Who knew at Enron? Stories don't match
Marilyn Geewax - Cox Washington Bureau
Friday, February 8, 2002
Washington --- Jeffrey Skilling said he was "devastated" by the collapse of Enron, the company he used to head. But he also insisted Thursday that he wasn't to blame.
He told members of Congress that he had had no knowledge there might be problems with partnerships set up by Andrew Fastow, Enron's former chief financial officer. The partnerships were used to inflate profits and hide debt, according to Enron's own investigation into the financial dealings that led to the collapse of the nation's seventh largest corporation.
Skilling's eagerly awaited testimony before a congressional investigative panel was at odds with what two current executives of the company had to say.
Earlier in the day, Jeffrey McMahon, Enron's current president and chief operating officer, and Jordan Mintz, vice president and general counsel, testified that they had approached Skilling to relay their concerns about the propriety of the partnerships. Those deals led to the energy trading giant's filing for bankruptcy protection in December.
Investigations by the Justice Department and the Securities and Exchange Commission of both Enron and its auditor, Arthur Andersen, followed, along with hearings conducted by various congressional oversight committees.
Skilling's ''parting words to me were he understood all my concerns and he would remedy the situation,'' McMahon told a House Energy subcommittee.
McMahon was Enron's treasurer when, he said, he complained to Skilling about ethical concerns involving the partnerships. McMahon said that shortly after raising the issue, he was shifted to a different job.
Mintz testified that Skilling ignored his requests to discuss the partnerships.
Mintz also testified that Cliff Baxter, a former Enron executive who committed suicide last month, once said to him that ''he didn't understand why the board was allowing Andy [Fastow]'' to get so deeply involved in the partnerships. He said Baxter complained about the partnerships to Skilling.
"I can believe them [McMahon and Mintz] or I can believe you," Rep. James Greenwood (R-Pa.) told Skilling. "Who's telling the truth?"
Skilling told the committee he had no recollection of Mintz's efforts to get him to sign off on a particular partnership, and provided a very different account of his meeting with McMahon.
"I do not recall being presented with those documents," Skilling said in response to Mintz's testimony that he sent a memo three times seeking Skilling's approval of the transaction.
Moreover, Skilling turned on its ear McMahon's description of the meeting, in which McMahon said he complained that Fastow was threatening to cut his compensation package if he didn't relent and negotiate deals favorable to a partnership named LJM.
"My recollection of the meeting is, Jeff came in and had some concerns about his compensation related to LJM," Skilling said. "What his concern was, as far as compensation was concerned, was that his dealings with Andy might jeopardize his compensation."
Skilling said he told McMahon: "You know how compensation is done around here. If you negotiate hard on behalf of Enron and take a baseball bat [to Fastow in negotiations], 23 of 24 people on that [compensation] committee will be cheering for you."
Skilling said the decision to offer McMahon a different job was totally unrelated to the meeting. "It was a huge promotion for Jeff," he said.
Skilling is the highest-ranking former executive of Enron to testify. Kenneth Lay, who held the chairman's title and served as chief executive officer after Skilling left the company in August, declined to testify on Monday. Lay has since been subpoenaed to appear before a Senate commitee Tuesday and a House panel on Thursday, Valentine's Day.
Fastow and three other current or former Enron executives appeared before the House subcommittee Thursday, but used their constitutional right not to testify.
''At the time I left the company, I fervently believed that Enron would continue to be successful,'' Skilling told the congressional panel. ''I did not believe that the company was in any imminent financial peril.''
''Enron's failure was due to a classic run on the bank, a liquidity crisis spurred by a lack of confidence in the company," he testified. "At the time of Enron's collapse, the company was solvent, and the company was highly profitable, but apparently not liquid enough.''
Much of Skilling's testimony was greeted with skepticism from lawmakers, who noted he had a reputation as a hands-on executive.
The issue of the partnerships was addressed on Oct. 6, 2000, at a gathering of Enron's board of directors in West Palm Beach, Fla., according to minutes of the meeting. Skilling said he could not recall Fastow assuring board members that Skilling would sign off on all partnerships.
Members of the congressional panel were incredulous and repeatedly asked Skilling about the meeting. In response, Skilling said he was ''in and out of the meeting,'' and therefore did not ''recall if I was there specifically at the time'' Fastow made the comments about the need for Skilling's approval on the partnerships.
Skilling said he did recall the meeting was disrupted by a power outage, so ''the room was dark."
--- News services contributed to this article.
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