In his second appearance on Capitol Hill, a more confident, almost brash Jeffrey K. Skilling denied that he lied to Congress last month or ever misled long-time Enron Chairman Kenneth Lay about the controversial off-the-book partnerships that prompted the devastating collapse of the energy trading company last year. But lawmakers in the end were far from convinced.

“I have not lied to Congress or anyone else about my recollection [of events] while I was at Enron,” the ex-Enron CEO said last Tuesday during a Senate Commerce Committee hearing. Also, “I never duped Ken Lay,” as Enron executive Sherron Watkins testified before a House subcommittee earlier. “I have no idea what the basis” for her charge was.

Skilling restated his claim that he was unaware Enron, which he referred to as a “once fine institution,” was in “financial peril” when he resigned in August 2001, and that he had “no knowledge of any wrongdoing by its employees.” Unlike others, “I am not one of the perpetrators,” he told disbelieving Senate lawmakers.

“What I know I am prepared to tell [the committee]. What I do not know was either kept from me or never happened at all,” said Skilling, who shared the witness table with his adversaries — Watkins and Enron President and COO Jeffrey McMahon. “I have nothing to hide. I take full responsibility for my actions as [a] senior executive of Enron Corp.”

Skilling is the only former Enron executive to answer questions before Congress. The rest have asserted their Fifth Amendment right against self-incrimination. One Enron executive who has been noticeably absent from the Capitol Hill hearings has been ex-Treasurer Ben Glisan. It was reported last week that Glisan, who profited $1 million from his investment in Enron’s Southampton partnership, may receive immunity from prosecution in return for helping the government’s lawyers connect all the dots about what went on at the top echelon of Enron.

Skilling got high marks for his presentation last week, but many felt the substance of his testimony still was questionable. “Frankly, he was pretty…sharp. Jeff Skilling is pretty good at handling himself in those type of situations. You may not like or agree with him, but he did not let the senators get the best of him,” said an energy industry source. Skilling upbraided senators several times for interrupting his responses, and for not treating him as “innocent until proven otherwise.”

Despite his “more polished” performance last week, “I still don’t think anybody believes him,” the source told NGI. Skilling continued to profess his innocence on CNN’s “Larry King Live” Friday night, and accused Congress of being “judge and jury.”

Watkins, who alerted Lay last August to accounting irregularities with Enron’s Raptor partnerships, stood by her prior testimony in which she said she believed Skilling knew all about the questionable partnerships that allegedly concealed company debt and inflated profits. “In my opinion, Mr. Skilling was aware of the problems” with the Raptor transactions, which “were back-stopped with Enron stock,” she told the Senate panel.

The Raptor partnerships were created to act as a hedge against Enron’s risky technology investments. However, Raptor was financed by the company’s stock and when the stock price plunged, Raptor was unable to repay more than $700 million that it owed Enron, according to Watkins. This prompted the restatement of the company’s earnings last fall.

Watkins defended Lay during her first appearance before Congress, but her support was more tepid last week. “If Mr. Lay had been able to realize the gravity” of what was facing Enron last fall, Watkins said “he would have better planned for the ensuing crisis.” Enron, she believed, had a “brief window to salvage itself last fall,” but Lay squandered it when he failed to acknowledge the manipulation of the company’s financial statements.

Unlike Watkins, Skilling argued that he didn’t have an accounting background, and relied on the expertise of Enron’s then-outside auditor Arthur Andersen LLP, which signed off on the Raptor deals. “I am not an accountant,” he said repeatedly, adding that he believed Raptor to be an “entirely appropriate” structure. He conceded, however, he knew “some Enron equity [was] involved” in Raptor, but he said he didn’t know precisely how much.

As “long as the accountants told me…this was an appropriate structure, I felt comfortable with it,” he noted. Sen. Barbara Boxer (D-CA) said she was stunned that Skilling, who has a master’s degree in business from Harvard University, didn’t know enough about accounting to determine for himself what was proper and what wasn’t.

House investigators released interview statements last Thursday of three current and former Enron executives, which directly contradict Skilling’s testimony that he was unaware of the questionable partnership arrangements, such as Raptor. The executives were Ryan Siurek, senior director for transaction support; Richard Causey, former chief accounting officer; and Rodney Faldyn, vice president of financial accounting.

Skilling continued to deny that he was required to sign approval sheets for the LJM partnership deal or any other off-the-book partnerships. “I can’t be any more clear about this,” he said, noting that the process spelled out by Enron corporate attorneys did not necessitate his signature.

But “any way you parse this, you [Skilling] had the responsibility as CEO” to oversee the company partnerships, said Sen. Ron Wyden (D-OR).

Watkins told Senate investigators that she didn’t take any of her concerns to Skilling because she feared it would have been a “job-terminating” move. “I believed it would be fruitless” then, she noted, adding she believed that now more than ever.

There is no evidence that Skilling ever “fixed” the conflict-of-interest concerns that were raised by employees about the dual role of ex-CFO Andrew Fastow in the LJM partnership, Watkins said. Fastow both managed and was an investor in LJM, and walked away about $30 million wealthier as a result.

“I believe that Andy Fastow would never have put his hands in the Enron [cookie] jar” without the explicit or implicit approval of Skilling, Watkins said.

But Skilling said he issued a warning to Fastow after McMahon, who at the time was treasurer, complained that Fastow was ignoring corporate controls designed to protect Enron against potential conflicts of interest with the LJM partnership. Skilling said he put Fastow “on notice” about McMahon’s complaint, and told him “I expected the controls to be operated effectively.”

McMahon said he received a verbal dressing down from Fastow after he had complained to Skilling and was soon transferred to another part of the company.

Skilling said he believed that Enron had a “good system” of controls in place to shield itself at the time. When asked what happened, he responded, “It turned out that something went wrong.”

If he could do one thing over again, Skilling told Senate investigators, he wished he had never heard of LJM.

Skilling, as well as Watkins and McMahon, believed that Enron’s collapse last fall was due to a “classic run on the bank,” which prompted a liquidity crisis at the company. Asked whether he thought his resignation and stock sales last year contributed to the company’s failure, Skilling said he had called “Mr. Lay and offered to come back to the company” when the financial irregularities first surfaced last fall.

“Our problem was that 90% of our business was [in] trading,” said Watkins, adding that this could dry up at the slightest hint of accounting impropriety. The majority of the company’s partnerships, mostly offshore, were “fairly legitimate,” she told the Senate panel.

Skilling denied that he left Enron because he feared the financial and accounting defects were about to made public. “I was tired. I was flat out tired” after 10 years with Enron, he said. “I had issues in my life that were more important to me.” After a decade of putting Enron first, he noted there were “clear imbalances in my priorities in life.”

When quizzed about the areas demanding congressional review, Skilling urged lawmakers to look into the “severe liquidity drain” that first afflicted Enron and has spread to other companies. Watkins proposed that clients be required to rotate their outside auditors every three years. The “largest deterrent to what Enron has faced is another pair of [auditor] eyes,” she said. McMahon called for simplified financial statements.

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