On a day devoted to cross examination of prosecution witnesses in the trial of Enron Corp. founder Kenneth Lay and ex-CEO Jeffrey Skilling, two of the company’s top executives maintained Skilling and others lied repeatedly to cover up financial shenanigans within some of the business units.
“As a management team, we did lie,” said David Delainey, former CEO of Enron North America and Enron Energy Services (EES). “We had a very compelling story that we were telling and we weren’t telling the complete truth.
“What was this Enron story?,” demanded Skilling lawyer Daniel Petrocelli. “Is it a story about a criminal conspiracy?”
“Yes,” Delainey shot back..
“Is it a story about fraud?” the lawyer asked.
“Yes,” Delainey replied.
Petrocelli asked Delainey to recount the times he lied to coworkers, investors, the FBI and others. Delainey said he had lied to the FBI before finally turning state’s evidence, and Petrocelli used those statements to portray the witness as someone willing to do anything to save himself. Calling him “opportunistic,” Petrocelli reminded Delainey that he had once hoped to rise to Skilling’s level at Enron.
“I think I said I was in denial and that I just wasn’t taking full responsibility for what I’d been part of and I was trying to protect myself,” Delainey said of his earlier statements to the FBI.
“By the way, are you still trying to protect yourself?” Petrocelli asked.
“No, I’m telling the truth.”
Petrocelli shot back, “we’ll talk about that.”
The defense lawyer frequently used the words “lie” and “lied” to describe Delainey’s actions at Enron North America and EES. Delainey had testified earlier that he had reservations about folding EES into Enron North America in early 2001. Why, asked Petrocelli, would he have reservations about something after he had lied to employees and shareholders several times during the previous year concerning moving reserves out of Enron North America to boost the corporation’s profits?
“You were in a conspiracy for a year,” Petrocelli said. “What’s another fraud?”
“In my memory, that was just about as bad as it can get, and about as brazen as it can get,” Delainey said.
“By this point, you were a full-fledged member of the Enron conspiracy,” the lawyer said. “You’re using this conspiracy to climb up the corporate ladder. Why would you be so concerned about moving these books over? That seems like child’s play. I would think that lying to your shareholders, lying to your employees would be more repulsive.”
“We did both,” Delainey shot back. He noted some of the members of Enron’s management lied to shareholders, employees, Wall Street, the FBI and even their families.
Under cross examination Delainey said he was angry at Skilling for not telling him about what poor shape EES was in when he took over.
Petrocelli shot back, “I guess it’s sort of like there’s no honor among thieves.”
The lawyer also hammered away at Delainey’s portrayal of all of the underhanded dealings at Enron. “You seem to be extremely determined to get out that it was a lie, it was a lie, it was a lie,” Petrocelli said.
“It was,” Delainey quickly answered.
“Are you nervous if you don’t keep saying that you’ll get in trouble with the [Enron] task force?” Petrocelli asked.
Delainey answered, “I just want to make sure the truth comes out.”
The former chief of trading for Enron Power Marketing also was questioned Wednesday about statements he made concerning the huge profits Enron made during California’s energy crisis in 2000-2001. Timothy Belden recalled that Enron purchased inexpensive power in the Northwest and resold it back to the energy-stricken state at exorbitant rates.
Belden, who ran Enron’s Western power trading desk in 2000 and 2001, pleaded guilty in October 2002 to conspiracy to commit wire fraud relating to power trading schemes (see Daily GPI, Oct. 18, 2002). Because of a scheduling conflict (Belden lives in Portland, OR), he testified early Tuesday and was cross examined Wednesday. He claimed to know a lot about the inner workings of the company, but Belden admitted he had never met Lay and only met Skilling once at a dinner with colleagues.
In recalling his time running Enron’s Portland trading desk, Belden told jurors California’s “dysfunctional” market following electricity deregulation made it easier to game prices.
“The chaos drove high prices and the high prices drove our profits,” Belden said.
On cross examination by Skilling lawyer Randy Oppenheimer, Belden said he “may” have said the troubled electricity retail unit EES would do better if it was folded inside Enron North America, the company’s massive — and profitable — trading operation. The prosecution has argued EES was moved into Enron North America in mid 2001 to mask its earnings losses from investors and analysts. Under questioning, Belden refused to acknowledge an assertion by Oppenheimer that merging EES into Enron North America enhanced Enron Corp.’s efficiency.
Lay lawyer Mike Ramsey also laboriously reviewed Belden’s plea agreement with the government almost line by line, in a confusing set of questions that even the witness sometimes could not answer. Ramsey attempted to show the jury that witnesses with plea agreements might testify in a way to reduce their sentence.
“You’ve made a settlement where you hope, if you perform correctly and render ‘substantial assistance’…your hope and belief is a judge will accept that settlement,” Ramsey said.
“My understanding is [the prosecution] won’t make a recommendation until before sentencing,” Belden said.
On redirect by prosecutor Sean Berkowitz, Belden was asked if he had been told by prosecutors to lie to the jury.
“My primary obligation is to be truthful,” Belden said.
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