Onetime Enron managing director of investor relations Paula Rieker largely supported the testimony of her former boss, Mark Koenig, as the trial of Kenneth Lay and Jeffrey Skilling resumed on Tuesday.
On numerous occasions, her wide-ranging testimony went further. Regarding Enron Energy Services, the company’s retail division, Rieker said that Lay may have begun misleading analysts as early as 2000, according to Bloomberg. The wire service noted that prosecutors have charged Lay only with acts beginning in 2001.
Rieker also testified that when earnings for the fourth quarter of 1999 seemed about to fall short of analyst expectations, she was ”shocked and horrified and a bit panicked,” according to the Houston Chronicle. Once the numbers had been fudged so the company wouldn’t miss earnings, prosecutor John Hueston reportedly asked her, why didn’t she offer more details to analysts? “It would have really hurt Enron and its credibility if analysts would have known that,” she replied.
She also reportedly testified about a meeting with Koenig before an October 2001 presentation to investors; in the presentation, losses were transferred from Enron’s retail unit to the company’s more successful wholesale division. Rieker, who told jurors she was “very bothered” by the undisclosed shift, reported the Chronicle, said that Koenig told her, “Look, you may not agree with it, but your job is to deliver the company message.”
Rieker also told jurors that Lay and other executives mentioned a $1.2 billion shareholder equity reduction during an October 2001 analyst call but not in the coinciding press release — intentionally, she said, because “the conference call wasn’t as widely distributed.” The Chronicle noted, too, that Rieker supported Koenig’s testimony by stating that the $1.2 billion was an accounting error, and that this fact was not revealed even to the analysts.
Later that month, she testified, other Enron senior managers were furious to learn about an SEC investigation into off-balance-sheet partnerships run by former CFO Andrew Fastow. ”It was a remarkable meeting because of how angry people were,” Rieker reportedly said.
That same month, Rieker reportedly testified, the board received a misleading analyst report. Although the company was letting employees go and suffering from liquidity problems, she noted, Lay knowingly allowed directors to receive a report that said “Enron had a strong future because of newly found cost controls” following Skilling’s abrupt departure. Lay did not correct the analyst’s views at the board meeting, said Rieker, according to the Chronicle.
Rieker was promoted to corporate secretary in 2001 after Skilling’s departure from the company; she succeeded Rebecca Carter, who was engaged to Skilling and left Enron with him, according to Bloomberg.
In 2004 Rieker pleaded guilty to one count of insider trading; she forfeited roughly $500,000 in trading profits to the government and surrendered a $130,000 retention bonus. Rieker, who has yet to be sentenced, faces a $1 million fine and 10 years behind bars, though according to the Houston Chronicle, she may serve no prison time if the sentencing judge believes she has been sufficiently cooperative with prosecutors.
Rieker was preceded on the stand, briefly, by Terry West, an Enron accountant called by the prosecution to introduce budget-related evidence, the Chronicle reported. West also reportedly testified that she is a current employee of Enron — one of the few who was kept on as the company concludes its final business dealings — though no more jobs seem to be available.