Text f Morning Session of Hearing on Enron
The New York Times
February 7, 2002
(Page 21 of 22)
MR. SKILLING: says, "reviewed," and
it says, for example, that the checklist
provides -- in the memo that Jordan
wrote, which was clearly not
contemporaneous with approval of LJM
transactions, they were basically saying
they were putting these up together,
bundling them up; it was not necessary
for approval the transaction for me to
sign, but they had a provision for me to
sign. I don't recall receiving that memo.
Had I received that memo, what I
would've done is looked at the specific
transactions. If Rick Buy and Rick Causey had signed those transactions -- and I
looked at the transactions, and they looked reasonable -- I would've had no trouble
signing for those transactions.
REP. GREENWOOD: Time of the gentlelady from Colorado has expired.
The chair recognizes the gentleman from Florida, Mr. Stearns.
REP. CLIFF STEARNS (R-FL): Thank you, Mr. Chairman.
Mr. Skilling, just sort of as a oversight, I think that your strategy at Enron has been
basically to build an asset-light strategy. Hasn't that been true? I mean, I've seen that
in Business Week and other literature that you've always said that you believed it
should be asset-light -- is your strategy for business.
MR. SKILLING: We we're trying to do as much profitable business per unit of assets as
we could.
REP. STEARNS: So just as a -- just as a commentary, then,
the fact that this went into bankruptcy and failed to provide
liquidity is really a failure of your strategy for this company. I
mean, just in a man-to-man talk here, that -- (brief laughter)
-- you're going around telling all the literature and all these
magazines it's asset light, and you just didn't have liquidity,
and this company failed in a large part because of you. I
mean, you're not trying to say this morning, this afternoon,
that you're here saying this company was just flying along,
100 percent in good shape, and then you left, and the thing
fell apart just because you left?
MR. SKILLING: Congressman, I think -- and we've all read
business history -- there are some things called runs on
banks. And you can --
REP. STEARNS: Called what?
MR. SKILLING: Things called a run on the bank. You can a fundamentally solvent
company that is profitable that has an illiquidity problem. That's my interpretation of it
--
REP. STEARNS: No, I understand that. But it's just awfully hard to believe, after
looking at all these partnerships and how they were financed, and Fastow taking
money out when nobody on the board of directors knew about it -- and this fellow
reported to you. And I understand he was your protege. And so here we have all these
partnerships, and you're saying -- you're saying today, basically, you did not know any
of the financial structure of LJM. Isn't that what you're saying today?
MR. SKILLING: I said that we knew they --
REP. STEARNS: I mean you -- you.
MR. SKILLING: -- that --
REP. STEARNS: I mean --
MR. SKILLING: Me --
REP. STEARNS: Yeah, you saying you didn't know any --
MR. SKILLING: -- as a member of the board of directors and a member of management
of Enron Corporation knew that a private equity fund was being established and that
one of our executives, Andrew Fastow, would have a role, an economic interest in that
-- in that entity -- we did know that, yes.
REP. STEARNS: So, Mr. Fastow reported to you. Did you ever talk to Jeffrey McMahon?
MR. SKILLING: Yes.
REP. STEARNS: Okay. Was he in his -- in your office regularly? Or did you talk to him
infrequently?
MR. SKILLING: Pretty infrequently.
REP. STEARNS: Pretty infrequently. Now, as I understand, his title was basically -- he
was president and chief operating officer of Enron, and you just didn't talk to him very
much.
MR. SKILLING: I'm sorry. Say again?
REP. STEARNS: It says here that he was president and chief operating officer of Enron.
MR. SKILLING: I think that happened last week.
REP. STEARNS: Not -- okay. Okay. Yeah. But you're saying you talked to him
infrequently, then?
MR. SKILLING: I would guess, probably, Jeff and I would talk once a month.
REP. STEARNS: We've got a calendar of his which shows that he met with you on
March 16th at 11:30 a.m. Now this is tab number 10. You might want to just take a
look at that. And -- and you know, one of the reasons he was meeting with you,
because he had some concerns about the LJM partnerships. And we have tab number
nine, which is before that -- you're welcome to look at -- talks about his concern and
basically conflicts of interest, talking about the financing structure. Do you remember
talking to him about this on March 16th?
MR. SKILLING: Yes, I do.
REP. STEARNS: Okay. Well, that's good.
We've established that Mr. McMahon's schedule is correct. He had you down for 11:30
appointment. We have his notes before he met with you, which you can look at, at tab
nine. He had a schedule. So he did meet with you.
So my question is to you, did he talk to you about LJM and the financing structure or
any of the partnerships?
MR. SKILLING: My recollection of the meeting is Jeff came in and had some concerns
about his compensation related to LJM.
REP. STEARNS: He never talked about any conflict of interest in any of the
partnerships? He never mentioned that -- anything like that to you?
MR. SKILLING: What his concern was, as far as compensation was concerned, is Jeff
felt that he was being put in an awkward position in having to negotiate with Andy and
that that might -- this is my recollection -- that it might impact his compensation
package.
REP. STEARNS: He never mentioned to you that "I'm concerned what's the best
interest of the shareholders here"?
MR. SKILLING: I don't recall that. I recall this being an issue of compensation.
REP. STEARNS: Mm-hmm. Well, you know, and you look at his schedule, he went out
and talked to -- on the 31st of March, he met with Fastow. And we've had a case on the
6th, then, of April -- he had appointment, and basically his job was changed. Did you
know about that?
MR. SKILLING: Yes.
REP. STEARNS: And why did his job change?
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