Enron Corp. played “fast and loose” with the rules and accounting tricks were “standard operating procedure,” a former top executive testified Tuesday at the trial of former CEOs Ken Lay and Jeffrey Skilling.
The executive, David Delainey, who met nearly daily with Skilling during his tenure as chief executive officer, provided an insider’s view of the executive offices at Enron, and his testimony appeared to be the most damaging yet to the defendants at the trial that has lasted four and a half weeks.
Prosecutors asked Delainey whether he was surprised to receive an email in late 2000 discussing the illicit tapping of cash reserves to inflate profits.
“No, it was standard operating procedure at Enron,” he answered. “My history with Enron in Houston was that we tended to be pretty fast and loose with the rules, generally.”
Delainey was CEO of the retail unit Enron Energy Services and also was CEO of Enron North America, the wholesale energy trading business.
Lay and Skilling on are trial for conspiracy and fraud related to the spectacular downfall of Enron. Skilling also faces insider trading charges, and both could be sentenced to decades in prison if convicted.
Enron, once the nation’s seventh largest company and the darling of Wall Street, collapsed into bankruptcy in December 2001 in the then-largest bankruptcy in U.S. history after its hidden billions of dollars in debt and pumped-up profits were revealed.
Delainey, 40, a Canadian citizen who joined Enron in Calgary and later moved to Houston to lead the company’s retail unit Enron Energy Services, pleaded guilty in 2003 to insider trading. He faces up to 10 years in prison and is cooperating with prosecutors, who could recommend a shorter sentence.
Delainey also said Skilling lied to an analysts meeting in January 2001 in an attempt to portray Enron as a stable logistics company rather than as an energy trader facing huge market risks.
The trading risks were so great in the volatile power and gas markets of late 2000, Delainey said, that the company was routinely recording losses and gains in the hundreds of millions of dollars on a daily basis.
Delainey said he remembered one day in 2000 when traders lost between $500 million and $600 million in a single day - equivalent to the entire company’s profit in 1999.
But losses were more than offset by huge gains, he said, and that trading business posted massive earnings for the year.