Risk & Compliance

Rieker Cross Takes a Nastier Turn

During vigorous questioning, Enron's former corporate secretary literally asks a defense attorney to step back.
Dave CookFebruary 23, 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 toughening cross-examination on Thursday at the trial of Kenneth Lay and Jeffrey Skilling.

Bruce Collins, who represents Lay, seemed to be “attempting to chip away at Rieker’s credibility,” observed the Houston Chronicle. A day earlier — on the issue of disclosing the shift of losses from one Enron division to another — she reportedly testified that “I tried to correct Mr. Lay, and I told him how some things should be described or said differently,” but that “he never responded to me.”

Rieker also reportedly testified that her discussion with Lay took place in a car while the two rode to a New York analyst conference. According to the Chronicle, Collins observed that in contrast to the masses of documentation assembled for each witness in fat three-ring binders, no one else was present but the driver, and there is no physical evidence that she cautioned Lay at all.

Regarding the same disclosure (or lack thereof), Collins also questioned the former IR exec’s statement that Wall Street analysts rely more on earnings releases than on 10-Qs, asked whether she was ever an analyst, and asserted that analysts who didn’t examine 10-Qs wouldn’t be doing their jobs. “I agree with you that they should read [the 10Q],” replied Rieker, “but I would get more calls from people [after earnings were released].”

The exchanges only got testier after Collins passed the baton to Daniel Petrocelli, the lead attorney for Skilling. Petrocelli started in by noting that Rieker made $2.9 million in 2000 and $3.1 million in 2001, according to the Chronicle. In her self-evaluation for Enron’s annual review, Petrocelli reportedly continued, Rieker called herself a ”key architect” in presenting Enron to investors.

“Now you want us to believe, contrary to what you wrote at the time,” Petrocelli continued, “now you want us to believe you were just repeating what you were hearing? You want us to believe that?” During his cross-examination, reported the Chronicle, Petrocelli often hovered near Rieker, and on one occasion she said, “May I ask you to step to the podium? Thank you.”

“Got too close,” Petrocelli reportedly said with a smile.

Rieker was not smiling today, the Chronicle noted, though she generally retained her composure during several hours of questioning in this vein. The paper also observed that Petrocelli “worked tirelessly to distance Skilling from her testimony for the government, which largely focused on Ken Lay.”

Petrocelli concluded his cross-examination of Rieker Thursday afternoon; after a short recess, reported the Chronicle, prosecutor John Hueston picked up with much-more-gentle questioning on redirect.

Defense attorneys began the day by playing the conclusion of a webcast of an October 22, 2001 employee meeting. According to the Chronicle, Lay fielded this query, which was delivered in writing: “I would like to know if you are on crack? If so, that may explain a lot. If not it will be a long time before we trust you again.”

The employees erupted in laughter, and Lay giggled himself, wrote the newspaper. He then reportedly responded: “No, I’m not on crack. It might have been a lot easier to take the last few days if I was.”