Government witness No. 2 on tap in Enron trial | VailDaily.com
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Government witness No. 2 on tap in Enron trial

HOUSTON – The government’s first witness in the fraud and conspiracy trial of former Enron Corp. chiefs Kenneth Lay and Jeffrey Skilling was the company’s top liaison with Wall Street. The second will be a top trader and division head who enjoyed a place in Skilling’s inner circle.Former Enron investor-relations chief Mark Koenig was expected to finish testifying Tuesday, and then make way for Kenneth Rice, former head of the company’s highly touted broadband unit that never lived up to its hype and was barely breathing when it crashed along with the parent into bankruptcy proceedings in December 2001.Both Koenig and Rice are among 16 ex-Enron executives who have pleaded guilty to crimes and are cooperating with prosecutors in hopes of receiving lenient punishments.Koenig, who was Enron’s chief liaison with Wall Street, has consistently described strictly work relationships with his former bosses. Rice and Skilling were friends as well, but have yet to face off in a courtroom.Prosecutors contend Lay and Skilling repeatedly lied about Enron’s financial health when they knew the company’s success stemmed from complicated finance structures that hid debt and inflated profits. The defense teams say there was no fraud at Enron and negative publicity coupled with loss of Wall Street confidence fueled its collapse.Throughout his testimony that began nearly two weeks ago, Koenig stopped short of asserting that Skilling or Lay explicitly ordered fudged financial statements. But Rice already has implicated Skilling in an alleged web of lies about the capabilities of Enron’s fledgling broadband network.In the fraud and conspiracy trial of five former broadband executives last year, Rice testified that he, Skilling and most of the defendants in that case told analysts at a January 2000 conference that the network was up and running when it wasn’t to generate Wall Street buzz and inflate the company’s stock price.Rice testified executives knew analysts might question an energy company’s venture into broadband.”Mr. Skilling liked to address issues head-on,” Rice testified last year. “We addressed that concern by lying about the capabilities we already had on our network.”Within two days of the conference, Enron’s stock price leaped from $54 a share to $72.The 31 charges pending against Skilling include allegations that he lied to analysts about the network’s capabilities. A videotape of Skilling’s presentation played during the broadband trial showed he alternated between saying what the network could do at the time and what it would do in the future.The distinction likely will dominate lead Skilling lawyer Daniel Petrocelli’s cross examination of Rice in the current trial.Skilling tried to watch Rice testify last year, but he was a possible witness and therefore barred from the courtroom. At the time, Skilling said through Petrocelli, “My heart goes out to these guys. Hopefully, all the facts will come out, and they will be exonerated.”The broadband trial ended with acquittals on some counts and jurors hung on others. Those defendants are to be retried in three separate cases this year. The unit itself never made a profit.Rice was a top trader and dealmaker at Enron. In 1999 Skilling tapped him to help run the broadband unit. He resigned from Enron in the summer of 2001, months before the company filed for bankruptcy protection.Rice had been bound for trial alongside the other broadband executives until he cut a deal with prosecutors in July 2004.The sports car aficionado also forfeited $13.7 million in cash and property, including a Ferrari, a Shelby coupe and a diamond, platinum and sapphire necklace and bracelet set he had bought for his wife, Theresa. In June last year, she filed for divorce, which became final last month, court records show.Vail, Colorado


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