Former Enron chief executive Jeffrey Skilling spent nine weeks listening in large part to his former underlings say or imply that he misled investors by saying all was well at the energy giant when accounting tricks and weak ventures fed financial rot.
Now he’s fighting back, having logged three days testifying in his fraud and conspiracy trial with a fourth on Thursday and more to come next week.
”I was aware of no illegal activity occurring at Enron Corporation,” he told jurors on Wednesday, adding that he and his co-defendant, Enron founder Kenneth Lay, never discussed doing anything they knew was forbidden by law. He acknowledged he was angry at the government because he steadfastly maintains he is falsely accused of wrongdoing.
Lay reiterated on Wednesday that he aims to testify later in the biggest corporate fraud trial to emerge from the recent era of business scandals.
Speaking with confidence sometimes accentuated by annoyance when faced with statements made against him, Skilling continued addressing damaging prosecution testimony. On Wednesday, he began addressing issues stemming from Enron’s broadband unit, which never made a profit and crashed into bankruptcy protection alongside the parent in December 2001.
Unveiled to Wall Street in 2000, Skilling billed the unit to dazzled Wall Street analysts as a potential multibillion-dollar business that would stream video to homes on Enron’s fledgling broadband network and trade internet bandwidth.
Several government witnesses, including former broadband unit CEO and Skilling ally Kenneth Rice, said Skilling minimised the division’s problems to maintain its positive buzz among analysts.
One such instance, Rice and others testified, involved Skilling in mid-2000 minimising the amount of revenues the unit earned from sales of inoperative fibre optic cable so analysts would believe more income stemmed from actual business operations.
Skilling acknowledged on Wednesday that he mistakenly told analysts such sales brought in $50-million in the second quarter of 2000 when the actual amount was about $150 million — or most of the unit’s revenue.
But he said such inoperative fibre sales ”were always part of the business”, and regulatory filings in 2000 and 2001 noted those transactions.
Earlier on Wednesday, Skilling countered dramatic recollections from David Delainey, also once one of his favourite top managers.
Delainey ran Enron’s trading arm, Enron North America, until Skilling asked him to take over the company’s retail energy unit, Enron Energy Services, in February 2001. Delainey pleaded guilty to insider trading in October 2003.
Delainey told jurors he gave in to a Skilling-approved plan in March 2001 to move the retail unit’s trading arm into the profitable Enron North America to hide $200-million in losses. He also said he felt pressure from Skilling and others in 2000 to
wrongly raid the trading unit’s reserves to fill earnings gaps when other divisions failed to meet targets.
Delainey said he opposed moving part of retail into Enron North America, but other executives were exasperated with him and Skilling asked him, ”What do you want to do?” He said he took his boss’ question as code to ”get in line” and go along with it.
Skilling denied the move was made to hide losses, and said it was meant to quell disputes between traders in the two divisions and gain efficiency.
”So I asked Mr Delainey, ‘Are you sure you want to do this?’ and he said yes,” Skilling said.
Regarding reserves, Delainey said he got a hug from a happy Skilling after he told his boss in late 2000 that Enron had racked up $800-million in reserves to ensure healthy earnings reports for ”a couple of quarters”.
Skilling said he hugged Delainey, adding, ”I may have kissed him,” but only because he thought Delainey had reinstated previously eliminated reserves to protect Enron from losing money in a volatile market.
Petrocelli displayed a document that showed Delainey’s unit had set aside $363-million in reserves, not $800-million.
”This shows he’s half a billion dollars off?” Petrocelli asked.
”Yeah, a little off,” an annoyed Skilling said with a hard voice and a sigh.
The government contends both repeatedly lied to investors and employees by claiming Enron was healthy when they knew their outward optimism hid weak ventures and accounting tricks.
Skilling and Lay contend no fraud occurred at Enron other than former Chief Financial Officer Andrew Fastow and a few others skimming money from secret schemes, and negative publicity and diminished market confidence sank the company.
Skilling is charged with 28 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces six counts of fraud and conspiracy. – Sapa-AP