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Former Enron executive rocks court
(AP)
Updated: 2006-03-03 10:36 Former Enron Corp. Chief
Executive Jeffrey Skilling told other top executives "they're on to us," when a
small analyst firm produced a research note critical of the company's sales to
partnerships run by then-Chief Financial Officer Andrew Fastow, a former top
executive testified in a bombshell revelation Thursday.
Minutes before that, Skilling said at the May 2001 meeting 锟斤拷 attended by
company founder Kenneth Lay 锟斤拷 that he had "brought Andy here" to talk about
those partnerships, called LJM1 and LJM2.
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| Former Enron executive Jeffrey Skilling, right, holds the door for
his attorney Daniel Petrocelli as they leave the federal courthouse at the
end of week five of his fraud and conspiracy trial Thursday, March 2, 2006
in Houston. [AP] |
"Fastow said, 'LJM is a good deal for me,'" Kevin Hannon, then chief
operating officer of the company's flailing broadband unit, told jurors in the
fraud and conspiracy trial of Lay and Skilling.
"As I remember, (Fastow's comment) was met by stunned silence," Hannon said.
"Did Mr. Skilling say anything?" prosecutor Cliff Stricklin asked.
"Yes. He said, 'They're on to us,'" Hannon said. "It seemed to indicate the
investment community was beginning to understand how Enron made money."
Hannon's statements 锟斤拷 in the last 10 minutes of testimony Thursday 锟斤拷 were a
potentially devastating blow to the defendants. Their lawyers have maintained
that Lay and Skilling did nothing wrong and there was no fraud at Enron besides
the theft of money by Fastow and two other former executives.
But Hannon's inside view of the company's executive policy meeting appeared
to directly challenge the defendants' insistence that the LJM partnerships were
proper and received appropriate approvals from lawyers and accountants as well
as Enron's board.
Prosecutors contend the partnerships were one of a slew of accounting tricks
used to prop up a wobbly company that Lay and Skilling touted publicly as
healthy before it spiraled into bankruptcy proceedings in December 2001.
Hannon's prosecution testimony was to continue Monday, followed by cross
examination. Trial is not in session on Fridays.
His revelation set the stage for testimony next week from Fastow. Lay has
labeled him as a crook who skimmed millions of dollars from the company until
his ouster in October 2001, one day after the founder publicly defended his
honesty and ethics.
Fastow is slated to succeed Hannon in the witness chair in a much-anticipated
confrontation with his former bosses. He pleaded guilty in January 2004 to two
counts of conspiracy for orchestrating schemes to manipulate Enron's reported
earnings. He has already agreed to serve the maximum 10-year sentence for the
crimes, with potentially a year and a half off for good behavior.
Fastow pocketed about $60 million in management fees and other income from
running the partnerships, which he created exclusively to buy Enron assets and
conduct other deals with his main employer.
Lay and Skilling aren't alleged to have known how much Fastow pocketed. But
prosecutors contend they knew the LJM partnerships were among tools used to
manipulate earnings so the two men could present a falsely rosy picture of
Enron's health to investors.
Hannon has admitted to conspiracy for helping promote the weak broadband unit
as healthy.
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