updated 2/14/2006 7:38:23 PM ET 2006-02-15T00:38:23

A former top trader who once enjoyed a place in Enron Corp.'s inner circle testified Tuesday that former chief executive Jeffrey Skilling set earnings targets to please Wall Street and then expected division heads to meet them.

Kenneth Rice, the prosecution’s second witness in the trial, ran Enron’s highly touted broadband unit before it crashed into bankruptcy proceedings with the parent in December 2001.

He began testifying Tuesday in the fraud and conspiracy trial of Skilling and company founder Kenneth Lay.

He said the broadband unit never lived up to its hype and had paltry cash flow and millions in losses after he, Skilling and others unveiled it with much fanfare at a January 2000 analyst conference.

But when he told Skilling in late 2000 that 2001 losses would reach $110 million — almost double the $60 million in losses for 2000 — Skilling told him to limit them to $65 million.

Rice said he felt he had no choice but to agree, even though the business was flailing.

“Mr. Skilling would simply say, in fact he did say, 'This is the number, this is what the number is going to be,”’ Rice said.

Rice also said a partnership called LJM, set up by former Enron Chief Financial Officer Andrew Fastow, “looked goofy to me.” The partnership, separate from Enron, existed almost exclusively to conduct transactions to help the energy company meet its earnings targets.

Rice appeared comfortable, though he focused on jurors or prosecutor Sean Berkowitz rather than the defendants. Skilling watched him intently, while Lay took notes.

Rice described Skilling as a hands-on boss, who saw broadband as an important venture that could help increase Enron’s stock price.

Rice said the broadband unit struggled in 2000 and 2001 to contain losses at the level Skilling told Wall Street to expect and show progress in gaining market share.

Though Rice called the setup “goofy,” his unit turned to LJM to meet earnings targets. LJM bought $90 million in inoperative fiber in the second quarter of 2000.

Prosecutors contend Lay and Skilling lied about Enron’s financial health when they knew complicated finance structures hid debt and inflated profits. The defense teams say negative publicity and loss of market confidence — not fraud — fueled the company’s collapse.

In the 2005 fraud and conspiracy trial of five former broadband executives, Rice testified that he, Skilling and most of the defendants in that case lied when they told analysts in January 2000 that the network was up and running when it wasn’t, to generate Wall Street buzz and inflate the company’s stock price.

Within two days of the conference, Enron’s stock price leaped from $54 a share to $72.

But a videotape of Skilling’s presentation played during the broadband trial showed he alternated between saying what the network could do at the time and what it would do in the future.

The broadband trial ended with acquittals on some counts, and jurors hung on others. Those defendants are to be retried in three separate cases this year.

Rice said he decided in July 2001 to leave Enron when the broadband unit was to be folded into the larger trading division. Skilling asked him to stay, and they both would leave in “a couple of years,” Rice said.

About two weeks later, Skilling told Rice that he was going to resign in mid-August.

He said Skilling also told him about plans to get a boat and travel the world.

“All I remember is, it was more like a ship,” Rice said. “It was a big boat you could put cars on and maybe a helicopter.”

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