- The Washington Times - Wednesday, April 12, 2006

HOUSTON (AP) — Former Enron Corp. Chief Executive Jeffrey Skilling spoke up yesterday for company founder Kenneth L. Lay in his third day on the witness stand in the pair’s fraud and conspiracy trial, saying they were a “good team” that committed no crimes.

Even though most counts pending against him and Mr. Lay charge crimes that occurred at different times before Enron crashed in scandal in December 2001, an overarching conspiracy count charges they participated in a sprawling effort to portray Enron as strong when they knew accounting tricks hid bad news and weak ventures.

Mr. Skilling appeared confident, alternating between earnestness and occasional annoyance, and told jurors that neither he nor Mr. Lay perpetuated such a ruse.

“Did you and Ken Lay ever discuss doing something you knew to be forbidden by law?” Mr. Skilling’s attorney, Daniel Petrocelli, asked yesterday.

“No,” Mr. Skilling said. Later, he added, “It is completely untrue,” and “I was aware of no illegal activity occurring at Enron Corporation.”

The ex-CEO countered dramatic prosecution testimony given in February from David Delainey, once a Skilling favorite. Delainey ran Enron’s trading arm, Enron North America, until Mr. Skilling asked him to take over the company’s retail energy unit, Enron Energy Services, in February 2001. Delainey pleaded guilty to insider trading in October 2003.

Delainey told jurors he reluctantly acquiesced in a Skilling-approved plan to move the retail unit’s trading arm into the profitable Enron North America to hide $200 million in losses.

Delainey said he told Mr. Skilling in March 2001 that the move lacked integrity because losses could just be written off. Delainey told jurors that Mr. Skilling asked him, “What do you want to do?” which he took as code to go along with the move.

Mr. Skilling testified yesterday that the move was intended to quell disputes between traders in the two divisions and gain efficiency — not to hide losses.

“So I asked Mr. Delainey, ‘Are you sure you want to do this?’ and he said ‘yes,’” Mr. Skilling said.

“Was this done to hide losses?” Mr. Petrocelli asked.

“Not in my mind,” Mr. Skilling replied.

Delainey also testified that when he ran Enron North America, he felt pressure from Mr. Skilling and others to improperly raid its reserves to fill earnings gaps when other divisions failed to meet targets. He said he told Mr. Skilling in late 2000 that Enron was raking in such high trading profits that “we had a couple of quarters in our pockets” from $800 million in reserves. Delainey said Mr. Skilling was so pleased, the CEO gave him a hug.

Mr. Skilling acknowledged yesterday, “I certainly hugged him, I may have kissed him,” but only because he thought Delainey had reinstated reserves to protect Enron from losing money in a volatile market — not to wrongly pad earnings.

“You kissed Mr. Delainey because you believed he did something good, not something illegal?” Mr. Petrocelli asked.

“Yes,” Mr. Skilling replied, noting later, “There were no cookie-jar reserves at Enron Corporation.”

Mr. Petrocelli showed jurors a document that showed Delainey’s unit had set aside $363 million in reserves — not $800 million, as Delainey said.

“This shows he’s half a billion dollars off?” Mr. Petrocelli asked.

“Yeah, a little off,” Mr. Skilling said with a hard voice and a sigh.

Mr. Skilling has mostly focused on addressing prosecution testimony damaging to himself, often saying it was outright wrong without documents to back him up.

Prosecutors also lacked obvious “gotcha” documents pointing directly to the defendants’ guilt, so Mr. Skilling’s recollections that differed from those of government witnesses injected a “he said, she said” quality to the proceedings that the jury will have to sort out.

The government contends both repeatedly lied to investors and employees by claiming Enron was healthy when they knew their outward optimism hid weak ventures and accounting tricks.

Mr. Skilling and Mr. Lay contend no fraud occurred at Enron other than former Chief Financial Officer Andrew Fastow and a few others skimming money from secret schemes, and negative publicity and diminished market confidence drove the company to seek bankruptcy protection in December 2001.

Yesterday, Mr. Skilling also told jurors he believed four fragile financial structures backed by Enron stock, dubbed Raptors, were proper vehicles to help Enron lock in gains from investments and assets. He countered prosecution testimony from former Enron Treasurer Ben Glisan Jr. and from Fastow that the company used the structures to hide losses.

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