Jeffrey Skilling, the former Enron chief executive whose reputation for nurturing innovations that woke up the once-sleepy energy industry shattered along with the company, must wait until next week to provide much-awaited testimony in his fraud and conspiracy trial.
He spent Thursday awaiting his chance to testify, but attorneys on both sides spent the day questioning Enron’s former top in-house lawyer, pushing the ex-CEO’s lengthy testimony to Monday.
“I’ve waited five years, I think I can wait another weekend,” Skilling said.
Skilling, 52, is expected to repeat statements he made years ago to congressional panels and the Securities and Exchange Commission during the storm of scrutiny touched off by Enron’s swift 2001 collapse: He committed no crimes and he believed the company was strong when he abruptly resigned a few months earlier.
“It is my belief that Enron’s failure was due to a classic run on the bank, a liquidity crisis spurred by a lack of confidence in the company,” Skilling defiantly told one of the congressional panels during the highly charged hearings in February 2002.
“At the time I left the company, I fervently believed that Enron would continue to be successful in the future,” he said.
Prosecutors allege Skilling and his co-defendant, Enron founder Kenneth Lay, knew the company had serious financial problems when they repeatedly told investors it was healthy and growing. The government contends their optimism was intended to mask weak business ventures and earnings derived from accounting tricks that could no longer sustain Enron as it careened into bankruptcy proceedings in December 2001.
The two men counter that no fraud occurred at Enron other than that committed by a few executives who skimmed millions from secret side deals, they did nothing wrong, and a storm of bad publicity and lost market confidence sank the company.
Charges against Skilling span several years, while those against Lay focus on his actions after Skilling resigned in mid-August 2001. Lay, who had been CEO for 15 years prior to ceding that seat to Skilling, resumed that role until he was pushed out more than a month after the bankruptcy filing.
Lay aims to testify as well, but likely won’t take the stand until mid-April.
Lay’s lead lawyer, Michael Ramsey, has been out of court all week undergoing tests for a clogged carotid artery. He had expected to have surgery, but Lay spokeswoman Kelly Kimberly said Thursday he would have another stent placed in the artery Friday to address the blockage.
Lay and his legal team say they won’t ask to delay the trial, and they hope Ramsey will return before it concludes. Ramsey sought treatment this week after a stent placed in his heart March 24 failed to improve his health.
Thursday’s testimony from Jim Derrick, Enron’s former general counsel, was a lead-in to the executives’ testimony.
Through Derrick, the defense team sought to counter prosecution testimony that Skilling failed to approve deals Enron conducted with partnerships run by former Chief Financial Officer Andrew Fastow as required. Derrick testified that Enron’s board approved procedures that required former Chief Accounting Officer Richard Causey and former Chief Risk Officer Rick Buy to review and sign off on such deals, but not Skilling.
“The test was, from the board, whether Mr. Causey and Mr. Buy had in fact reviewed and approved the transactions,” Derrick told Skilling lawyer Mark Holscher.
Fastow testified for the prosecution that all three were supposed to review those deals, some of which he said were done to help Enron manufacture earnings and hide bad investments.
Skilling also is accused of signing fraudulent annual and quarterly regulatory filings that he knew inaccurately reflected Enron’s finances. Derrick told jurors that such filings undergo extensive reviews by lawyers, accountants and other executives before they reach a CEO’s desk. Under cross-examination by prosecutor John Hueston, Derrick acknowledged that he reviewed only sections about litigation in the filings and glossed over business discussions.
Derrick also addressed a cursory investigation his former law firm, Vinson & Elkins LLC, conducted in response to accounting complaints raised by former Enron finance executive Sherron Watkins days after Skilling resigned.
Watkins gained fame for trying to warn Lay of fallout from the crumbling financial structures backed by Enron stock that would lead to hundreds of millions of dollars in losses. She urged Lay to investigate, but rely on professionals other than Vinson & Elkins, Enron’s outside counsel, and Arthur Andersen LLP, Enron’s outside accountants, because both had reviewed and approved all or part of the structures that caused her concern.
Derrick and Lay, with two Vinson & Elkins partners who conducted the probe, chose not to seek professionals without Enron ties to investigate because they wanted a fast conclusion of whether Watkins’ concerns had merit.
The probe concluded no further investigation was necessary, and Enron’s only risk was a possible public relations frenzy if media or investors questioned the financial structures.
Derrick told Lay lawyer George Secrest that because Watkins’ allegations didn’t question the legality of the structures, he doesn’t think criticism they failed to assign the probe to independent firms is valid.
Derrick also said he took Watkins’ complaints “extremely seriously,” but when pressed on cross-examination as to why he didn’t want a more comprehensive probe, he said his role ended with selecting Vinson & Elkins and then helping them interview whom they chose.
“This wasn’t our investigation,” he said.
Skilling faces 28 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces six counts of fraud and conspiracy.