Enron Witness Stands Firm on Assertions

Former Enron Corp. executive Mark E. Koenig spent a fifth day on the witness stand Wednesday as defense lawyers tried to chip away at his testimony that the company, under then-Chief Executive Jeffrey K. Skilling and Chairman Kenneth L. Lay, tried to hide mounting losses from investors.

But Koenig, who ran Enron’s investor relations as the company spiraled toward bankruptcy in December 2001, stood firm on his key assertions that the energy giant shifted losses from one division to another to conceal them from the public.

Skilling lawyer Daniel M. Petrocelli challenged Koenig’s claims that it was wrong for Enron to move those losses, saying that it did not violate securities laws or even accounting regulations.

“That was an unfair accusation, wasn’t it?” the hard-charging Petrocelli asked Koenig. “What difference does it make if they followed all the rules?”

Koenig, who has pleaded guilty to aiding and abetting securities fraud and is testifying for the prosecution in a bid for a more lenient sentence, responded that the move was disingenuous because it hid from investors the true state of the company’s financial health.

Lay and Skilling, who presided over Enron when it collapsed into the largest bankruptcy case of its time, face some three dozen fraud and conspiracy charges. They could face decades in prison if convicted.

Skilling told analysts in a 2001 conference call that Enron transferred certain risk-management operations from its money-losing electricity retail division to its hugely profitable wholesale arm purely as a consolidation move.

“There are [accounting] requirements that say things have to be presented fairly,” Koenig said. “If the reason that it’s stated [by the company] is that it’s for efficiency but it’s more to transfer losses to wholesale, that’s a big difference.”

Koenig told jurors under earlier questioning by prosecutors that the shift was really done to hide losses from Enron’s retail operation and make the new unit appear financially healthy and growing.

The testimony came during a long day for jurors as Petrocelli played for them some five hours of recorded conference calls in which Skilling touted the financial health of Enron to employees and analysts.

Defense lawyers said they needed to play the hours of conference calls because prosecutors had cherry-picked snippets from the tapes that reflected poorly on their clients. The lawyers said they were trying to put those comments in context.

At the end of the day an exasperated Assistant U.S. Atty. Kathryn Ruemmler pleaded with U.S. District Judge Sim Lake to put an end to the tapes, saying that the presentation had brought the prosecution’s case to a halt.

The judge agreed, saying that he did not intend to allow Lay’s attorney, Mike Ramsey, to play still more recordings when Ramsey cross-examines Koenig unless he could show that it was appropriate to the witness.