A key prosecution witness testifying against his once-powerful bosses at Enron Corp. broke down in tears Monday after a defense lawyer accused him of lying to try to protect himself and questioned him about his children.
Mark Koenig, who spent nearly three days testifying for prosecutors against former Enron CEOs Ken Lay and Jeffrey Skilling, was responding to a series of questions from Skilling attorney Daniel Petrocelli about his guilty plea when he became emotional.
“It wasn’t easy entering this (plea deal). This wasn’t a good deal for me. Its not fun to say you’re guilty,” a clearly emotional Koenig, the former head of investor relations at Enron, told jurors.
Skilling and Lay are charged with fraud and conspiracy linked to the December 2001 Enron bankruptcy. Prosecutors say the pair told investors and the public that the energy giant was in excellent financial shape even as it sank in a sea of debt.
Petrocelli -- who repeatedly suggested during his daylong cross-examination that Koenig was lying in his testimony and trying to “protect” himself by pleading guilty and testifying for the government -- then asked the witness how old his children were when he pleaded guilty in August of 2004.
Koenig began to respond but instead broke down into sobs, wiping away tears and prompting the judge to call for a recess in the proceedings. Koenig had regained his composure when the trial resumed some 15 minutes later.
Petrocelli did not ask Koenig again about his children but the former executive soon returned to the subject himself, saying: “If I can answer your earlier question, two of my children are in college and one is in high school. Entering this guilty plea, its not hard to tell them that. I’m over the big fear.”
Koenig began the day under direct examination by prosecutors, saying that he had expressed concerns to several Enron executives, including Skilling and Lay, about the lack of disclosure of the company’s finances.
‘Still protecting yourself’
He said the company mischaracterized $1.3 billion in losses in 2001 as “non-recurring,” or one-time events, when the losses actually came from its ongoing business, adding: “It was misleading.”.
During his testimony for prosecutors, Koenig admitted lying to the U.S. Securities and Exchange Commission and a federal grand jury probing Enron’s collapse, saying that he did so “in a mode of protecting myself.”
Petrocelli began his cross-examination by seizing on those past lies asking Koenig: “You’re still in the mode of protecting yourself, aren’t you?”
Koenig responded: “I don’t know what you mean by protecting myself, but I don’t feel in last three days that I’ve protected myself.”
And when Petrocelli said Koenig, who faces ten years in prison and 14 civil lawsuits, was putting his life “on the line” with the testimony, Koenig answered: “My life is not on the line testifying at this trial, my life has been on the line since August of 2004.”
Koenig pleaded guilty to aiding and abetting securities fraud in August of 2004. He has not been sentenced and prosecutors can ask a judge to give him leniency if he cooperates fully.
Petrocelli also appeared to mock the conspiracy charges against Skilling and Lay, asking Koenig several times if he were part of a “huge” criminal conspiracy at Enron.
“I believe that when I carried out the fraud I carried out, and aided and abetted, I sure wasn’t alone in that,” Koenig said at one point.
Lay and Skilling together face more than three dozen counts of conspiracy and fraud linked to the company that was once a darling of Wall Street, but imploded into bankruptcy in December 2001 after its hidden debts and inflated profits were discovered.
The two men have pleaded not guilty to all counts and said the company did not engage in any widespread illegal activity, except for some crimes committed by former Chief Financial Officer Andrew Fastow and his team.
Fastow and 15 other former Enron executives have pleaded guilty to Enron-related crimes, and many are expected to testify against Skilling and Lay in the coming weeks.