Execs Square Off in Enron Testimony

In a confrontation between accuser and accused, Enron Corp. Vice President Sherron S. Watkins told Congress on Tuesday that former Chief Executive Jeffrey K. Skilling must have known about the company’s financial troubles, while Skilling maintained that he was unaware of accounting improprieties.

Meanwhile, former Enron Treasurer Ben F. Glisan--who reportedly pocketed $1 million by investing $5,800 in the company’s off-the-books partnerships--has begun cooperating with the Justice Department, according to a source familiar with the investigation. Glisan is believed to be the first Enron executive to attempt to trade his inside knowledge of the company’s affairs for softer treatment by law enforcement investigators.

“They think he’s the best guy so far that they can flip,” said a source familiar with the criminal probe.

At the Tuesday hearing, Skilling, whose earlier testimony before a House panel was greeted with skepticism from lawmakers, denied lying to Congress during 5 1/2 hours of grilling before the Senate Commerce Committee. In a classic he-said-she-said duel, Skilling and Watkins--seated at the same table and separated by only Skilling’s attorney--disputed each other’s account of what led to the largest bankruptcy in the U.S.

“I have not lied to the Congress or anyone else about my recollection of events while I was at Enron,” Skilling said.

But Watkins said, “I believe that Mr. Andy Fastow would not have put his hands in the Enron candy jar without an explicit or implicit approval to do so by Mr. Skilling.”

Fastow, Enron’s former chief financial officer and a Skilling protege, is regarded as the architect of the off-the-books partnerships that investigators say were used to hide Enron’s losses.

“In my opinion, Mr. Skilling was aware of the problems,” Watkins told the committee.

“How would she know that?” Skilling responded at a later point.

Skilling also expanded briefly on the reasons for his resignation after six months as chief executive last summer, saying he was “tired” and didn’t enjoy the job.

Watkins, who wrote to former Enron Chairman Kenneth L. Lay in August, warning that the company was about to “implode in a wave of accounting scandals,” also sharply criticized Lay, whom she had defended in testimony to a House panel two weeks ago.

“I was incredibly frustrated with Mr. Lay’s actions or lack thereof,” she told senators Tuesday. “I believe that Enron had a brief window to salvage itself this past fall, and we missed that opportunity because of Mr. Lay’s failure to recognize or accept that the company had manipulated its financial statements.”

Lay and Fastow have declined to testify, invoking the right against self-incrimination.

Despite his drubbing before a House panel earlier this month, Skilling showed no signs of being humbled or intimidated Tuesday, frequently sparring with lawmakers, correcting, interrupting and occasionally chastising them.

Skilling also revealed a greater familiarity with the details of the partnerships than he disclosed in his earlier testimony, saying he was aware the Raptor partnerships were being supported by Enron stock and required outside investors to make the accounting treatment allowable. In his previous testimony, Skilling suggested that he was unaware of or could not remember many of the details of the partnerships’ transactions.

At one point, after Skilling lectured lawmakers about the difference between a “naked hedge” and “low-collateral hedge,” Sen. Byron L. Dorgan (D-N.D) quipped: “You seem to know more about accounting and finance than you let on.”

Skilling said he relied on the advice of Enron accountant Andersen to ensure that the structure of the partnerships was appropriate.

“As long as the accountants had told me that they thought this was an appropriate structure, I felt comfortable with it,” he said.

Enron’s current President and Chief Operating Officer Jeffrey McMahon testified he brought concerns to Skilling about conflicts of interest involving subordinates of Fastow negotiating on behalf of Enron with partnerships in which Fastow had a financial interest.

McMahon said Fastow’s role in the partnerships “created conflicts

Skilling claims McMahon was largely concerned about his bonus.

Glisan, who was fired in November, may be able to fill in many of the holes in the Enron story and resolve some of the conflicting statements made by Enron officers. He also may be in a position to give criminal investigators information that could be used against some of his former bosses, including Lay, Skilling and Fastow.

Glisan has refused to comment publicly about his role in Enron’s demise. His signature appears on several company documents involving the partnership deals that eventually caused the company to file for bankruptcy. He replaced McMahon as treasurer.

According to the special internal investigation conducted by Enron’s board of directors after the Dec. 2 bankruptcy filing, Glisan was among several company insiders who profited by investing in those partnerships.

It was unclear whether Glisan has been, or will be, offered immunity in exchange for his cooperation. Justice Department officials declined to comment.

But his assistance was considered so valuable that the FBI asked at least one congressional committee to refrain from calling Glisan as a witness, which might have compromised his usefulness to the investigation, sources said.

Rep. James C. Greenwood (R-Pa.) declined to comment on any contacts with the FBI, but said, “Obviously Mr. Glisan, as treasurer of the company, is in good position to know a lot about who knew what and when they knew.”

Greenwood said the House subcommittee on oversight and investigations, which he chairs, had invited Glisan to testify, but was informed by Glisan’s attorney that he would refuse to talk under the 5th Amendment.

At the hearing Tuesday, Skilling strongly denounced his critics.

“The entire management and board of Enron has been labeled everything from hucksters to criminals, with a complete disregard for the facts and evidence assembled,” he said. “Common decency suggests that I be treated as innocent until proven otherwise....Unfortunately, neither common decency nor common sense will carry the day in this politicized process.”

Sen. Peter Fitzgerald (R-Ill.) praised Skilling for not succumbing to the “5th Amendment fever” that has kept other former Enron executives from testifying, but scoffed at suggestions that Enron’s troubles were solely the result of a rogue chief financial officer.

“I just don’t buy it,” Fitzgerald said.

Senators also grilled Skilling about his reasons for resigning after just six months as CEO.

“You had spent a decade working your way up through the company to this pinnacle of power,” Sen. Jean Carnahan (D-Mo.) said. “It looks suspiciously as if you realized that the company was coming apart and you jumped ship.”

Skilling insisted that he stepped down for personal reasons.

“To be quite frank, I was tired,” he said. “This may be the perfect job for some people. It was not the perfect job for me.”

But Skilling said he was so concerned about the company’s future that he called Lay in late October and offered to return to the company at no salary.

The hearing extended beyond Enron’s collapse to a joke that Skilling made last year during California energy crisis.

He was repeatedly excoriated by Sen. Barbara Boxer (D-Calif.), who held up a placard with the joke: “You know what the difference is between the state of California and the Titanic? At least when the Titanic went down, the lights were on.”

“That comment does not sit well with the people of California,” Boxer told Skilling. “And clearly, the Titanic was not California. It turned out to be your company.”