updated 2/9/2006 7:00:09 PM ET 2006-02-10T00:00:09

Enron Corp.’s former investor-relations chief on Thursday acknowledged that founder Kenneth Lay had to jump back into nuts-and-bolts management of his company when he resumed the role of chief executive after Jeffrey Skilling resigned less than four months before Enron collapsed in December 2001.

“He had to get more involved, yes,” Mark Koenig said in response to cross examination by lead Lay lawyer Michael Ramsey in his sixth day on the witness stand. Koenig is the government’s first witness in the fraud and conspiracy trial of his former bosses.

“He was involved before, but he took on a whole new duty,” Koenig said. Lay remained chairman of Enron throughout 2001, but he ceded the CEO position to Skilling in February that year. Skilling abruptly resigned six months later.

Lay’s new duties included a hastily arranged conference call with Wall Street analysts on the day Enron announced Skilling’s resignation in mid-August 2001, Koenig said. He said Enron was obligated to make executives available on the call to try to calm any market jitters sparked by the unexpected resignation.

Ramsey’s questioning appeared to try to highlight what Lay claimed publicly when he was indicted in July 2004: Lay knew of no skullduggery, and was like a student cramming for an exam when his hand-picked successor as CEO quit.

“We think the company’s on solid footing,” Lay told analysts on the August 2001 conference call played in court for the jury. On the same call, Skilling tried to reassure analysts that his departure was “purely a personal decision” and he stressed that it had nothing to do with Enron.

Ramsey said he expected to finish questioning Koenig on Monday, when the trial will resume.

At times, U.S. District Judge Sim Lake shut down Ramsey’s efforts to delve into issues that weren’t covered first when prosecutors questioned Koenig. Court rules limit cross examination to areas touched on in direct examination.

In one instance, Ramsey sought to question Koenig about a comment about Lay by California Attorney General Bill Lockyer to the Wall Street Journal in early 2001, the second year the state suffered through a power crunch that led to rolling blackouts and astronomical utility bills. Neither Lay nor Skilling are charged with manipulating California’s power market, but three former Enron traders have pleaded guilty to doing so.

“Do you know of personal threats made against Mr. Lay by the attorney general of California?” Ramsey asked, his voice raised.

When a prosecutor objected, Lake cut Ramsey off. “I don’t know of any threats against Mr. Lay that came up on direct,” the judge said.

Lockyer told the Journal in May 2000, “I would love to personally escort Lay to an 8 by 10 cell that he could share with a tattooed dude who says, ’Hi my name is Spike, honey.”’

Skilling lawyer Daniel Petrocelli, before he wrapped up three days of cross examination, sought to show how Skilling discussed bad news with analysts in conference calls earlier in 2001. Those discussions included the meltdown of the telecom industry in 2001 as Enron pushed its venture into broadband and bandwidth trading. The downturn siphoned potential bandwidth trading partners, he said.

The broadband unit never earned a profit and filed for bankruptcy protection alongside its parent in December 2001. Prosecutors contend Lay and Skilling hid bad news as they painted a falsely rosy picture of Enron.

“You understand in conference calls, you have to be careful and cautious in how the questions are answered?” Petrocelli asked.

“You want to be accurate, yes,” Koenig replied.

Koenig is among 16 ex-Enron executives who have cut plea deals with prosecutors. He pleaded guilty in August 2004 to aiding and abetting securities fraud for lying to investors about Enron’s finances. As head of investor relations, he was the company’s chief liaison to Wall Street.

He told jurors Thursday he isn’t proud of his actions.

“I was frankly afraid these things would come back to me for years,” Koenig said.

The defense teams have suggested to jurors that Koenig and other ex-Enron executives pleaded guilty to crimes they didn’t commit out of fear of lengthy prison terms or pressure from prosecutors.

Enron, once the nation’s seventh-largest company, collapsed amid revelations of billions of dollars hidden debt and inflated profits.

Both face decades in prison if convicted. Both sold millions of dollars in stock before Enron went bankrupt, but only Skilling faces allegations of improper stock sales.

Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors for allegedly conspiring to fool investors into believing Enron was healthy. Lay faces seven counts of fraud and conspiracy for perpetuating the alleged ruse after Skilling quit.

Both say no fraud occurred at Enron other than a few executives skimming money, and they are innocent of any wrongdoing.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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