Defense witnesses for Enron Corp. founder Kenneth Lay and ex-CEO Jeffrey Skilling on Tuesday continued to refute claims by government witnesses, attempting to cast doubt about whether layoffs were actually reassigned and whether international assets were in poor shape, as the prosecution claims. Skilling is expected to take the stand in his defense within the next two days.
Former Enron human resources supervisor Sarah Davis, testifying for a second day, told jurors employees were “redeployed” from the company’s struggling Enron Broadband Services (EBS) unit in early 2001 to other assignments and were not laid off. Davis’ account differed from the testimony by former CEO Kenneth Rice, who told the jury in February that Skilling had told him to call about 250 EBS staff cuts “redeployment” instead of layoffs to ensure Wall Street would not be aware of the business unit’s weak performance (see Daily GPI, Feb. 15).
Skilling lawyer Mark Holscher asked Davis if Rice or anyone at Enron had told her the staff cuts were “a ruse to lay people off” or “some sort of disguised layoffs.” Davis said, “No…it was redeployment.”
Under cross-examination, Davis admitted it was not her job to keep up with the reasons why Enron would redeploy or fire anyone.
In his testimony, Wade Cline, the former CEO of Enron India, said the company had been committed to its Dabhol, India power plant project even though there were business setbacks. Former CFO Andrew Fastow and former Treasurer Ben Glisan Jr. had both earlier testified that Enron had not been committed to maintaining the plant and had planned to write off the losses.
However, Cline, who still works for the bankrupt company, testified the plant, in which Enron was a 65% stakeholder, had been well maintained. He also said there was no discussion to write off Dabhol as a loss in early 2001, as Fastow maintained. A contract dispute with the Maharashtra State Electricity Board eventually led to a lengthy court case, and following Enron’s bankruptcy, the plant was shuttered.
“Mr. Lay was very committed to the project,” Cline told the jury. “He had a special place in his heart for India.”
Mark Metts, who joined Enron in 1999 executive vice president of corporate development, recounted Fastow’s anger at how Metts and his team handled Enron’s sale of wind turbine assets in April 2001. Metts told the jury Fastow was angry that the LJM partnerships, the special purpose entities Fastow oversaw, was not given first bidding on the sale.
Metts told Fastow that a bid by LJM had to be treated like any other bid. However, he said Fastow called him early one morning and berated him for 10 minutes, screaming “several nasty things” and threatening to take the matter to Skilling.
“His basic point was that I was out of my mind that he was not being treated special,” Metts told the jury.
Eventually, the asset sale problems were taken to Skilling. “Jeff agreed with me that the only way that LJM could participate in the wind process was if LJM played by the same rules as everybody else,” Metts told the jury. Skilling, said Metts, assured him LJM would not have preferential treatment, and he said Skilling appeared to be upset by Fastow’s moves to take over the deal.
On cross-examination by prosecutor Sean Berkowitz, Metts admitted he had been demoted about a month after he got into the argument with Fastow. Afterward, instead of reporting to Skilling, Metts reported to Fastow.
Berkowitz also referred to a civil lawsuit in which Metts is a defendant related to an Enron stock sale. Metts apparently sold some Enron stock as the company was imploding, and the lawsuit is ongoing.
“You realize that anything you say here could be used against you in civil proceedings?” Berkowitz asked him.
Skilling’s lead lawyer Daniel Petrocelli told U.S. District Judge Sim Lake late Monday he may call Skilling to the stand by Thursday, depending on how long the preceding witnesses take. Lay also is expected to testify later this month.
Meanwhile, Lay’s lead lawyer Mike Ramsey will undergo surgery on a blocked carotid artery at The Methodist Hospital in Houston on Wednesday. Lay is not expected to ask for a continuance, and he is still expected to testify. Ramsey, who may be out of the courtroom for a month, said George “Mac” Secrest would be prepared to present Lay as a witness.
“Certainly he will be out of pocket for a few days,” Lay said. “I fully expect him to be back before the trial is over. We’re going to proceed ahead.”
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