Video shows Lay, Skilling in Enron's better days

Wednesday, February 08, 2006

(2/08/06 - HOUSTON) -- For about 30 minutes, jurors in the fraud and conspiracy case against former Enron Corp. chiefs Kenneth Lay and Jeffrey Skilling saw the one-time corporate celebrities as the energy giant's top cheerleaders rather than criminal defendants.

Skilling's lead lawyer, Daniel Petrocelli, on Tuesday played a videotape of Lay and Skilling addressing analysts at a January 2001 conference near the end of a second day of cross-examining the prosecution's first witness, former Enron investor relations chief Mark Koenig.

On the video, Lay and Skilling, casual with open-collared shirts and sport coats, appeared demonstrative, tanned and enthusiastic as they praised their company and lofty growth prospects.

That vibrancy was long gone Tuesday as each watched from the courtroom defense table, leaning back in leather chairs and peering up at their images of five years ago on a large screen, Lay thinner and more pale and Skilling tightlipped.

Petrocelli told U.S. District Judge Sim Lake more video and audio tapes would come Wednesday, when he aims to play about five hours' worth in their entirety to address charges that Skilling repeatedly lied to investors by approving financial statements with fudged numbers or hiding bad news. Koenig, who had yet to be questioned by lead Lay lawyer Michael Ramsey, was expected to remain in the witness chair through Thursday.

On Tuesday, Koenig grew tense as Petrocelli challenged his testimony that suggested Skilling participated in schemes to raise earnings estimates or minimize how much revenue stemmed from asset sales.

In his fourth day of testimony, Koenig reiterated his belief that top executives bent on meeting or beating Wall Street earnings expectations made or knew of overnight changes to estimates that he considered suspect.

Failure to meet or beat analyst earnings expectations could trigger a drop in the company's stock price.

But Koenig couldn't say Skilling lied or knowingly did anything improper. Koenig pleaded guilty in 2004 to aiding and abetting securities fraud for lying to auditors.

For example, Koenig said he informed Skilling and former top Enron accountant Richard Causey, on the day before Enron was to announce fourth-quarter 1999 earnings, that analysts pushed expectations to 31 cents per share from 30 cents. Koenig said "a decision was made to increase the earnings" and Enron announced it had hit 31 cents.

But Koenig again did not say Skilling ordered the change, nor did he know how Enron justified the increase.

"I know they figured out a way to come up with the extra penny. I didn't inquire into the exact transaction or adjustment, no," he said.

Causey was bound for trial alongside Skilling and Lay until he cut a deal with prosecutors and pleaded guilty to securities fraud three days after Christmas.

Enron was the nation's seventh-largest company before it went bankrupt in December 2001 upon revelations of billions of dollars in hidden debt and inflated profits.

Prosecutors contend Lay and Skilling repeatedly lied about Enron's health when they knew accounting maneuvers propped up a facade of success. The defendants say there was no fraud at Enron except for three former executives who skimmed millions from some deals.

Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces seven counts of fraud and conspiracy. Both face decades in prison if convicted. Both sold millions of dollars in stock before Enron went bankrupt, but only Skilling faces allegations of improper stock sales.

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