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Skilling Says Government Witnesses Lied
Former Enron Corp. CEO Jeffrey Skilling, more animated and at times testy on his second day in the witness chair, Tuesday said the ex-Enron executives who testified that he manipulated earnings and lied to investors were not telling the truth. Skilling also deflected responsibility for the content of Enron’s Securities and Exchange Commission (SEC) filings and earnings releases, telling jurors he was often the last person to see them before they were issued.
On the second day of his testimony, defense lawyer Daniel Petrocelli concentrated on Skilling’s 28-count indictment on fraud and conspiracy. Skilling is being tried with Enron founder Kenneth Lay, who is being tried on six counts of fraud and conspiracy.
One by one Petrocelli quizzed Skilling about each of the government’s charges against him. Skilling, wearing a dark suit and red tie, was more animated than on Monday, still directing his answers to the 12-member jury. He often referred to Enron in the present tense as he answered questions about the charges against him.
“You’ve heard a lot of people come in here, people you worked elbow-to-elbow with, who said you lied,” Petrocelli said. “Were they telling the truth?”
“No,” Skilling replied quickly. “They weren’t.”
Asked about then-CFO Andrew Fastow, who has pleaded guilty to wrongdoing at Enron, Petrocelli said, “He testified he was consumed by greed. Did you know he was consumed by greed?”
“No,” Skilling said. “I trusted him.”
“Were you consumed by greed?”
“No.”
“What were you consumed by?”
“I was consumed by this company,” Skilling said. “I wanted to build this company to be an institution.
“We thought there was a chance Enron could become the energy company, and later the company, of the 21st century…The position we had, the successes we were seeing, we were building an institution that was going to be a very important player for a very long time. That was my opinion.”
Petrocelli later quizzed Skilling about whether he had been responsible for boosting 2Q2000 actual earnings by 2 cents, upping profit to 34 cents/share from 32 cents. Mark Koenig, Enron’s former investor relations chief and Paula Rieker, former corporate secretary, have testified that Skilling led the conspiracy to increase the earnings.
“That is absurd. That is not true,” Skilling said angrily. He quickly apologized for his outburst, then he explained that the 2Q2000 figure was expected to be 33 cents — a penny higher than original internal estimates. Koenig and Rieker, said Skilling, did not put together the quarterly figures and were usually readying the company’s “road show” for Wall Street analysts.
In that particular quarter, Skilling said the California power crisis in the spring of 2000 boosted Enron’s earnings in the final days of the quarter, which increased earnings to 34 cents/share.
“Our net position in the western United States was slightly long…and that slight long position would be worth more,” Skilling said. The volatility in energy prices helped Enron because prices were locked in. “No one had ever seen anything like this before…and when you have something like this start to happen, that’s worth more.” The forecast data at the time “was coming in hot.”
Skilling’s memory appeared to not be as clear regarding Enron’s 4Q1999 earnings. Petrocelli asked if he had ordered the quarter’s earnings altered to be 1 cent higher than an internal 30 cents/share estimate.
“I have absolutely no recollection of that occurrence,” Skilling said.
“How can it be up until the last minute in time that the numbers are still moving around?” Petrocelli asked.
“This is just the way it is,” said Skilling. “The numbers are moving constantly. They were all over the place as the data was trickling in from all of the business units at the company.” He added, “You can’t close the door on the last day of the month because none of the data has been generated yet.”
Skilling said he played only a small role in what went into Enron’s quarterly reports for investors and for the SEC filings.
“I don’t [sic] really have a role,” Skilling told the jury. He explained that Enron had specialists who tallied the information required; he and Lay were only responsible for the discretionary data issued.
Petrocelli asked if Skilling had ever made a mistake during the conference calls with investors and analysts.
“Sometimes I might stumble…leave a word out,” However, Skilling said if he misspoke, other executives typically in the room would correct him.
Koenig had earlier testified that other Enron executives did not want to correct Skilling because of his temper.
Focusing on Enron’s LJM special purpose entities (SPE), which were controlled by Fastow, Petrocelli asked, “You were wrong about one thing, right? Mr. Fastow?”
“Yes.”
“Why did you trust him?”
“I had worked with him for a long time.” Skilling said Fastow appeared to be good at his job and said he believed Fastow put the company’s interests ahead of his own.
“Did you like him?”
“I liked Andy, yes.” Skilling said his children also liked Fastow. “In the lower left-hand drawer of Andy’s desk in his office, he always had some toys.”
Fastow earlier testified Skilling gave him a verbal approval, or “bear hug,” to approve LJM deals. Fastow also testified some of the LJM SPEs were not third-party, independent entities, which are required under law. However, Skilling told jurors the SPEs were, in fact, independent.
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