Prosecution Witness in Enron Case Stands Up to Cross-Exam

A key prosecution witness at the trial of former top Enron Corp. executives Kenneth L. Lay and Jeffrey K. Skilling parried a withering cross-examination Wednesday, sticking to her claims that Lay covered up the looming financial disaster at the company.

The witness, Paula Rieker, had an inside view of Lay and Skilling in her job as Enron’s corporate secretary. Her testimony has been the strongest yet to link Lay to wrongdoing at the company, which was a Wall Street darling before it tumbled into bankruptcy in December 2001.

Lay’s lawyer Bruce Collins questioned Rieker on her Tuesday testimony, when she said Enron’s board was growing worried in the months leading up to the bankruptcy filing because of the company’s difficulty in accessing new supplies of cash to continue operating.

Showing data given to the board in October 2001, Collins said, “That is in fact showing the liquidity has improved.”

“No, sir, that number had reduced significantly,” she answered, citing figures that indicated the company had access to only one-third as much money in the financial markets as it could have accessed just weeks earlier.

On Tuesday, Rieker testified that Lay knew the company could face a cash squeeze but lied to employees and analysts by describing Enron’s liquidity as “strong.”

Lay, 63, and Skilling, 52, are charged with conspiracy and fraud, accused of covering up financial problems that led to the demise of the company. Skilling also faces insider trading charges.

Both men have proclaimed their innocence and laid the blame for Enron’s downfall on former Chief Financial Officer Andrew Fastow.

Rieker, 51, is the fourth witness in the trial that began Jan. 30 and is expected to last at least three more months. She has pleaded guilty to insider trading and is one of several witnesses cooperating with prosecutors.

Collins targeted Rieker’s statements that the company sought to hide the declining performance of its retail energy arm, which was expected to fall short of its 2001 performance target.

Collins said Rieker was not in a position to judge a decision by retail division head David Delainey to release rosier figures.

But Rieker, who remained composed under rapid-fire questioning, defended her testimony.

“David had more expertise about the retail business. I felt that I had more expertise on what the investor community expected and relied upon,” answered Rieker, who had also worked as an investor relations executive at Enron.

Also Wednesday, a judge gave initial approval for three more banks to pay $6.6 billion to settle civil claims that they helped Enron manipulate earnings.

U.S. District Judge Melinda Harmon is expected to give final approval to the deals with Canadian Imperial Bank of Commerce, JP Morgan Chase & Co. and Citigroup Inc. later, said William Lerach, who represents the University of California, the lead plaintiff in the conglomerate of shareholder lawsuits.

Under the settlements, first announced last year, CIBC will pay $2.4 billion; JPMorgan, $2.2 billion; and Citigroup, $2 billion.