Former Enron Corp. Chief Executive Jeffrey Skilling struggled to hold his temper Thursday at being pegged a liar and a crook by federal prosecutors, telling jurors in his criminal trial that he was devastated the company he cherished became a symbol for scandal.
“I think they have purposely not looked at facts they should have looked at if they wanted to come to a more balanced and accurate conclusion,” Skilling declared with a hardened gaze and a stiff jaw.
His comments came as defense lawyer Daniel Petrocelli led him through the government’s indictment, which accuses him of minimizing bad news in 2001 so that investors and Wall Street would remain bullish on failing Enron ventures in broadband and retail energy.
Skilling wrapped up a week of testimony that he used to swipe at the prosecution’s case that he and Enron founder Kenneth Lay masterminded a fraud that led to one of the biggest business scandals in U.S. history.
Michael Wynne, a former federal prosecutor in Houston who has watched most of the testimony, said Skilling’s animated efforts to teach jurors how Enron’s businesses worked “conjured up images of ’It’s a Wonderful Life,’ but Ken Lay and Jeffrey Skilling aren’t Jimmy Stewart.”
“It was a good performance,” Wynne continued. “He got to the position he was in for a reason. He tried to charm the 12 people he needed to charm, but I never saw much of a reaction. He’s still a cheerleader, and he thinks he can talk his way out of anything. Maybe he can.”
After a week of calm, measured denials, Skilling on Thursday angrily attacked the government’s case. Jurors were taking notes even in his most heated moments.
Skilling almost took over the questioning, interrupting when Petrocelli said, “Let’s go on to the next sentence” in the indictment, with a tense, “Yes, let’s go on to the next sentence.”
Finally, he tried to rein in his visible anger.
“I’m sorry, I have to calm down here,” Skilling said in a tight voice.
Rather than return to routine questioning, Petrocelli let the plainspoken ex-CEO known for speaking his mind roll with it.
“These are serious accusations?” Petrocelli asked.
“These are serious accusations,” Skilling repeated tightly. “This is a total misrepresentation, in my view, of the state of events that was occurring at the time, and I believe it would be very easy for someone to confirm that if they had any interest in confirming that.”
He and co-defendant Lay have complained that witnesses who could corroborate their claim that no fraud occurred at Enron haven’t stepped forward for fear of being targeted by prosecutors. Skilling has also said the ex-Enron executives who have pleaded guilty to crimes cut deals with prosecutors — even though he says they did nothing wrong — out of fear of expensive trials and lengthy prison terms.
Skilling later gave jurors a glimpse of his wealth, all frozen during the trial. He said he has $47 million in municipal bonds, a $5 million Houston mansion, a townhouse in Dallas worth $550,000 and about $600,000 in other investments.
Skilling said the $23 million he set aside for legal defense has been spent.
“Is it important for you to clear your name?” Petrocelli asked.
“Yes it is,” Skilling said.
Skilling said he was crushed, not only because Enron spiraled into bankruptcy proceedings in December 2001, but also because there had been “a lot of damage to individuals subsequent to that, which was not a result of facts, or what really happened, but a result of rewriting of history to accomplish certain objectives people have that are not consistent with what happened in the company.”
Prosecutors allege Skilling and Lay repeatedly lied to investors and employees about Enron’s health, using false optimism to hide weak business ventures and accounting tricks to create an image of success. They attribute the failure of what was once the country’s seventh-largest company to bad publicity and lost market confidence.
Much of Skilling’s testimony since he took the witness stand on Monday has featured fond memories of leading the transformation of a staid pipeline company to an energy giant that pioneered new trading markets.
“I bled Enron blue,” he told jurors Thursday, invoking a company slogan for loyalty. “I believed in this company. I believed this was a fine company (in 2001) ... a vibrant company in fact having some of the best financial performance in the history of the company.”
Prosecutors have presented a string of witnesses — including eight ex-Enron executives who have pleaded guilty to crimes — who gave a starkly different view than the defendant’s. They bolstered government contentions that Skilling knew Enron turned to fraud to appear successful — or at least he knew some divisions were struggling when he said publicly they were strong.
Skilling told jurors Thursday he was devastated by Enron’s demise.
“Are you just devastated because you believe you’ve been falsely accused?” Petrocelli asked.
No, Skilling said, he was devastated because what he believed was a fine corporation “was brought to its knees,” and that “horrific failure” was “made worse by this sort of ... these sorts of ... inaccuracies,” he said evenly.
Petrocelli then twice asked Skilling if he needed a break, to which he twice replied, “No, I’m OK.”
Skilling’s mood lightened in the afternoon as he responded to one of the most dramatic moments of the trial that began Jan. 30.
Last month Kevin Hannon, a former executive, told jurors that Skilling said, “They’re on to us,” at a 2001 meeting, when a small analyst firm questioned Enron’s reliance on partnerships run by then-Chief Financial Officer Andrew Fastow to buy assets so the energy trading company could book earnings.
Hannon conceded that Skilling may have been being sarcastic, reflecting his annoyance at short-sellers betting that Enron stock would fall.
Skilling said Thursday that he may have said the phrase, but he was joking. He said he and Cliff Baxter, another Enron executive, used to mimic the “Saturday Night Live” character, Mr. Bill.
Skilling, imitating the high-pitched voice of the character, said Baxter may have said, “Oh, no, Mr. Bill,” which could have prompted Skilling to say, “Oh, no, they’re on to us,” soliciting laughter from everyone in the courtroom except prosecutors.
Skilling denied government allegations in 10 counts of insider trading that he sold $62.6 million in stock in 2000 and 2001 based on inside information that Enron was in serious financial trouble.
The first nine counts refer to trades that Skilling said were part of a program of pre-ordered sales to diversify his holdings. Skilling said he halted that program in the summer of 2001 because “I believed this company was very strong, and the stock underreflected that strength.”
The 10th count refers to the largest sale — 500,000 shares — on Sept. 17, 2001, the first day the market opened after the Sept. 11 terrorist attacks.
Skilling told the Securities and Exchange Commission that he ordered the sale in response to markets that had been roiled by the attacks. But he didn’t tell agency investigators that he tried to sell 200,000 shares several days earlier, on Sept. 6, a deal that was held up by paperwork.
Skilling said Thursday — as he did on Monday when his testimony began — that he didn’t remember setting up the Sept. 6 sale.
Petrocelli played an audiotape of Skilling discussing the Sept. 6 sale with his broker, Glenn Ray.
“Hold that order, and I’ll go ahead and have them send you a letter,” Skilling told Ray, referring to a letter from Enron confirming that Skilling had resigned the previous month and therefore did not have to report stock sales to the SEC.
“Apparently from the recording, I asked Mr. Ray about that, yes,” Skilling acknowledged.
On the same call, Skilling discussed short-selling 800,000 shares of another energy company — AES Corp. — after criticizing short sellers hours earlier.
He said later, “I know I didn’t do anything until Sept. 17.”
Earlier, Skilling denied allegations that he hyped Enron’s broadband venture to maintain Wall Street buzz when he knew it was failing.
Unveiled to Wall Street in 2000, Skilling billed the unit to dazzled analysts as a potential multibillion-dollar business that would stream video to homes on Enron’s fledgling broadband network and trade Internet bandwidth.
Skilling said Thursday he believed that venture was successful and had great potential until July 2001, when the telecom industry was in a meltdown. By that time, Enron had no choice but to lay off hundreds of its workers and shut down many operations, even though he had been confident months earlier that the venture could ride out the industry’s problems with some restructuring.
“This was my failure. I made a mistake,” he testified.
Several government witnesses, including former broadband unit CEO and Skilling ally Kenneth Rice, said Skilling minimized the division’s problems long before the summer of 2001.
Skilling will proceed to cross-examination Monday by Sean Berkowitz, director of the Justice Department’s Enron Task Force. Lay’s lawyers told U.S. District Judge Sim Lake they wouldn’t question Skilling before Berkowitz gets his turn.
Skilling is charged with 28 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces six counts of fraud and conspiracy.