Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Proclaiming innocence with his first few words on the witness stand, former Enron Corp. Chief Executive Officer Jeffrey Skilling began the important task of trying to convince jurors in his criminal trial that he should be acquitted of fraud and conspiracy charges he faces in connection with the collapse of the Houston energy company. After admitting he was a bit nervous, Skilling, who took the witness stand at mid-morning on April 10, told jurors that his “life is on the line” in the trial. “I am absolutely innocent,” Skilling testified in response to a question from his defense attorney, Daniel Petrocelli, a partner in O’Melveny & Myers in Century City, Calif. Skilling faces 28 charges and his co-defendant, former Enron Chairman Kenneth Lay, faces six charges in their criminal trial in U.S. District Judge Sim Lake’s courtroom in Houston. Skilling and Lay have pleaded not guilty to the charges. Skilling’s testimony, which should last several days, was long awaited in the trial that is in its 11th week. Prosecutors allege Skilling and Lay participated in a conspiracy to misrepresent the true financial condition of Enron, but the defendants have blamed Enron’s problems on criminal acts by former Enron Chief Financial Officer Andrew Fastow, who pleaded guilty to two criminal charges and agreed to a 10-year prison sentence. Under questioning from Petrocelli, Skilling testified he believed Enron was strong financially when he left the company in August 2001 after just a few months in the CEO job. Skilling testified Enron’s pipeline, wholesale and retail businesses were in good shape when he departed, but he conceded Enron Broadband Services was “a mess.” Skilling testified that Enron’s international assets were undervalued in his opinion, and although many were for sale, he did not believe it would be wise at that point to sell them. Skilling testified he left the company in August 2001 because he was physically tired, and his heart wasn’t totally in his job. He said the balance between his work and personal life was “totally out of whack” and he decided to leave the company because of that. “The reason I left was I was ready to go. My mind . . . my head wasn’t in it anymore,” he testified. But in hindsight, considering what happened at Enron over the next few months, Skilling testified he wouldn’t have resigned. “I will regret always that I left, when I left,” Skilling said under direct examination. Skilling said he ignored advice from his lawyers to plead the Fifth Amendment to avoid testifying in 2002 before a congressional committee investigating Enron, and to give testimony to other government agencies. “Someone had to get out and start explaining what happened,” Skilling testified. “I didn’t believe anybody had done anything wrong.” Petrocelli elicited detailed, colorful direct testimony from Skilling about the events from the summer of 2001, before he resigned from the CEO job, through the time in 2004 when he was indicted. Skilling testified he took some time off in the summer of 2001 to vacation with his son, and after returning from a trip in July, he told Lay he wanted to resign. “I was tired. I believe in some ways that I was no longer part of the solution. I was part of the problem,” Skilling testified. He said he believed he had become a lightening rod for controversy about the energy crisis in California, where the market had supply problems, and he believed short sellers — investors who bet on a decline in stock prices — were “all over the [Enron] stock.” “In some ways, I had lost credibility with the street,” Skilling testified in reference to Wall Street. Skilling said he formally resigned at the next meeting of the Enron board of directors in August 2001, and he left the company on Aug. 14, 2001. At the time, Skilling testified, he believed he had the confidence of the Enron board, but was surprised board members didn’t try harder to persuade him to stay with the company. “I associated that with the fact that they thought it was time for me to go, too,” Skilling testified. Skilling testified that the next few weeks, from his mid-August resignation until the Sept. 11, 2001, terrorist attacks on America, were among the best of his life, and he spent a lot of time with his family. But by October 2001, after The Wall Street Journal began reporting about the LJM partnerships — which were off-balance-sheet partnerships Fastow used to help Enron manipulate its earnings — Skilling testified he became concerned about Enron’s financial condition. By late October 2001, when the Securities and Exchange Commission announced an informal inquiry into Enron’s financial reporting, and the company’s stock price took a big dip, Skilling said he called Lay and offered to return to Enron. “I said I think it would show support to the marketplace because . . . I understand the business. By coming back, that would send a signal to the marketplace that I didn’t think anything was wrong,” Skilling testified. “I don’t know if I could make a difference, but it might make a difference.” But Skilling testified that Greg Whalley, then Enron’s president, called him to tell Skilling that Enron’s management decided against bringing him back to Enron. Skilling testified that he feared that the end of Enron was near after he learned from reading an article in The Wall Street Journal in late October that reported Enron had drawn down its lines of credit. “This was the first clear indication the company had a liquidity problem. I was under the impression that our backup lines, our backup credit lines, were in good shape and there was sufficient liquidity,” he testified. “It suggested to me the problem might be deeper than I thought.” Before Skilling took the witness stand on April 10, the jury heard the end of the testimony from James Derrick Jr., Enron’s former general counsel. Derrick began his testimony on April 6. Derrick, the in-house lawyer who hired Houston firm Vinson & Elkins in August 2001 to investigate then-Enron Vice President Sherron Watkins’s allegations of accounting improprieties at Enron, testified on April 10 that he has admitted no responsibility in connection with alleged improprieties at Enron that occurred from 1999 to 2002. Derrick testified on April 6 that he made the right call at the time by hiring V&E, Enron’s go-to outside firm, for the investigation into Watkins’ allegations. In the memo Watkins sent to Lay in August 2001, she suggested the company would “implode in a wave of accounting scandals.” Derrick testified on April 10 that he at one time owned Enron stock valued at $80 million, but still owns most of his holdings, which are now virtually worthless.

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.