- The Washington Times - Wednesday, February 27, 2002

Former Enron Chief Executive Jeffrey Skilling yesterday accused Enron's critics of spreading "untruths" that "shatter lives" and gave a detailed defense of his efforts to shore up the energy giant's finances in the months before its demise.
In a feisty appearance before the Senate Commerce Committee, the protege of Enron founder Kenneth L. Lay said he spent much of the six months he ran the company last year grappling with "strategic" and "policy" matters: the California power crisis, staging an exit from the company's failing broadband business, trying to sell off international assets to raise cash, and striving to prevent the unraveling of Enron's federally subsidized Dabhol power project in India.
These crises not only distracted him from overseeing the details of the complex off-book partnerships that created huge losses for the company and led to its collapse, Mr. Skilling said, but were also the reasons behind the precipitous drop in Enron's stock price from more than $80 at the beginning of the year to about $40 when Mr. Skilling resigned Aug. 14.
"On all these things, I got personally involved," he said. "I was out of town 50 percent of the time." Mr. Skilling acknowledged that he resigned partly because he was "tired, flat-out tired" due to his strenuous schedule and "frustrated" with attempts to stop the stock's fall.
Mr. Skilling laid the blame for the questionable off-book deals squarely on the company's auditor, Arthur Andersen, which was paid $25 million a year to ensure the company's financial statements were legal. He also suggested that a cabal of company finance officers working under him was responsible.
"If the accountants at any time had said anything was wrong with these transactions, we would have done [it differently]," he said, referring to the Raptor hedge transactions. The unraveling of those deals forced the company to deduct $1 billion from its equity in October, a crucial event that precipitated Enron's collapse.
Even as he spoke, Enron whistleblower Sherron Watkins, at his side, repeated her charges that the chief executive must have known that the Raptor deals, set up by former Chief Financial Officer Andrew Fastow, were iffy.
"Andy Fastow would not have put his hand in the Enron candy jar without the explicit or implicit approval of Mr. Skilling," she said. Mr. Fastow reaped $30 million from the deals, an amount that Mr. Skilling said "surprised" him.
Mr. Skilling was aware that no outside party would have been willing to do the hedge transactions, Mrs. Watkins said, noting the company had been exploring ways to hedge its high-tech investments for several years before the "miraculous" Raptor deals came along.
Mr. Skilling also appeared to be involved because he put "the fox in charge of the henhouse," Mrs. Watkins said, by replacing former Enron treasurer Jeffrey McMahon with Ben Glisan after Mr. McMahon complained about Mr. Fastow's conflicts in the deals.
Mr. Glisan helped create the Raptor deals and reaped millions from them. Mr. Skilling said he was not aware of Mr. Glisan's involvement in the deals. Mr. Glisan is reportedly negotiating a deal with the Justice Department to testify under immunity from prosecution.
Mrs. Watkins, who is writing a book about the Enron story titled "Power Failure," also laid more blame on Mr. Lay than she did in previous testimony, saying she was "incredibly frustrated" that he failed to act quickly on her warning in August that the company might "implode in an accounting scandal."
"I believe that Enron had a brief window to salvage itself this past fall, and we missed that opportunity because of Mr. Lay's failure to recognize or accept that the company had manipulated its financial statements," she said.
Mr. Skilling, the only senior Enron executive who has been willing to testify before Congress, outclassed many of his interrogators in this second appearance with a commanding grasp of the facts.
Muffling his renowned temper in the face of intense criticism and skepticism, he met fire with fire, saying the legislators' accusations ranged from "outrageous" to "silly."
"I have not lied to Congress. I never duped Ken Lay," he said. "The entire management and board of Enron has been labeled everything from hucksters to criminals with complete disregard for facts and evidence. These untruths shatter lives. … Neither common sense nor decency can prevail in this politicized process."
Mr. Skilling lectured senators on what went wrong with Enron and what should be done about it, while he offered sympathy for investors and Enron employees, whose stock is now worthless.
Mr. Skilling acknowledged amassing a fortune of $66 million through stock sales in his 10 years at Enron, but he said that $170 million worth of stock he held when he left the company also is worthless.
Asked whether he would contribute any of his fortune to bereft Enron workers, he said he is facing 36 employee and investors lawsuits that he expects to spend five to 10 years fighting, and he doesn't know whether much of that fortune will be left after they are resolved.
"I am not a victim here, but I am not one of the perpetrators either," he said. Mr. Skilling agreed with Mrs. Watkins that the kind of "cozy" relationship that developed between Enron and Andersen is at fault and that perhaps companies should be required to rotate auditors every few years.
At one point, Mr. Skilling raised eyebrows by advising senators to take legislative action to prevent other companies from experiencing the "classic run on the bank" that ruined Enron. He said the company ran out of cash last fall because fears about its financial health prompted banks and other creditors to call in some $15 billion of trading contracts they held with Enron.
"If the company had some time and access to liquidity, we'd have been fine," he said, suggesting that he would change the laws governing those contracts "if I ruled the world."
Legislators scoffed at his recommendations.
"If we did that, we'd have banks sticking with a company that was essentially a shell game," said Sen. Barbara Boxer. The California Democrat also questioned why Mr. Skilling did not see that the Raptor transactions were deceptive because they essentially enabled the company to use its own stock to hide losses and generate gains on its income statement.
But Mr. Skilling shot back that there is no "absolute prohibition" against using stock to manipulate income, noting that company executives often are compensated with stock options to avoid deducting salary expenses from company income. He said Mrs. Boxer was among the members of Congress who helped carve out that exemption for stock options in the 1990s.
Mr. Skilling testified that California's demand for caps on wholesale power prices last year was partly responsible for the fall of Enron's stock, an issue often trumpeted by Mrs. Boxer.
The California senator on Friday released documents showing that Enron strenuously fought price caps during the waning days of the Clinton administration, but she did not quiz Mr. Skilling about that yesterday.

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