Enron Witness Says She Didn’t Think Crimes Were Committed

A former Enron Corp. vice president of investor relations testified Thursday that in the months before the company failed in late 2001, she witnessed behavior by top executives that concerned her, but that she didn’t think crimes were being committed.

“I observed events that I thought were wrong, so I did make a conclusion. I didn’t make a conclusion that it was legal or illegal,” Paula Rieker said under cross-examination in the fraud and conspiracy trial of Enron founder Kenneth L. Lay and former Chief Executive Jeffrey K. Skilling.

But Rieker stuck to her contention that Skilling withheld vital information in a July 2001 analyst conference call that he knew would portray Enron’s struggling Internet division in a bad light.

Much of Rieker’s three days of testimony had focused on Lay, who led the company during its rapid ascent, but she also linked Skilling to efforts to cover up the company’s declining health, which culminated in its collapse into bankruptcy in December 2001.

Under an often acrimonious cross-examination by Skilling’s lawyer Daniel M. Petrocelli, Rieker acknowledged that Skilling did not directly understate the effect on revenue and earnings of sales of unused fiber optic cables when questioned by analysts in the conference call.

“So how did Mr. Skilling answer ... or is it unclear?” Petrocelli asked.

“It’s unclear,” she said.

Prosecutors have said Skilling sought to hide the fact that the Internet unit, Enron Broadband Services, had virtually no earnings or revenue except for $150 million in sales and $50 million in earnings from asset sales in the quarter.

Rieker and her former boss, Mark E. Koenig, who testified earlier in the trial, had contended that Skilling wanted to portray the division as healthy even as it hemorrhaged cash.

“I felt at that time Mr. Skilling was purposely misrepresenting” the earnings, Rieker said.

Rieker is one of 16 former Enron employees who have pleaded guilty to crimes linked to Enron and was the fourth witness in the trial, which has run four weeks.

She is awaiting sentencing for one count of insider trading and faces as many as 10 years in prison. Rieker acknowledged under questioning that she was paid $5 million at Enron during 2000 and 2001.

Skilling is facing 31 charges and Lay faces seven. Both men could spend decades in prison if found guilty.

Rieker often appeared tense and agitated during Petrocelli’s questioning, a sharp departure from her first two days on the witness stand, when she was composed and frequently smiling.

Prosecutors said Wes Colwell, former chief accounting officer for Enron’s trading unit, would begin to testify Monday. Colwell in October 2003 agreed to pay $500,000 to settle Securities and Exchange Commission allegations of manipulating earnings by using trading profit to offset massive losses in Enron’s retail energy unit. He has not been charged with a crime.