HOUSTON – Former Enron Corp. Chief Executive Jeffrey Skilling yesterday addressed prosecution testimony that painted him as an earnings-obsessed leader so bent on meeting or beating Wall Street expectations that his underlings resorted to fraud with his knowledge.
The ex-CEO denied spearheading a conspiracy that in part included fudging Enron's books before the company sought bankruptcy protection in December 2001.
“You are a smart guy, aren't you?” his lawyer, Daniel Petrocelli, asked the ex-CEO known for a swaggering bravado.
“Yes,” Skilling replied matter-of-factly.
“Are you smart enough to mastermind this kind of conspiracy and pull it off without getting caught for years?” the attorney asked.
“I don't think so,” Skilling said.
Testimony from Skilling, who transformed Enron from a stodgy pipeline company to an energy heavyweight in the decade before it crashed, is among the most highly anticipated in the federal criminal trial. His co-defendant, Enron founder Kenneth Lay, is expected to testify later in the trial.
Skilling began testifying Monday and is expected to be on the stand for several days.
Lay and Skilling are accused of repeatedly lying to investors and employees about Enron's financial health when they allegedly knew fraudulent accounting created a facade of success.
The two men say there was no fraud at Enron other than that committed by former Chief Financial Officer Andrew Fastow and a few others, who skimmed millions from secret scams, and that bad publicity as well as lost market confidence sank the company.
Prosecutors allege Skilling predetermined that Enron's earnings would grow up to 20 percent annually and resorted to accounting tricks to manufacture profits when business operations weren't up to snuff.
Skilling sought to erase his image as an overly demanding CEO who expected top performance at all costs. He acknowledged he had high expectations, but he described himself as a negotiator with business heads when setting earnings targets. He said Wall Street would understand if companies missed expectations if they had a reasonable explanation.
“Are you just ordering these people: 'You come up with this number. We need it. I don't want to hear anymore. I'm Jeff Skilling?' ” Petrocelli asked.
Skilling laughed, then said, “No.”
Skilling later addressed one of the most notorious elements of the Enron scandal – the LJM partnerships created and run by Fastow to conduct deals with the energy company.
Fastow testified last month that Skilling told him, “Get me as much of that juice as you can,” regarding the personally lucrative partnerships the ex-CFO used to manipulate Enron's finances.
Skilling said he didn't recall making that statement. “I don't use the word 'juice' in that context,” he said.
Fastow had testified that Enron turned to the partnerships to buy its own poor assets and investments so the energy company could hide debt and boost earnings. However, Skilling said Fastow pitched the partnerships as quick buyers for Enron assets, which the ex-CEO thought would help the energy company manage risk while benefiting shareholders.
“Was LJM a puppet of Enron?” Petrocelli asked.
“No, it wasn't,” Skilling said.
Fastow testified the partnerships helped Enron meet earnings targets, but Skilling minimized their importance. He said the $125 million in deals one of the partnerships conducted at the end of 1999 was “something you would hardly notice, frankly.”
Skilling also denied he gave Fastow “bear hugs” – the ex-CFO's term – or promises that LJM wouldn't lose money on deals with Enron. The indictment alleges he knew Fastow and former Enron Chief Accounting Officer Richard Causey hatched such side agreements guaranteeing no losses for LJM.
“That is not true,” Skilling testified, having earlier described Causey as “a conscientious, hard-working guy” and a “consummate professional.”
Fastow and Causey are among 16 ex-Enron executives who have pleaded guilty to crimes. Fastow admitted to two counts of conspiracy in January 2004. Causey was bound for trial alongside Lay and Skilling until he pleaded guilty to securities fraud in December.
Unlike Fastow, Causey didn't testify during the prosecution's case. However, he could testify for the defense – or for the government on rebuttal.
