Enron judge berates defense
by Claire Poole in Houston
TheDeal.com
16, Feb 2006
The federal fraud trial of former Enron Corp. chairman Kenneth Lay and former CEO Jeffrey Skilling bogged down Wednesday, Feb. 15, with the playing of videotapes and displaying of e-mails, lots of objections and berating of the defense from the bench.
In his cross-examination of the government's second witness, former broadband chief Kenneth Rice, one of Skilling's defense attorneys, Mark Holscher, played a videotape of an employee meeting in which executives described how the unit was being restructured and some employees were being redeployed. In earlier testimony, Rice said, "redeployment" — a word that Skilling favored over "laying off" — was misleading.
Holscher began questioning Rice about what the other broadband executives said on the videotape about the network's technology, which Rice had previously testified wasn't quite up to snuff. That began a series of objections by Assistant U.S. Attorney Sean Berkowitz, head of the Justice Department's Enron Task Force, who objected to the playing of the whole videotape, interrupting with questions that weren't addressed in his direct examination and covering items that had nothing to do with Skilling.
Judge Simeon Lake III agreed, using his oft-repeated phrases, "We're wasting our time" or "Ask a question."
Lake drew the biggest laugh from the courtroom in response to Holscher's explanation that he was showing e-mails between executives preparing documents for an upcoming analyst conference call to disprove Rice's comments that the unit had no customers, services and products. "If you want to ask him about Shakespeare," Lake snorted, "you don't have to begin with the invention of the alphabet."
Conditions didn't improve much after that, and the judge called a 10-minute break "much to my chagrin" so the attorneys could discuss their issues during a sidebar at the bench. When the jury returned, Lake apologized: "Sometimes it helps to clarify things and save time."
The action picked up later, when Rice agreed that many viewed him as the best "sandbagger" at the company, meaning he was good at underestimating earnings and overestimating capital needs during budget planning time. Through that, Holscher was able to shed light on why Rice's original estimated loss number for the unit for 2001 was a high $489 million, which was later revised to $110 million and which Skilling later took down to $65 million. But Rice said there was as much "sandbagging" on the corporate level as well, which had originally estimated a $40 million to $76 million profit for the unit for the year.
Holscher then asked Rice about the broadband unit's business with Microsoft Corp., which declined to buy part of its broadband network — a deal that would have helped earnings in the short term — but agreed to use its intermediation services for MSN, a transaction that would help earnings longer term. "Was it a groundbreaking deal?" Holscher asked Rice, who replied, "That's how we wanted it perceived."
Rice also talked about the unit's attempt to make acquisitions to boost its prospects and said the target list included AT&T's broadband business, Global Crossing Ltd., Sprint and PSINet, none of which were pursued because of cost. "You still had big dreams?" Holscher asked. "Yes, but I was also focused on short-term survival," Rice said.
After the jury was dismissed for the day, Holscher said he would finish his cross of Rice Thursday, after which Lay's attorney Chip Lewis will get a turn. ("It's becoming known as 'Elongate,' " Skilling's attorney Daniel Petrocelli said, to which Lake replied, "I won't touch that.")
Berkowitz said Terry West, a former Enron employee who was subpoenaed to testify about documents being introduced at the trial, and Paula Rieker, the No. 2 person in investor relations who worked for the government's first witness, Mark Koenig, are next on the witness stand.
Then came the complaints.
Petrocelli griped to the judge that the government was not giving his team enough heads-up on what they were going to present. While Lake said he'd never seen the government provide as much "specificity" as it had to the defense in the Enron trial, he directed Petrocelli to send an e-mail to prosecutors voicing his concerns.
Berkowitz said he was trying to keep his objections short, but the defense seemed to turn each one into an argument. Lake said he had already cut Michael Ramsey, Lay's attorney, "pretty good" for that ("I still have the teeth marks in my leg," Ramsey said), but that he'd continue to watch it. |
