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Enron's decision to shift business units was not, as prosecutors said, an attempt to hide losses, but a practice that "happens all the time," says a defense witness.
Stephen Taub, CFO.com | US
May 4, 2006
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An accounting expert in the Enron trial defended the company's decision to shift part of one business unit to another, which the prosecution claims was done to hide losses, according to the Associated Press.
Testifying for a second day, Walter Rush, a consultant and former PricewaterhouseCoopers LLP partner, said Enron did not break rules, noting that such transfers happen "all the time." Jeffrey Skilling's lawyer, Randy Oppenheimer, asked Rush whether there anything whatsoever, "a rule, law, regulation you're aware of, to keep a company from doing it?"
According to the AP, Rush replied: "As long as it stayed within the same country. As long as it was the same taxing jurisdiction, it's fine."
The trial was adjourned shortly after the lunch break, and Judge Sam Lake said he expected testimony to be completed by next Thursday. That means closing arguments are likely to begin on Monday May 15, with the case going to the jury a few days later.
Earlier in Thursday testimony, an economics professor at Texas Christian University defended large stock sales by Kenneth Lay in 2001, asserting they were actually signs that the former Enron chairman was actually bullish on the stock.
Christopher Barry asserted that most of Lay's $70 million in stock sales were due to margin calls on borrowed money as Enron's stock fell from Aug. 19 to Sept. 8, 2001, according to the Houston Chronicle. The witness noted that as Lay drew on a line of credit, his debt level dropped significantly, according to the report.
Noting that Lay received $20 million in August 2001 — $10 million in cash and $10 million in stock and options — after resuming the CEO role, Barry said it was a bullish sign that the executive used the $10 million in cash to pay off his margin call, likening it to a decision to buy more Enron stock, according to the report.
"By using the cash to pay off debt, that allows him to avoid selling off Enron stock," to pay off the margin calls, Barry reportedly said. "It's like deciding to acquire more Enron stock."
"It's very consistent with confidence in the firm," Barry reportedly told jurors.