Instead of fleeing a collapsing corporation in mid-2001, Jeffrey Skilling
said on April 10 that he left Enron when he did in part because he believed the company
was "in better shape than it had ever been in" and in fact had offered to
return as Enron's financial woes mounted.
The former CEO admitted that he believed he had caused some perception
problems for Enron in the two years before it filed for bankruptcy protection in
December 2001, by using an expletive to describe an analyst critical of the
company during a 2001 conference call and his cavalier reaction to the "the
public uproar" about profits Enron earned during the 2000-2001 California
energy crisis.
"In many ways, I had become a lightning rod for controversies," Skilling
said told a Houston jury in his first day of testifying in his trial on fraud
and conspiracy charges. "In some ways, I had lost credibility with" Wall
Street.
While Skilling conceded he "may have been looking at the business through
dark-colored glasses," he insisted that he had no inkling of the impending
implosion of the corporation that occurred less than four months after his
departure.
Skilling's testimony countered that of some prosecution witnesses who
believed he knew that elaborate accounting schemes were about to be exposed,
revealing previously hidden, massive losses.
Enron founder Ken Lay and Skilling are in their 11th week of their fraud
and conspiracy trial. They are accused by the government of deceiving analysts
and employees about Enron's condition in an effort to prop up its stock price.
Daniel Petrocelli, Skilling's lawyer, peppered his client with rapid
questions about whether the former CEO had done anything at all to "destroy
evidence, discuss fraudulent acts or try to flee to break the law."
"Nothing," Skilling replied.
Andrew Fastow, Enron's former chief financial officer, testified earlier
that he created the special purpose financing entities to help Skilling mask
mounting losses and said Skilling guaranteed him that the controversial
partnerships would make hefty profits in return for sham purchases of losing
assets.
But Skilling on April 10 denied Fastow's allegations, telling jurors that
Fastow called him after Skilling resigned to tell him how much he respected
him and wished him well.
Skilling said he was "hurt" that other executives and no board directors
personally called to thank him for his service and the work he had done in
moving Enron into the nation's seventh largest corporation.
The CEO said he had told Lay on the "fateful Friday the 13th" of July
2001 of his decision to quit. While Skilling said he worried about how the
market perceptions of him may have impacted the company, he said the primary
reason for leaving was to spend more time with his children.
He told of being convinced that it was a good time to depart because he
was sure Enron was more solid than ever. International markets had declined,
but he said the overseas assets were valuable. In fact, Skilling testified
that many had been upgraded and were generating good revenues and it would
have been "silly" to sell them.
Enron had conducted a risk assessment in the spring of 2001 that
concluded it had the liquidity to weather any serious problem, Skilling said,
adding that one of the scenarios examined what would have happened were all of
the world's nuclear power generators shut down because of a problem.
"We made a mistake," he said of the computer modeling."We assumed it was
going to be an industry-wide phenomenon." In that case, Skilling said, Enron
was far stronger than its competitors in the energy industry. Instead, the
problem that would surface was "very specifically targeted at Enron [and] we
didn't anticipate that."
Skilling said he expected to spend his retirement by working as a
lecturer at several US business schools and planned to help a Houston charity
acquire and renovate a house for a center for at-risk children.
Skilling, however, said he said he felt helpless later in 2001 as he
learning of the increasing attacks on Enron's accounting, especially Fastow's
off-the-books entities headed by the LJM partnership.
"I was devastated, this company had been my life," Skilling said. "It was
devastating to be so powerless...you know, to not do anything." But he added
that he realized he was no longer with the company and was unsure what was
happening behind the scenes.
Skilling said he finally called Lay in October 2001 and told him Enron
had to mount a counter-offensive against the attacks in the media and stock
market. Skilling said both executives were convinced by that time that there
were many negative stories "already in the can" waiting to be published.
He told the jury that he was surprised to hear that many Enron executives
merely thought the challenges to the company's accounting would just "blow
over," saying "once that starts, it is like wildfire. If you don't put it out,
it consumes you?"
In late October, Skilling said he called Lay and said, "You've got to
bring me back."
He said he proposed to return to the company to "send a strong signal to
the marketplace that nothing was wrong." Only "an idiot," he said, would come
back to a corporation that was collapsing.
Skilling said he braced to go to New York and rely on his industry and
financing connections to come up with as much as $3 billion in new capital to
prove to the market that Enron would have the cash to survive the threat.
Instead, he said Lay told him he would confer with other executives and
the board. His offer was rejected. The explanation was that his return could
cause even more turmoil in investment and creditor circles, Skilling said.
Skilling is expected to remain on the witness stand for most of this week.
April 10, 2006
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