Enron Exec’s Counsel Tries to Raise Doubt

With a pivotal government witness waiting in the wings, a defense lawyer in the Enron Corp. fraud trial sought Monday to cast doubt on a former executive’s dramatic claim that former Chief Executive Jeffrey K. Skilling fretted in 2001 that “they’re on to us.”

Kevin Hannon, a former Enron broadband unit executive, testified last week that Skilling made the remark when an analyst from a small research firm criticized sales that Enron made to partnerships run by its own chief financial officer, Andrew S. Fastow.

But under cross-examination Monday by Skilling lawyer Mark Holscher, Hannon acknowledged it was possible that Skilling was just being sarcastic because he was miffed that the boutique firm catered to short-sellers -- people betting that Enron’s stock would fall.

Holscher asked Hannon whether it was possible Skilling was “dripping with sarcasm” when he made the statement in a May 21, 2001, meeting with other Enron executives. “Anything’s possible,” Hannon replied.

Using a marker and a large sketch pad, Holscher listed other executives -- as many as 17 -- who might have been at the meeting. He asked Hannon whether anyone followed up on Skilling’s dramatic statement.

“Not that I’m aware of, no,” the witness answered.

The cross-examination took place as prosecutors prepared to call Fastow to the stand, perhaps as early as today. Fastow was seen walking into the Houston federal courthouse at midmorning, accompanied by his lawyer.

The testimony of Fastow, who pleaded guilty in 2004 to two counts of conspiracy and has agreed to serve as many as 10 years in prison for his crimes, is among the most highly anticipated of the Enron trial.

Skilling and former Chairman and CEO Kenneth L. Lay are charged with fraud and conspiracy, among other crimes, in the collapse of Enron in 2001. The defense claims there was no massive fraud at the company.

Last week, Hannon told jurors that Skilling misled Wall Street analysts about the future of the broadband unit during a March 2001 conference call.

Skilling told analysts then that bandwidth trading had enjoyed a “great quarter,” while, Hannon told the jury, the division was bleeding cash and facing layoffs without gaining any substantial revenue from bandwidth and on-demand video ventures.

Holscher, the defense lawyer, reminded Hannon of extensive testimony he gave to the Securities and Exchange Commission in 2002 that depicted a far rosier picture of the broadband unit’s performance. On the witness stand Monday, Hannon admitted he had lied to the SEC.

Hannon is among 16 former Enron executives who have pleaded guilty to crimes. The defense has challenged prosecution cooperators in the trial, suggesting that the government goaded them into admitting crimes they never committed.

Fastow’s cross-examination should be different: The defense suggested in opening statements that it would go after Fastow as a shady executive who stole money from corporate coffers and kept his bosses in the dark.