Enron Exec: Report Raised Fears

Enron Corp.’s top managers fretted over a damaging 2001 analyst report, fearful that Wall Street had uncovered its accounting tricks, a former executive testified Thursday at the trial of Jeffrey K. Skilling and Kenneth L. Lay.

The witness, Kevin Hannon, said the report published in May 2001 by Off Wall Street Consulting Group valued Enron’s stock well below what it was trading for at the time and was discussed at a meeting of Enron’s senior managers, including Lay and Skilling.

One top executive said at the meeting that the report was mostly valid in its criticisms, said Hannon, who has pleaded guilty to conspiracy in connection with Enron’s collapse.

“And what did Mr. Skilling say?” prosecutor Cliff Stricklin asked Hannon.

“He said ‘They’re on to us,’ ” Hannon replied, which he took to mean “the investment community was starting to understand how Enron made money.”

Prosecutors contend Lay, Enron’s founder, and Skilling, its former chief executive, sought to cover up Enron’s deteriorating financial health, hiding losses and portraying the company as healthy and vibrant even as it headed toward the then-largest U.S. bankruptcy.

Skilling is charged with 31 counts of conspiracy, fraud and money laundering, and Lay is charged with seven counts of conspiracy and fraud. The trial is scheduled to resume Monday.

The testimony by Hannon, 45, the former chief operating officer of Enron’s Internet division, came at the end of the trial’s fifth week and appeared to contradict claims by Lay and Skilling that they knew of no wrongdoing at the energy trader.

The Off Wall Street report valued Enron’s shares at about $27, half its then-market price in the $50s, and suggested the company was inflating profit through questionable accounting.

Hannon is cooperating with the government in hopes of receiving a shorter sentence than the possible five-year term he faces.