Witness; Skilling, others lied about Enron’s finances | VailDaily.com

Witness; Skilling, others lied about Enron’s finances

HOUSTON – A former high-ranking Enron trading and retail energy executive testified Wednesday that he, Chief Executive Jeffrey Skilling and others lied about the company’s financial health as part of a conspiracy to defraud investors.”As a management team, we did lie,” David Delainey said, sticking to damaging testimony under cross examination from Skilling lawyer Daniel Petrocelli in the fifth week of the fraud and conspiracy trial of Skilling and Enron founder Kenneth Lay.”We had a very compelling story that we were telling and we weren’t telling the complete truth,” Delainey said.”What was this Enron story? Is it a story about a criminal conspiracy?” Petrocelli demanded.”Yes,” Delainey replied.”Is it a story about fraud?” Petrocelli asked.”Yes,” Delainey said.Prosecutors contend Lay and Skilling repeatedly lied about Enron’s financial health while knowing fraudulent accounting propped up the company before it spiraled into bankruptcy proceedings in December 2001.The defendants say there was no fraud at Enron, and negative publicity and dwindling market confidence fueled the company’s collapse.Delainey, who was one of Skilling’s chosen stars at Enron in its last years, said the most brazen example of the collusion he could remember was a meeting in late March 2001, at which he caved in to a Skilling-approved plan to move the trading arm of Enron’s flailing retail energy unit, Enron Energy Services, into the company’s larger, profitable energy trading franchise, Enron North America, to hide $200 million in losses.Delainey had just become CEO of Enron Energy Services, having run Enron North America before.Delainey Wednesday stood by his initial testimony Tuesday that he had told his superiors the move lacked integrity and Enron should just write off the losses. He said Richard Causey, then Enron’s chief accounting officer, reacted angrily to his statements. Delainey said Skilling looked at him and asked, “What do you want to do?” Delainey said he interpreted that as an order to go along with the move.The next month, Skilling told analysts who influenced Enron’s stock price that move was driven by the need to improve efficiency.While Delainey said Skilling never explicitly ordered him to lie, he said he vocally opposed the move and his participation and his superiors’ implicit approval was “the worst conduct I have ever been a part of, and everybody knew exactly what was going on at that meeting.””In my memory, that was just about as bad as it could get and as brazen as it could get,” Delainey said.But Delainey freely admitted that he went along with the lies as Petrocelli tried to show he may still be lying. Delainey had acknowledged that he initially lied to investigators in an effort to avoid prosecution before he pleaded guilty in October 2003 to insider trading. He is testifying as part of that plea agreement in hopes of getting a lenient punishment.Petrocelli asked Delainey if he was afraid he’d get in trouble with prosecutors if he didn’t keep pushing Skilling’s public explanation of the move of retail losses as “a lie, a lie, a lie,” to which Delainey said, “No, I just want to make sure the truth comes out.”Delainey also said he aspired to replace Skilling after the CEO abruptly resigned in mid-August 2001. He said he opposed Skilling’s offer to return in October that year when Wall Street’s adoration of Enron began plummeting upon revelations of losses and murky accounting.Lay, who resumed the role of CEO upon Skilling’s resignation, ultimately rejected the offer.When asked why Delainey opposed the return of the CEO who had nurtured his career, Delainey said, “He had just put us through the ringer by quitting. And all of a sudden he wanted to come back? We had enough problems without having to explain that.”Earlier Wednesday Timothy Belden, a former top Enron trader, also said the retail unit’s trading arm was folded into the larger trading franchise to hide losses. He disputed that the need for efficiency drove the move, because he was put in charge of cleaning up messy, overvalued retail contracts in mid-2001.Belden pleaded guilty in 2002 to conspiracy for orchestrating schemes to manipulate California’s energy markets during the state’s power crisis in 2000-2001, but didn’t testify about that because neither Lay nor Skilling are charged with such market manipulation.Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces seven counts of fraud and conspiracy. If convicted, both could serve decades in prison. Only Skilling faces allegations of improper stock sales.—Associated Press Writer Michael Graczyk contributed to this report.Vail, Colorado

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