Witness Spars With Lawyer at Enron Trial

Former Enron executive Mark E. Koenig, the prosecution’s leadoff witness in the trial of Jeffrey K. Skilling and Kenneth L. Lay, sparred with a defense lawyer Tuesday, insisting that it was wrong for Enron to jack up reported earnings to match Wall Street estimates.

Koenig, Enron’s former head of investor relations, stood his ground under an often combative cross-examination by Skilling attorney Daniel M. Petrocelli over the company’s raising of 1999 earnings per share by a penny, which Koenig related in earlier testimony. Prosecutors have portrayed the incident as an intentional bid to mislead investors.

Petrocelli asked Koenig to concede that the company could legitimately find additional earnings after learning of the Wall Street estimates.

“There is nothing wrong with that, right?” Petrocelli asked Koenig.

“That is wrong,” Koenig shot back. “I think that’s wrong. To go back and sharpen the pencil and find another penny of earnings, I don’t think that’s fairly presenting the quarter.”

The point is central to the prosecution theme of the case that Skilling, Enron’s former chief executive, and Lay, the company’s former chairman, spun a web of lies to convince investors and the public that Enron was in excellent financial health even as it spiraled toward bankruptcy.

But under further questioning by Petrocelli, Koenig gave ground on his earlier testimony that key statements made by Skilling to investors were misleading.

Koenig agreed with Petrocelli that he didn’t know exactly what information Skilling had in mind at the time and couldn’t say for certain whether the remarks were deliberate lies or simply mistakes.

Petrocelli also played a 20-minute videotape of Skilling and Lay addressing a 2001 Enron analysts’ conference and asked Koenig to write down every lie or misleading statement that he heard from the two men.

Koenig picked up his pen only once, after a remark by Lay that Koenig had previously said was false.

Lay and Skilling are charged with fraud and conspiracy in Enron’s December 2001 collapse.

Koenig pleaded guilty in 2004 to aiding and abetting securities fraud under an arrangement with prosecutors that calls for him to testify against his former bosses in exchange for a recommendation of leniency when he is sentenced.

Koenig has spent four days on the witness stand. He choked back tears Monday after Petrocelli accused him of lying to try to protect himself and questioned him about his children.

Petrocelli made a reference to that moment Tuesday after another testy exchange, telling Koenig: “You’re being tough on me, but fair enough; I might have been tough on you yesterday.”

Skilling and Lay have pleaded not guilty and said the company did not engage in any widespread illegal activity, except for some crimes committed by former Chief Financial Officer Andrew S. Fastow and his team.

Defense attorneys say it was Fastow’s misdeeds that brought down the company by triggering a panic on Wall Street when they became public.

Fastow and 15 other former Enron executives have pleaded guilty to Enron-related crimes, and many are expected to testify against Skilling and Lay in the coming weeks.

Petrocelli was expected to resume questioning Koenig today.