Skilling is grilled on stock sales

Top Enron prosecutor raises inconsistencies

April 18, 2006|By BLOOMBERG NEWS

HOUSTON -- Former Enron Corp. Chief Executive Officer Jeffrey K. Skilling denied that he inflated earnings, misled investors or engaged in insider trading during his first day of cross-examination yesterday at his fraud trial in Houston.

Federal prosecutor Sean M. Berkowitz confronted Skilling with inconsistencies between his four days of testimony last week and the testimony of at least eight witnesses. Berkowitz also showed that Skilling's testimony varied from documents in evidence and his 2002 interview with the Securities and Exchange Commission.

"I have nothing to hide," Skilling told Berkowitz, under the gaze of federal jurors whose verdict may turn on their judgment of his demeanor and credibility. "I will respond to your questions to the best of my ability."

The government seeks to undermine Skilling's claims that Enron was financially healthy and only declared bankruptcy in 2001 because some investors bet its shares would fall, not because of fraud and phony accounting. Skilling and former Chairman Kenneth L. Lay each face at least 25 years in prison if convicted of conspiring to defraud Enron investors before the company collapsed in 2001.

"You desperately want validation for how you conducted yourself at Enron, don't you?" asked Berkowitz, head of the Justice Department's Enron Task Force.

"I desperately want the truth to get out about Enron," Skilling said.

"At the end of the day, Mr. Skilling, it's your word, your interpretation of things, your knowledge that's at issue, correct?" Berkowitz asked.

"It's a question of figuring out what makes sense," Skilling said as the trial entered its 12th week. "You can pitch it however you want. I'm trying to describe how it happened."

Berkowitz asked Skilling about selling some of his 936,000 shares in Enron after resigning Aug. 14, 2001.

Skilling denied knowing that the company was in trouble because of bad accounting.

On Aug. 15, Enron executive Sherron Watkins sent Lay an anonymous letter saying she feared that the company would "implode in a wave of accounting scandals."

The prosecutor asked Skilling about meeting with Lay on Aug. 22, 2001 - just hours before Lay met with Watkins. Skilling insisted his meeting was about business strategy, not her letter.

"You knew nothing about the problems that had been brought to Mr. Lay's attention?" Berkowitz asked.

"I don't know what Ken was thinking but he certainly didn't discuss this with me," Skilling said.

Berkowitz asked about Skilling's testimony that he did not remember trying to sell 200,000 shares of Enron stock on Sept. 6, 2001, until prosecutors played a taped conversation with his stockbroker. The sale did not go through because the broker sought confirmation that Skilling was no longer an Enron officer.

Skilling insisted he only sought to sell shares because of his concern about the stock market after the Sept. 11 terror attacks. He sold 500,000 shares on Sept. 17 for $15.6 million, one of 10 acts of insider trading alleged in the indictment.

Berkowitz also questioned Skilling about stock sales in 2000 by his then-girlfriend, Rebecca Carter, a former secretary to Enron's board of directors who sold $1.6 million in shares, and by his former wife, Susan Lowe, who sold $14 million in shares. In November 2000, Skilling himself sold $32.4 million in stock. He later married Carter.

"It's a coincidence that the Skilling family was selling shares at this time, you, your ex-wife and the woman you were having a relationship with?" Berkowitz asked.

"Yes," Skilling responded.

After a break in testimony, Skilling said his family did not sell shares based on his advice.

"I was talking to my brothers at the break and they said, `You didn't tell us to sell stock,' " Skilling said, provoking laughter in the courtroom.

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