Lay lawyers move to undermine Ex-Enron treasurer testimony
HOUSTON – Lawyers for Enron Corp. founder Kenneth Lay on Monday seemed to weaken testimony the failed energy company’s treasurer gave last week asserting that founder Kenneth Lay lied to employees about the company’s financial health in October 2001.On Monday, Lay lawyer Bruce Collins sought to show that former treasurer Ben Glisan Jr. didn’t paint as dire a financial picture of Enron’s finances during a board meeting on Oct. 22, 2001 as he had asserted during testimony.Specifically, a corporate secretary’s notes showed Glisan told directors – including Lay – that Enron’s liquidity was adequate.Glisan told directors that Enron had immediate access to $1.5 billion in cash either in its coffers or from banks, and more was “under consideration by the company,” which appeared to temper his testimony that he had given Lay a much darker financial forecast.Enron Corp. founder Kenneth Lay told employees the company was sound in October 2001, a day after the company’s treasurer says he informed Lay the once-envied energy giant was so weak that bankruptcy was “inevitable.”Glisan Jr., is the government’s last major witness in the fraud and conspiracy trial of Lay and former Enron Chief Executive Jeffrey Skilling.Glisan, who testified for two and a half days last week, corroborated much testimony presented earlier in the trial from ex-executives – many of whom, like himself, have pleaded guilty to crimes – that Lay and Skilling repeatedly lied about Enron’s financial health when the former top two leaders knew the company faced serious problems.Lay and Skilling counter that there was no fraud at Enron, they did nothing wrong, and the company crashed into bankruptcy protection in December 2001 because of negative publicity coupled with diminished market confidence.Glisan was considered to be a key government witness because of his knowledge of Enron’s inner financial workings and his access to Lay and Skilling. He testified that both knew Enron, then a reputed powerhouse, was wobbly and faced multibillion-dollar losses and writedowns on poorly performing or overvalued assets.Glisan told jurors last week that in October 2001, more than two months after Skilling abruptly resigned as CEO and company chairman Lay had resumed that role, Enron sought a private $500 million loan to help ease its financial woes.Glisan said he advised Lay the company’s liquidity and balance sheet were strained and cash flow was very weak. Credit rating agencies increasingly questioned the company’s credibility because of possible looming losses and writedowns in addition to a $1 billion charge and $1.2 billion writedown in shareholder equity announced the prior week.Earlier that month, Lay had directed him to feel out credit rating agencies on how much of a writedown Enron could report for the third quarter that year and maintain its investment grade rating. Enron limited its third-quarter charges to the amounts reported based on those inquiries, Glisan said.He said he “laid out the logic” to Lay on Oct. 23, 2001, by saying, “Bankruptcy is inevitable.” He described Lay as “non-responsive and somewhat resigned.”Yet Lay then told employees the company was “doing well financially and operationally” and “liquidity is fine.” Lay’s public statements to analysts were equally optimistic.Under cross-examination, Glisan has acknowledged that while he kept copious notes of meetings, he had no tangible proof he told Lay that Enron’s financial situation was dire.Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors. Lay faces seven counts of fraud and conspiracy, most of which focus on his actions after Skilling resigned to the point when Enron sought bankruptcy protection.Both sold millions of dollars in stock before the company failed, but only Skilling faces charges of improper stock sales.Glisan pleaded guilty in September 2003 to conspiracy for creating financial structures he said Enron used to manipulate earnings and hide losses. He received no recommendation for a reduced sentence from prosecutors, but is expected to shave about 18 months from his five-year term – which he began serving upon pleading guilty – for good behavior and completion of an alcohol abuse prevention program.After Glisan finishes, prosecutors intend to summon a few more witnesses to address Skilling’s stock sales and to present documents to jurors. The government expects to rest its primary case by midweek, and the defense is scheduled to begin April 3.Both defendants intend to testify. Skilling is expected to be the first of the two in the witness chair. He twice testified before Congress in February 2002, attributing Enron’s failure to a “classic run on the bank.”
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