Risk & Compliance

Enron Defense Steps Up to the Plate

Onetime assistant to Mark Koenig maintains that the former investor-relations chief lied when he told the jury, ''I pled guilty because I am guilty.''
Stephen TaubApril 3, 2006

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After a long weekend recess, defense attorneys got things started slowly on Monday as they began their case on behalf of Kenneth Lay and Jeffrey Skilling.

They began without Lay’s lead attorney, Mike Ramsey, who was absent following outpatient treatment for a stent that had been inserted in his chest last month; Bruce Collins will take the lead until Ramsey’s return.

Perhaps to get the jury back into the swing of things, the defense trotted out several minor Enron employees to make one or two small, sometimes arcane points.

Joannie Williamson, once an assistant to Lay, Skilling, and Mark Koenig — the former chief of investor relations and a key prosecution witness — testified that Koenig lied in February when he told the jury, “I pled guilty because I am guilty,” according to the Associated Press.

She reportedly asserted that Koenig called her on the day in August 2004 that he agreed to plead guilty to aiding and abetting securities fraud and to testify for the prosecution. Williamson recalled telling Koenig, “You’re not guilty.” According to Williamson, he replied, “I know that, but in order for this to work, everyone needs to believe that I am.” She reportedly added that she herself did not believe he was guilty.

On cross-examination by prosecutor Kathryn Ruemmler, the AP also reported Williamson testified that Koenig made no mention to her of being pressured to take a plea.

The defense also called former Enron employee Scott Stoness to counter the testimony of David Delainey, the former head of Enron Energy Services. During the prosecution’s case, Delainey told jurors that his division hid $200 million in losses, according to the Houston Chronicle; Stoness reportedly testified that the loss-hiding strategy, which Delainey attributed to Skilling in March 2001, was just one of five possible plans under consideration at the time. He also told jurors that the unit was unable to quantify the cost of a California tariff for several weeks after it was imposed, so it couldn’t immediately create a reserve for the expense, according to The Wall Street Journal.

For its part, the prosecution observed that whatever possible plans may have been under consideration, the loss-hiding scenario was the one that played out.

On Monday afternoon, the defense called Rogers Herndon, once vice president of Enron’s North America division. Herndon testified that it made good business sense to transfer losses from struggling Enron Energy Services to its profitable wholesale division, according to the Chronicle, which noted that Herndon was responsible for assessing the risk of the transfer.

The transfer allowed “EES to do what it did best, which was sales, and wholesale to do what it did best, which was risk management,” he reportedly told jurors. According to the newspaper, Herndon also testified that Delainey, his boss at the time, never told him the transfers were intended to hide losses from Wall Street analysts, as prosecutors have alleged.

On cross-examination, Enron Task Force chief Sean Berkowitz asked Herndon whether he had attended meetings with Skilling and Lay and if he had any involvement with profit and loss at Enron, the Chronicle reported.

“You weren’t a profit center, correct?” Berkowitz reportedly asked. To which Herndon replied: “Correct.”

Question: “You cared most about risk, correct?” Answer: “Correct.”

Berkowitz continued to grill Herndon along these lines, observed the Chronicle, in an effort to portray him as a naïve outsider who — though a former division vice president — was unaware of misconduct at the top.