Accounting experts testifying for the defense endorsed Enron Corp.’s financial statements, said the Associated Press. Jerry Arnold, an accounting professor at the University of Southern California, told jurors that third quarter 2001 financials that former Enron Chairman and CEO Kenneth Lay discussed with investors complied with Securities and Exchange Commission rules, according to the wire service.
“That is my view,” he said, according to the report, noting that Enron had reported $638 million in losses and a $1.2 billion reduction in shareholder equity.
The government and several witnesses contended that Lay misled investors because he knew Enron’s assets were overvalued and that losses were coming, the AP noted. “I disagree with their interpretation,” Arnold testified.
Arnold told the jury that his company was paid $1 million for his work, of which he had received “a little more than $600,000.”
Later in the day, another accounting expert, former Coopers and Lybrand auditor Walter Rush took the stand. Rush, who was asked to examine Enron’s handling of reserves and other matters, testified that last-minute changes to quarterly earnings reports allegedly ordered by former Enron Chief Executive Jeffrey Skilling were accurate and not the result of improper tapping of company reserves, according to the AP.
“In a company as large as Enron, to get financial statements out … is an enormous undertaking,” Rush reportedly said. “And people are scrambling, trying to get these estimates put together. There are changes going on up to the very last second. It is universal. Every company goes through this.”
Mark Koenig, former head of investor relations at Enron, testified early in the trial that top Enron executives made overnight changes to the financials because they were determined to meet or beat consensus earnings forecasts to keep the stock aloft, noted the AP. Paula Rieker, who worked with Koenig, said Koenig told her that Skilling ordered abrupt last-minute changes to two quarterly earnings reports, added the wire service.
Rush, however, dismissed the testimony, asserting, “They could have just had a bad number.” He also dismissed Skilling’s phrase—”beat the street”—as inconsequential, noting, “Companies set goals and forecasts for themselves all the time,” reported AP.
Rush also disputed government claims that Enron executives improperly moved parts of the company’s retail operation into its highly profitable wholesale business to disguise financial problems under an accounting process called “resegmentation,” according to the report. “I do believe it was properly disclosed and properly accounted for,” Rush reportedly said. In fact, he asserted that Enron went beyond the rules in disclosing details about the resegmentation, according to the AP.
“The rules only require we tell we have made a resegmentation,” Rush reportedly stated. “You just merely need to alert the reader there has been a change.”
![](https://pixel.welcomesoftware.com/px.gif?key=YXJ0aWNsZT0xN2ZhMjlmMDJmNzUxMWVjYjk5ODgyYzM1ZjQxZTgzNw==)