Risk & Compliance

Enron’s Rieker Calm During Cross-exam

''I wish a lot of people had spoken up,'' testifies the former corporate secretary and investor relations executive, but ''I fell into the role of ...
Dave CookFebruary 22, 2006

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Paula Rieker, a onetime Enron Corp. corporate secretary who previously served as lieutenant to director of investor relations Mark Koenig, faced cross-examination on Wednesday at the trial of Kenneth Lay and Jeffrey Skilling.

The day before, under questioning by the prosecution, she had recounted the outrage of board members when they learned that Lay had sold $70 million worth of Enron stock to the company. One board member, she testified, said that Lay was “using Enron as a damn ATM machine.”

On Wednesday Rieker faced off against Bruce Collins, an attorney for Lay. The Houston Chronicle observed that although Collins has been practicing law for nearly 30 years and has a reputation as an intense questioner, Rieker responded calmly and confidently, and also made frequent eye contact with the jury.

Collins asked about an October 2001 board meeting, where one topic was the transfer of losses from one Enron unit to another. According to Bloomberg, prosecutors have contended that the company shifted $665 million in losses from Enron’s retail unit to the company’s more successful wholesale division, which reaped more than $2 billion during the California energy crisis.

“Everybody in that room could put two and two together, that there was a risk transfer and Enron was exposed to losses,” Collins reportedly said. “Not one person said this was wrong and Enron was hiding losses, did they?” “No one stated that,” Rieker replied, according to the wire service.

“You could have spoken up, too, but chose not to,” Collins continued, according to the Chronicle. “I wish a lot of people had spoken up that wholesale was not recording its true level of profits and retail was not recording its true level of profits,” Rieker responded.

She also testified that “there were times when I found myself blinding myself to things that had occurred,” reported Bloomberg. “I fell into the role of being a good corporate citizen.” Although she reportedly acknowledged never telling Lay that he had done anything wrong, she added, “I tried to correct Mr. Lay, and I told him how some things should be described or said differently.” Rieker added that “he never responded to me, according to the wire service.

Cameo appearance: William Lerach showed his face in the courtroom this morning, the Chronicle also noted. Speaking in the hallway several minutes later, the lead attorney in the Enron class-action lawsuit said that in the courtroom next door, U.S. District Judge Melinda Harmon had preliminarily approved settlements with Citigroup, JP MorganChase and CIBC, to the tune of $6.6 billion before interest.

Asked by reporters if he would be watching the criminal trial, the paper reported, “Lerach indicated he has other things to do.”

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