Skilling's Testimony Met With Skepticism
Former CEO's Knowledge Of Enron Deals Questioned
By April Witt
Washington Post Staff Writer
Wednesday, February 27, 2002; Page A01
Jeffrey K. Skilling defiantly refused during a five-hour Senate hearing yesterday to accept the role of villain in the collapse of Enron Corp., declaring to skeptical lawmakers, "I have not lied to the Congress or anyone else about my recollection of events" that happened during his tenure as chief executive.
Skilling appeared with Sherron Watkins and Jeffrey McMahon, Enron employees who criticized aspects of his tenure. Skilling told members of the Senate Commerce Committee several times that he relied on the advice of his aides and Enron's accountants in approving the structure of partnerships whose failure triggered the Houston energy company's collapse late last year.
"Quite frankly, as long as the accountants had told me that they thought this was an appropriate structure, I felt comfortable with it," he said in answering a question about the Raptors, entities that a special committee of Enron's board said hid $1 billion in losses.
In his testimony before a House subcommittee earlier this month, Skilling repeatedly answered questions by saying, "I do not recall." A constant refrain yesterday was "I am not an accountant."
The hearing yesterday was the latest in a series planned by several congressional committees. At the same time, the Justice Department and securities regulators are investigating possible criminal conduct. And outraged employees and investors, who lost billions in Enron's bankruptcy, are suing Skilling and other former top executives as well as the company's outside auditor, Arthur Andersen.
Several members of the committee told Skilling they did not believe his testimony, even as he defended himself aggressively. He said he couldn't recall $5.6 million in bonuses he received a few years ago or whether he sold $66 million in Enron stock. And he said he believed that Enron could have survived had it had more time to raise money last fall to meet what he called "a run on the bank."
"I approach your testimony with some skepticism," said Sen. Peter Fitzgerald (R-Ill.). "We have a chess game here, Mr. Skilling, and our challenge is to find a way to check every single one of the moves you made on that Enron board."
Sen. Byron L. Dorgan (D-N.D.), who chaired the hearing, mocked Skilling's claims that he couldn't remember key details and was oblivious to self-dealing in which some of his top aides made millions of dollars at Enron's expense, according to the board of directors' special report.
"I have great difficulty in believing your testimony," Dorgan said. "There are times when that Harvard MBA [which Skilling received] shows through very well -- you are articulate, incisive in your analysis of complex financial transactions."
But when pressed to explain apparent wrongdoing at Enron, "you seem to me to lapse into utter confusion about accounting," Dorgan said. "Somehow, it just doesn't fit. And I don't know that we have gotten much closer to the truth today."
Skilling is the only member of Enron's senior management to testify before Congress, appearing before a House subcommittee earlier this month. Others, including longtime chairman Kenneth L. Lay, refused to testify, citing their Fifth Amendment protections against self-incrimination.
Skilling took the offensive from the beginning yesterday. "I have not lied to the Congress or anyone else about my recollection of events while I was at Enron," he said, an apparent reference to House members' criticism of his sworn testimony at a subcommittee hearing there earlier this month.
He said the tenor of the congressional inquiries into Enron's collapse "should be cause for concern of every American." He added: "The entire board management and board of Enron has been labeled everything from hucksters to criminals, with a complete disregard for the facts and evidence assembled. These untruths shatter lives, and they do nothing to advance the public understanding of what happened at Enron."
Separated at the witness table by their lawyers, Skilling, Watkins and McMahon sometimes agreed about events at Enron, and they sometimes gave widely divergent testimony. Watkins's attorney had asked that his client not have to sit at the same table as the former boss she had described in House testimony as so intimidating she feared he would fire her if she approached him about her concerns.
Watkins, an Enron vice president, kept her gaze on the lawmakers seated before her and rarely looked at Skilling throughout the hearing. But she did not shy away from criticizing him. She questioned Skilling's claim that he did not know that former Enron chief financial officer Andrew S. Fastow, who created some of the key off-the-books partnerships, made $30 million from those dealings.
"I believe Mr. Andy Fastow would not have put his hands in the Enron candy jar without an explicit or implicit approval to do so by Mr. Skilling," she said.
Watkins also lodged her first criticism of Lay, whom she had previously portrayed as an innocent dupe of nefarious Enron executives out to enrich themselves at the expense of stockholders.
She said she was "disappointed" and "frustrated" that Lay failed to conduct a full investigation of accounting improprieties she alerted him to during a meeting that took place on Aug. 22, 2001, after Skilling had suddenly resigned from the company. She called the investigation Lay requested from Enron's outside law firm "a whitewash."
"I believe that Enron had a brief window to salvage itself this past fall, and we missed that opportunity because of Mr. Lay's failure to recognize or accept that the company had manipulated its financial statements," Watkins said.
But the sharpest criticisms, and fiercest exchanges, were between Skilling and senators.
Sen. Barbara Boxer (D-Calif.) lambasted Skilling for what she called Enron's role in driving up electricity prices in California and trying to improperly influence federal energy regulators. At one point, she indicated that Skilling would be relieved to know that she had only one more question for him.
"You haven't asked any questions yet," Skilling retorted, suggesting that she was grandstanding.
Legal experts have said Skilling's decision to testify repeatedly is bold, risky and could expose him to charges of perjury. But Skilling appeared confident as he told lawmakers he was willing to testify because "I have nothing to hide."
"I never duped Ken Lay," he said, referring to Watkins's characterization. "I have no idea what the basis was for this opinion."
Skilling testified that he didn't realize there was anything wrong with Enron's accounting practices. "I had no reason to think there was a problem," he said.
"You say I received a bunch of warnings. I don't recall any of those people warning me," Skilling said.
McMahon, who was Enron's treasurer at the time, repeated his description of a meeting with Skilling in March 2000, in which he complained about the conflicts of interest caused by the board letting Andrew Fastow run off-the-books partnerships. McMahon has said that he felt pressured to make deals with the partnerships that were not in the best interests of Enron's stockholders.
Skilling told the House subcommittee he recalled McMahon worrying that Fastow might affect his compensation. Yesterday, he tried to minimize discrepancies between their two accounts.
He said he put Fastow on notice that he expected him to deal with the complaint. McMahon said Fastow dealt with it by telling him they could no longer work together. McMahon soon transferred to another job in the company.
Skilling expressed regret for the Enron employees and investors who lost their life savings. Dorgan asked if he was donating any of the $66 million he made from selling Enron stock to the employees' fund.
"I think at this point I have 36 separate plaintiffs' lawsuits against me," Skilling responded. "It's my expectation I will probably spend the next five to 10 years of my life battling those lawsuits. I don't know if I'll have anything at the end of that."
© 2002 The Washington Post Company
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btw, I'm glad that we've started to see the grilling of former CEO Skilling...The top execs of Enron have lots of questions to answer...The sooner we let The Justice Dept. prosecute the better off we'll be (last night Larry Kudlow said on CNBC that he's quite confident that Skilling will go to prison -- we'll see)...It would not disappoint me if the class action lawsuits stripped Skilling of much of his wealth (eg. forced him to return the $66 million+ he received by cashing in options in the time period Enron was cooking the books). I also wouldn't be bothered if he was forced to sell his family's Hacienda down in Houston either. A STRONG MESSAGE must be sent to corporate America that high level white collar crime will not be tolerated AND it does not pay. |
