Former Enron CEO defends himself in House testimony; four executives take the Fifth | TahoeDailyTribune.com

Former Enron CEO defends himself in House testimony; four executives take the Fifth

MARCY GORDON, AP Business Writer

WASHINGTON (AP) — Former Enron chief executive Jeffrey Skilling insisted to skeptical lawmakers Thursday that he knew of nothing improper about the complex web of partnerships that brought down the company, draining the savings of millions of investors and employees.

Four of Skilling’s former colleagues at the energy-trading conglomerate remained silent and refused to testify, invoking their constitutional privilege.

Back in August, when he resigned his post, “I did not believe the company was in any financial peril,” Skilling said, testifying under tough questioning in his first public accounting of the collapse. “I absolutely, unequivocally thought the company was in good shape.”

The company’s financial statements, “as far as I knew, accurately reflected” Enron’s condition, Skilling told the House Energy and Commerce oversight subcommittee.

He said he had no knowledge that the partnerships run by his longtime colleague Andrew Fastow, who collected at least $30 million for his efforts, were designed to conceal massive losses.

Skilling spoke after Fastow and three other current or former Enron executives declined to answer questions at the hearing, citing their Fifth Amendment right against self-incrimination. Former chairman Kenneth Lay is expected to do the same next week when he appears before two other committees that have subpoenaed his testimony.

“It was my understanding that the purpose of the transactions was to provide a real hedge” — locking in profits from technology investments, Skilling said.

Skilling, who resigned before Enron’s troubles became public, insisted he didn’t know the details of the partnerships that concealed hundreds of millions of dollars in debt and overstated the company’s profits by more than $1 billion over several years.

Skilling also said he could not recall key events under close questioning by lawmakers. Nineteen times during his testimony his answer was “I don’t recall” or something similar.

He said he didn’t remember, for example, hearing Fastow tell an October 2000 board of directors meeting that Skilling would approve all the partnerships.

“I was in and out of the meeting” and “I don’t recall if I was there specifically at the time Andy” made the comments, he said.

Skilling said the board meeting in Palm Beach, Fla., occurred under difficult conditions because the electric power had gone out and “the room was dark.”

In contrast to Skilling’s statements, Enron’s new president and chief operating officer, Jeffrey McMahon, testified earlier at the hearing that he was transferred to a new job shortly after he complained to Skilling about the obscure partnerships in a 30-minute meeting in March 2000. McMahon was treasurer at the time of the meeting.

At the dramatic hearing, as Congress pressed its sprawling inquiry into the biggest bankruptcy in U.S. history, lawmakers denounced Fastow and the three other current or former Enron executives who sat silently before them. They called them “economic terrorists,” “business cowboys” and “corporate thieves,” accusing them of enriching themselves while thousands of Enron employees watched their retirement savings dissolve in 401(k) accounts heavy with company stock.

“Was the selling of your morals … of your souls, worth it?” asked Rep. Bobby Rush, D-Ill.

The Justice Department and the Securities and Exchange Commission are investigating Enron and its auditor, the Arthur Andersen accounting firm, which has acknowledged massive destruction by its employees of Enron-related documents.

Rep. Jim Greenwood, R-Pa., chairman of the subcommittee, swore in all the witnesses.

“You enriched yourself by tens of millions of dollars” through deals “with your own company,” he told Fastow.

Under close questioning, Skilling brushed aside the testimony of former Enron attorney Jordan Mintz, who spoke before him, that Mintz had asked Skilling to sign approval sheets for one partnership arrangement before it could proceed.

Lawmakers have suggested that Skilling may have wanted to keep his fingerprints off the questionable partnership.

Skilling said he didn’t sign the documents because he didn’t receive Mintz’s material.

“I don’t recall,” Skilling replied when asked if he had seen the documents in question or had signed them.

Said Enron board member Robert Jaedicke, who appeared with Skilling: “We did not know, to my knowledge, that the approval sheets were not being signed. I don’t know why that happened.”

Also asserting his constitutional right against self-incrimination and refusing to testify was former Enron executive and Fastow aide Michael Kopper, who saw an investment of $125,000 become $10.5 million in under three years. The two are at the center of the web of more than 3,000 partnerships, some with names of “Star Wars” characters like Jedi, which brought in big outside investors such as state pension funds.

“On the advice of my counsel I respectfully decline to answer the questions,” said Fastow.

Fastow, Kopper and two current Enron executives, Richard Buy and Richard Causey — who also had knowledge of the partnership — were dismissed after telling the subcommittee they were invoking their Fifth Amendment right and would not answer questions.

McMahon and Mintz testified they were concerned about conflicts of interest arising out of Fastow’s financial interests in the partnerships while he was Enron’s chief financial officer.

Mintz suggested that the close relationship between Skilling and Fastow was an obstacle to bringing the partnerships under control.

According to McMahon, Fastow told him that “everything Mr. Skilling says, I hear about.”

Mintz said Skilling ignored his repeated requests to meet about the partnerships.

Mintz said that Cliff Baxter, the Enron executive who recently committed suicide, said over lunch one day that “he didn’t understand why the board was allowing Andy to do this” by running partnerships. Baxter also complained to Skilling.


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