Enron rivals at odds in testimony

Lawmakers scoff as Skilling denies knowing of losses

`Have not lied to Congress'

Whistleblower VP gives conflicting account of deals

February 27, 2002|By Marego Athans | Marego Athans,SUN NATIONAL STAFF

WASHINGTON - Enron's former chief executive officer, Jeffrey K. Skilling, faced off with company whistleblower Sherron S. Watkins yesterday as the two gave a Senate committee disparate versions of the corporation's demise.

Sitting a few feet apart and flanked by attorneys, they acknowledged each other with strained civility.

Watkins, still an Enron vice president, said she's certain Skilling knew the energy corporation was hiding huge losses in private partnerships.

Skilling, whose testimony at times elicited derisive laughter from senators and onlookers, insisted he had no idea that the nation's seventh-largest company was on the brink of bankruptcy or that his protege, Andrew Fastow, had pocketed $30 million by crafting off-the-books partnerships.

"I have not lied to Congress or anyone else," said Skilling, who complained of being subjected to a "politicized process."

"I am not a victim here, but I am not one of the perpetrators," he said.

Watkins sharply contradicted Skilling, saying Fastow, formerly Enron's chief financial officer, "wouldn't have put his hands in the Enron cookie jar without an explicit or implicit approval from Mr. Skilling."

Fastow has invoked his Fifth Amendment privilege and refused to testify; so has the company's former chairman, Kenneth L. Lay.

"You are ... very smart," Sen. Barbara Boxer, a California Democrat, told Skilling.

"And that's why I don't believe you when you say you didn't know [what] was going on, because you had people with lesser education, you had people with less access to the documents ... who knew exactly what was going on."

Skilling also insisted "I never duped Ken Lay," referring to an allegation by Watkins in prior congressional testimony.

Pleading ignorance to the complexities of accounting, Skilling said he relied on the corporation's accountants to tell him whether partnerships were appropriately structured and reported.

Because the accountants signed off on the deals, he said, "I had no reason to think there was a problem."

"I am not an accountant," he said repeatedly.

An MBA from Harvard

When a senator drew an acknowledgment from Skilling that he had a master's in business administration from Harvard - a degree that would require a detailed knowledge of accounting - there were chuckles.

"There are times when the Harvard MBA shows through very well," said Sen. Byron L. Dorgan, a North Dakota Democrat and chairman of the Senate Commerce Committee panel that held the 5 1/2 -hour hearing.

But, Dorgan told Skilling, "you seem to me to lapse into utter confusion about accounting."

"I find it hard to believe that Mr. Skilling was not aware that something was amiss, that this could not be legitimate," said Watkins during her testimony.

Run on the bank

As the verbal bullets flew at him, Skilling, seemingly unruffled, continued to profess his ignorance of the company's mounting troubles.

Asked why he believed Enron spiraled into bankruptcy Dec. 2, he blamed "a run on the bank" and liquidity problems that led to a loss of confidence.

"If the company had a couple of months of breathing space, I think it would have turned out OK," he said.

"The company was solvent."

Skilling blasted as "outrageous" the public statements made by members of Congress, some of whom said Enron's former executives belonged in jail.

"These untruths shatter lives and they do nothing to advance the public understanding of what happened at Enron. The framers of the Bill of Rights are watching," he said.

Often seizing the opportunity to lecture senators, he suggested they examine a policy that allows banks to pull back loans if they lose faith in the borrower.

Some senators all but called Skilling a liar.

"It's unbelievable to me what we've heard," said Dorgan.

At one point, Skilling said he couldn't recall getting more than $5 million in bonuses in 1998 and 1999.

"Boy, I would have remembered mine," said Sen. John B. Breaux, a Louisiana Democrat, as laughter engulfed the hearing room.

Sen. Peter Fitzgerald, an Illinois Republican, disputed Skilling's claims that he did not know what was going on with Fastow and his many partnerships.

`Deep in the jungles'

"If the theory is that Fastow went rogue somewhere deep in the jungles of Enron - and was the sole agent of the apocalypse - I just don't buy it," Fitzgerald said.

The partnerships are the focus of investigations by a dozen congressional committees, the Securities and Exchange Commission and the U.S. Justice Department.

A recent report commissioned by Enron's board of directors concluded that the partnerships were used to disguise debt and to inflate profits by more than $1 billion.

As the stock price plunged and the company collapsed, millions of investors lost money and thousands of employees lost retirement savings as well as jobs.

Watkins, who had warned Lay in a memo last August of accounting problems with the partnerships, was more critical of the former chairman yesterday than in her previous testimony.

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