits, called "off budget" expenditures which is the same thing Enron was doing but on a much larger scale. I believe this is where you come up with your assertion "But he's guiltier than me".

But Mr. Anderson is not saying this at all. He stated the case against Enron belonged in civil court where stockholders could have sued Lay, Skilling and others and it would have been nearly impossible for them to hold onto their wealth. Mr. Anderson concluded “Instead, the government stepped in and stripped these people of their freedom and relieved them of their money, too. Stockholders will get nothing.”

The article’s point is our government’s elected and appointed officials have done more harm to the public and to the economy and that “Compared to them, Lay and Skilling are Boy Scouts.”

john lichtenstein said...

I think you mean Young in Utah or maybe Moses in Sinai. Smith died in Nauvoo, IL.

20 to 30 miles a day was an achievable pace for an army for a couple thousand years. Once, in response to an ambush, Alexander took a team of several hundred equipped light walking 40 miles per day for a few days in Afghanistan to catch the raiders. That's walking! Pheidippides ran 147 miles in 3 days and might have fought at Marathon as well.

Do you really doubt that the Alexander of our times, Jeff Skilling, could walk 30 miles a day?

The grubs bit is pretty implausible. I have no trouble believing that Skilling is capable of living off bugs, roadkill, or any other type of garbage that would make an Earth human ill. But I don't see how he could gather a substantial quantity of such bugs in the Rockies while also walking 30 miles per day. I wonder if he secretes a stench that attracts bugs so he can gather them as he walks. If Emshwiller comes from the same planet as Skilling, this might seem so natural to him that he forgets to mention it, even when writing for an Earth based paper. Maybe that's why Emshwiller didn't call Skilling on this.

BelowTheCrowd said...


I don't think there's a problem with retiring for personal reasons. Everybody either does this or dies on the job.

What is suspicious, and what Cramer actually did point out at the time, is that CEOs don't suddenly wake up in the morning and discover unstated "personal reasons" to quit the same day with no time allowed for transition. They do what Bill Gates just did: announce that they will be retiring at some point out in the future and announce the beginning of a transition. Either that, or they have to have a really good story.

Skilling, of course, offered no reason. He just announced he was quitting. That's what was suspicious at the time, and would be again today.

ddresser said...

I backpack occasionally.

30 miles a day sounds like perjury to me, even without taking into account his age and occupation. Send him to jail.