The government’s last major witness in the Enron fraud and conspiracy trial backpedaled Thursday when grilled about his assertion that Chief Executive Officer Jeffrey Skilling approved the use of a fraudulent financial structure.
Daniel Petrocelli, attorney for Skilling even challenged ex-Enron Treasurer Ben Glisan Jr. on whether the structure was fraudulent. The defense claims no fraud occurred at Enron other than a few employees skimming money for themselves.
On Wednesday, Glisan testified that when he explained the structure known as a Raptor at a March 2000 meeting of the Enron board’s finance committee, former CEO Jeffrey Skilling “noted that this is not a deal that he would recommend except for the fact that it allowed him to circumvent the accounting rules.”
But Petrocelli noted Thursday that Glisan told a grand jury in March 2004 that Skilling said at that meeting that he wouldn’t enter into the Raptor structure “but for accounting rules” that required companies to take losses on assets that declined in value unless they were hedged by such structures, Petrocelli noted.
“He didn’t say violated, circumvented, or that anything was improper, did he?” Petrocelli asked.
“That’s true,” Glisan replied.
Glisan also told that grand jury that at the time of the presentation, he didn’t think, nor did he assert, that the accounting was “just flat wrong.”
“You didn’t think the accounting was wrong, did you?” Petrocelli asked Thursday.
“In the end, I did,” Glisan replied.
“At the time?” Petrocelli pressed.
“At the time, I worried that it was. I didn’t think it would withstand scrutiny of the (Securities and Exchange Commission).”
But Glisan acknowledged he didn’t voice that concern to Skilling or directors.
Glisan also said he could not recall any notes, e-mails or other tangible proof that would support his testimony tying Skilling to fraud and conspiracy at the failed energy giant. He relied only on his memory of conversations to support his claims that Skilling knew of shady goings-on.
“The conversations we talked about yesterday were quite memorable,” Glisan told Petrocelli of his Wednesday testimony that Skilling approved a plan for Glisan to create the Raptor financial structures.
Glisan was considered to be a key government witness — the last of eight ex-Enron executives who have admitted to crimes to testify for the prosecution — because of his knowledge of Enron’s inner financial workings and his access to company founder Kenneth Lay and Skilling.
Prosecutors expect to call a few witnesses next week — including an insider trading expert to address 10 counts against Skilling — and then rest.
U.S. District Judge Sim Lake had said he would allow a day off from court after that to let the defense teams gear up to present their case. The judge said Thursday he may let the defense begin April 3.
After court recessed for the weekend, Petrocelli said the defense would start with a few witnesses and then Skilling would testify.
“He’s got a long story to tell,” the attorney said.
Glisan, 40, the only ex-Enron executive to go straight to prison after pleading guilty to a crime, testified under a prosecutor’s questioning Wednesday that Enron’s management — including Lay and Skilling — repeatedly misled investors about the company’s health by propping it up with fraudulent deals or hiding bad news.
When Petrocelli first began cross-examining him Thursday, Glisan was resolute.
Peppering him with rapid-fire questions, Petrocelli asked Glisan if he had “lied all day” Wednesday when he matter-of-factly described such wrongdoing.
“Absolutely not,” Glisan said.
Lay lawyer Bruce Collins briefly cross-examined Glisan and was to continue Monday. He started off by challenging the former treasurer’s assertion Wednesday that Lay giggled “in delight” after then-Chief Accounting Officer Richard Causey explained that the Raptor structure carried “accounting risk,” but outside auditors had approved it.
“I’ve gotten to know Mr. Lay pretty well. He may chuckle, but he doesn’t giggle,” Collins said.
“I concede chuckle as opposed to giggle,” Glisan said.
Lay on Wednesday angrily told reporters Wednesday he had never heard “so many lies in one day in my whole life” regarding Glisan’s testimony. After court on Thursday, he told reporters, “A lot more truth today. We’ll have more on Monday.”
Glisan pleaded guilty to conspiracy in September 2003 for creating the first of the four Raptor structures.
He corroborated a lot of earlier testimony. But unlike other cooperators who are awaiting sentencing, Glisan is already serving a prison sentence.
Glisan met with prosecutors 10 days after Enron filed for bankruptcy protection in December 2001 in hopes of scoring a plea deal. He failed and was indicted on fraud, conspiracy and money laundering charges in April 2003. Most of those counts stemmed from Glisan pocketing $1 million from a $5,800 investment in a scheme run by his boss at Enron, former Chief Financial Officer Andrew Fastow.
“I was minimizing my participation in all these activities. I was desperately trying to avoid prosecution,” Glisan said of his initial encounters with prosecutors.
Glisan pleaded guilty to a conspiracy count and, because prosecutors deemed him uncooperative, began serving his sentence. He was put in solitary confinement for the first 10 days, and then in a low security facility with two cellmates.
He was subpoenaed to appear before a grand jury for the first time since his incarceration on Feb. 19, 2004 — the same day Skilling made his first appearance in court upon being indicted on more than 30 criminal counts — and a shackled Glisan encountered a handcuffed Skilling in an elevator at the Houston federal courthouse.
“Did you think, for one second, that was a coincidence?” Petrocelli asked of his client seeing Glisan in prison garb.
“I didn’t believe that, no,” Glisan replied. “In substance, I remember saying, ’God bless and good luck,’ and he said something similar to me.”
Outside of court later Thursday Skilling, flanked by Petrocelli, said he felt bad for Glisan during that elevator encounter.
“I feel sorry for him. I think Ben has been through a tough couple of years,” Skilling said.
Glisan went on to testify in a 2004 Enron-related trial. After that, he wanted prosecutors’ help in being transferred to a minimum security prison camp because he felt threatened by fellow low security inmates prone to dislike so-called “snitches.”
He got the transfer — but he didn’t get a recommendation from prosecutors for a reduced sentence.
He won’t serve his full five-year term. He is expected to be released from custody in January next year, having shaved about 18 months for good behavior and completion of an alcohol abuse treatment program. He expects to spend the last four months confined at home, so he’ll return to his family in September this year. Under Federal Bureau of Prisons policy, such reductions are available to all minimum-security inmates who qualify.
Glisan had described his pre-prison drinking problem as consuming two glasses of wine upon returning home and sometimes a bottle when out with colleagues.
“You said one or two drinks. If you have a drinking problem, then I’m in serious trouble,” Petrocelli joked.
“You’ll get a year off,” Glisan replied with a laugh.