Witness says Skilling directed him to mislead Enron board | VailDaily.com

Witness says Skilling directed him to mislead Enron board

HOUSTON – Kenneth Rice, chief of Enron Corp.’s struggling broadband unit, testified Thursday that his boss, Jeffrey Skilling, directed him to paint a rosy, misleading picture for the Enron board of directors that was in line with false statements Rice said he already made to financial analysts in 2001.But Rice, the former CEO of Enron Broadband Services, said in his third day on the stand at the fraud and conspiracy trial of Skilling and founder Kenneth Lay that he had no documents and “only my recollection” to back up a conversation he had with Skilling, Enron’s chief executive, as he prepared for a May 2001 meeting of the company’s board.”What I took from meeting with Mr. Skilling was he wanted me to put a presentation together that was more consistent with the analyst conference and less direct on some of the challenges we were facing at EBS,” Rice said.In January 2001, Rice told Wall Street analysts who influenced the company’s stock price that the business was well-positioned for strong, long-term financial performance. In reality, however, EBS was spending $100 million per quarter and generating little revenue and business, he said.He told the board, after making what he said were some 13 drafts of his presentation, that his unit was successful, helped Enron overall keep a strong position in the market, that its broadband network was substantially complete and they had an “excellent deal flow” in trading activities.”What I presented to board was inconsistent with what was going on at EBS,” said Rice, who is among 16 ex-Enron executives who have pleaded guilty to crimes stemming from the government’s investigation of the energy company’s swift tumble into bankruptcy proceedings in December 2001.But as he has done throughout his three days of testimony, Rice stopped short of saying Skilling lied to investors about the health of Enron.”I knew that Mr. Skilling and I had misled investors on a number of occasions on the prospects of our business within EBS,” Rice said under questioning by Skilling attorney Mark Holscher.When Holscher asked if Rice had ever expressed concerns to “your friend” Skilling about any of those misleading statements, he replied: “I don’t know if I did.” He described Skilling as “very hard working” and said Enron was worse off upon his abrupt resignation in August 2001, less than four months before Enron imploded.Rice pleaded guilty in July 2004 to securities fraud and turned over $13.7 million in cash and property – including a Ferrari and a Colorado vacation home – and agreed to help prosecutors in Enron-related cases. The government can recommend a sentence more lenient than the 10-year maximum for securities fraud if prosecutors are pleased with his help.Rice’s net worth was about $25 million when he was indicted in May 2003. He told jurors Thursday he was able to keep about $10 million after striking a plea deal with prosecutors.Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces seven counts of fraud and conspiracy related to the months after he replaced Skilling as CEO. Both men sold millions in stock before the company crumbled, but only Skilling is charged with improper stock sales.Lay’s name barely surfaced in testimony Thursday. One of his lawyers, Chip Lewis, asked Rice only whether Lay and Enron board members should have expected Rice’s presentation to them on May 1, 2001, to be “anything less than candid.””No,” Rice replied.Rice was followed on the stand by Terry West, an accountant at what is left of Enron and the former director of corporate planning who joined the company in 1981 when it was a relatively small pipeline business known as Houston Natural Gas.She explained for jurors the process Enron followed to develop its annual spending and earning plans to meet corporate goals of 15 percent yearly gains in earnings per share. Enron became the nation’s seventh-largest company.As usual, no trial was scheduled for Friday, and a federal holiday meant no proceedings on Monday.The government’s next witnesses, beginning Tuesday, were to include Paula Rieker, Enron’s former No. 2 executive in investor relations. She also served as corporate secretary, dealing directly with Lay and the company’s directors, in the months before Enron failed. In May 2004 Rieker pleaded guilty to insider trading for selling shares in mid-2001 upon learning that Enron’s broadband unit lost more money than publicly disclosed.After Rieker, prosecutors expect to call Wes Colwell, former chief accounting officer for Enron’s trading unit. Colwell in October 2003 agreed to pay $500,000 to settle Securities and Exchange Commission allegations of manipulating earnings by using trading profits to offset massive losses in Enron’s retail energy unit.Vail, Colorado

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