Enron Defense Grills Witness
The former head of Enron Corp.’s struggling Internet unit testified Wednesday that he never corrected his boss, Jeffrey K. Skilling, when Skilling allegedly misled Wall Street about the division’s financial health in early 2001.
“No, I didn’t want to talk about that,” Kenneth Rice told Skilling lawyer Mark Holscher during cross examination in the fraud and conspiracy trial of former Enron Chief Executive Skilling and former Chairman Kenneth L. Lay.
“You never once told Jeff Skilling you were uncomfortable with any statement he made to analysts about [Enron Broadband Services], is that right?”
“Yes,” said Rice, who is among 16 ex-Enron executives who have pleaded guilty to crimes stemming from the government’s investigation of the energy company’s swift tumble into bankruptcy proceedings in December 2001.
Under additional questioning by Holscher that suggested Skilling may not have knowingly deceived anyone, Rice acknowledged that there was reason for long-term optimism at his beleaguered broadband unit.
Possible deals were in the pipeline, including a letter of intent with Microsoft Corp.; acquisitions were discussed; and new top-level people were hired to beef up the operation, Rice said.
Holscher also sought to portray Rice, who was to continue testifying today, as an out-of-touch manager who didn’t know how many people worked for him.
When Holscher asked whether he knew how many people worked at Enron Broadband Services, Rice replied: “Twelve [hundred] to 1,500.”
“You’re CEO. You don’t know?” Holscher asked incredulously.
“I don’t know the exact number,” Rice said. “I’m saying I don’t know the number of employees.”
Holscher also accused Rice, 47, of “checking out” of Enron beginning in 2001 to pursue his passion for race cars, an assertion Rice denied.
But Holscher pointed out that people above and below Rice at Enron were critical of his work, that he wasn’t a hands-on manager, and that underlings urged Skilling to fire him.
Rice pleaded guilty to securities fraud in July 2004. The defense teams have suggested that most of those who pleaded guilty to crimes did so because of prosecutorial pressure and fear of lengthy prison terms.
Prosecutors contend that Lay and Skilling lied about Enron’s financial health when they knew complicated finance structures hid debt and inflated profit. The defense teams say negative publicity and loss of market confidence -- not fraud -- fueled the company’s collapse.
Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors. Lay faces seven counts of fraud and conspiracy related to the months after Skilling abruptly resigned from Enron in mid-August 2001.
