Ex-Enron exec says Skilling gave analysts bad information in ’01 | VailDaily.com

Ex-Enron exec says Skilling gave analysts bad information in ’01

HOUSTON – Former Enron Corp. CEO Jeffrey Skilling gave misleading information to Wall Street analysts about the earnings of a highly touted business unit in 2001, the company’s former head of investor relations testified Thursday.Skilling did not disclose in conference calls with analysts that the Enron retail energy division had suffered $726 million in first-half losses from its contracts, and insisted that the unit was profitable, Mark Koenig told jurors.Those losses had been moved into the Enron wholesale division, which was making enough money to absorb them – but that accounting change was not initially disclosed to analysts, Koenig said.”It would have been a big surprise, a negative surprise, a large surprise to investors” had they known the truth, he said.Analysts did get a surprise when Skilling gave a sarcastic response to a hedge-fund worker frustrated with Enron’s lack of details in its reports.Prosecutors played for the jury a tape of the worker asking Skilling during an April 2001 conference call why Enron had not published more detail on its finances.”You’re the only financial institution that can’t produce a balance sheet or a cash flow statement,” complained Richard Grubman of Highfields Capital Management.”Thank you very much,” Skilling answered. He then added, “We appreciate it,” and called Grubman an obscene name.Lay laughed aloud; Skilling simply smiled. Several jurors laughed, then a few appeared to sneak peeks at Skilling when the moment of levity was over. Outside court, Skilling lead lawyer Daniel Petrocelli said he was not worried about the tape and would have played it himself if the prosecution had not.Koenig, the former executive vice president for investor relations is the first government witness against Skilling and former CEO Kenneth Lay, who are accused of fraud and conspiracy in the spectacular collapse of Enron in 2001.In his second day on the witness stand, Koenig stopped short again of saying either Skilling or Lay explicitly ordered the books cooked, or that Skilling was aware he was giving analysts bad information.Under questioning from prosecutors, Koenig described his guilty plea in 2004 to aiding and abetting securities fraud. He is one of 16 former Enron executives who have pleaded guilty since the company filed for bankruptcy protection in December 2001.He admitted on the witness stand Thursday that he lied to investors.”I wish I knew why I did it,” he told jurors. “I did it to keep my job, to keep the value that I had in the company, to keep working for the company. I didn’t have a good reason. If I did, I wouldn’t be here.”Koenig’s testimony took the jury of eight women and four men into new areas of the company where he claims the books were cooked or investors were given bad information.On Wednesday, Koenig testified Skilling misled analysts about Enron’s broadband division – including one quarter in which virtually all of its revenue came from the sale of a type of fiber, not part of the sector’s core revenues.Koenig spoke Thursday of a decision by Enron management to raise its forecast for 2001 profits in a press release on April 17, 2001. He said he was aware of no “bottoms-up analysis” and said there was a “decision to simply raise it.”He said Skilling, Lay and Enron top accountant Richard Causey had the authority to raise the guidance – but again stopped short of saying definitively that Lay or Skilling ordered the numbers be fudged.The defense said in opening statements that many former Enron executives like Koenig were pressured by prosecutors into pleading guilty when they had committed no crimes, suggesting they were afraid of paying for long legal battles.A federal prosecutor asked Koenig on Thursday whether it was true that he entered the plea deal because he could not afford to fight the government.”I pled guilty because I am guilty,” he said.Outside court, Petrocelli stood by his defense: “I don’t believe any of these witnesses for one minute thought that they were doing anything wrong.”Koenig walked jurors through two different explanations Skilling gave for his resignation from Enron in mid-August 2001.Skilling initially said in a press release that the decision was entirely personal, Koenig said. But Skilling told The Wall Street Journal days later that the company’s plunging stock price – it had lost half its value that year – was also a factor.Both Skilling and Lay sold millions of dollars in stock options before the company declared bankruptcy. Skilling is charged with insider trading; Lay is not.Skilling faces 31 criminal counts, Lay seven. Each could spend the rest of his life in prison if convicted.Kenneth Rice, who ran the Enron broadband unit, is expected to follow Koenig on the witness stand.Vail, Colorado

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