Skilling Is Pressed on Stock Sales
In an occasionally tense first day of cross-examination, former Enron Corp. Chief Executive Jeffrey K. Skilling defended his reasons for selling tens of millions of dollars’ worth of company stock in the 15 months before the energy giant’s December 2001 bankruptcy filing.
Co-lead prosecutor Sean M. Berkowitz tried to show that Skilling sold stock at times when Enron faced serious problems, such as an impending $1-billion write-off in the summer of 2001 and the collapse of a planned sale of international assets a year earlier.
Skilling denied any such intent, saying the earlier transactions were to cover tax liabilities and pay off a home construction loan.
The latter came shortly after Skilling’s August 2001 resignation from Enron, when, he said, the company was “in the best shape it had ever been in.”
Berkowitz’s cross-examination came in a jammed courtroom as the fraud and conspiracy trial entered its 12th week, with friends and relatives of the two adversaries looking on.
It followed Skilling’s four days of direct testimony last week, in which he offered sharply conflicting versions of events from what government witnesses had described earlier in the trial.
Berkowitz asked whether observing those witnesses and spending two years in preparation for his trial hadn’t given Skilling ample opportunity to tailor his testimony.
“I have nothing to hide, Mr. Berkowitz, so I don’t think it’s a question of tailoring your testimony,” Skilling replied. When asked if he has been counseled by a trial consultant on body language, communicating effectively and how to be persuasive, Skilling replied, “Communicating effectively, yes.”
Skilling, 52, faces 28 counts of conspiracy, fraud and insider trading. His co-defendant, former Enron Chairman Kenneth L. Lay, 64, faces six charges of conspiracy and fraud. Both could spend decades in prison if convicted.
One line of questioning by Berkowitz marked the first time that Skilling’s testimony threatened to damage Lay.
Displaying business datebooks for both men, Berkowitz showed that Lay and Skilling had met in Lay’s office on the morning of Aug. 22, 2001, a week after Skilling’s surprise resignation from Enron and only four hours before Lay was to meet with Enron whistle-blower Sherron S. Watkins to discuss explosive allegations in her nowfamous memo to Lay.
The memo, which warned that Enron might “implode in a wave of accounting scandals,” questioned Skilling’s reasons for resigning and cited rumors of an illicit “handshake deal” between him and then-Chief Financial Officer Andrew S. Fastow over Fastow’s controversial off-the-books partnerships.
Lay had launched an investigation when he’d received the memo eight days earlier, but according to Skilling, the subject never came up during the Aug. 22 meeting. Instead, the two spent an hour talking about long-term business strategy, he testified.
If Lay was truly serious about getting to the bottom of Watkins’ allegations, asked Berkowitz, wouldn’t he have taken the opportunity to ask Skilling about it?
Skilling said he had no way of knowing what was in Lay’s mind. He said he didn’t learn of the Watkins memo until the following January, a month after Enron’s bankruptcy filing, when he read about it in the newspaper.
Skilling was generally calm and serious under Berkowitz’s questioning, but he raised the prosecutor’s ire when he tried a joke comparing California’s government to that of a developing nation.
As Skilling grinned at his quip, Berkowitz demanded: “You think that’s funny?” He noted that Skilling had made similar jokes during California’s 2000 and 2001 energy crisis, when Enron was accused of profiteering as electricity prices skyrocketed.
Skilling said he regretted having made those jokes.
Regarding Skilling’s stock sales, Berkowitz pointed out that within weeks of Skilling’s large stock sales in the late summer of 2000, his ex-wife and his then-girlfriend -- now wife -- both sold large amounts of Enron stock and stock options.
Skilling said he was unaware of those transactions.
Berkowitz said that the sales had come after a Middle Eastern sheik had backed out of a long-negotiated sale of some of Enron’s troubled overseas assets -- perhaps the last, best chance to get a decent price for holdings that had slipped in value to billions of dollars less than the $10 billion that Enron had invested in them.
Skilling denied that the failed sale had influenced his stock transaction.
Berkowitz also presented copies of checks totaling $180,000 that Skilling wrote to a former girlfriend and ex-Enron employee who had started an Internet business that Skilling said was an investment in the new company.
That company relied on Enron for most of its business, Berkowitz showed, making Skilling’s investment a violation of the company’s ethics policy because he did not clear his ownership stake with Enron’s board of directors .
“It may be [a violation],” Skilling said. “It didn’t occur to me.”
Times wire services were used in compiling this report.