Risk & Compliance

Enron Defense Still Playing Small Ball

One of the heavy hitters, Jeffrey Skilling, may testify as early as Wednesday.
Stephen TaubApril 4, 2006

Examine our Enron archive

For a second straight day, attorneys for Kenneth Lay and Jeffrey Skilling called a succession of witnesses to pick away at the prosecution’s case. During much of the morning, the defense — minus Lay attorney Mike Ramsey, who is scheduled for carotid artery surgery on Wednesday — focused on the difference between “redeployment” and “layoffs.”

In February, Kenneth Rice — the former chief executive officer of Enron Broadband Services — testified that Skilling encouraged him to lay off employees as a cost-cutting measure but to tell Wall Street analysts that the company had merely shifted around some employees.

“It was redeployment,” testified Sarah Davis on Tuesday. According to the Houston Chronicle, the former human relations employee told jurors that Enron tried to get those workers jobs elsewhere in the company. If they had been laid off from the broadband unit, she reportedly added, the workers would have been taken to HR, given a severance package, and escorted from the premises.

Marla Barnard, a former human relations executive at Enron Broadband Services, reportedly testified that half of the affected employees took new jobs at Enron, while the remainder accepted a severance package.

Wade Cline, a 14-year veteran of Enron and the company’s current general counsel, testified about the $3 billion Dabhol power plant in western India. By the spring of 2001, Fastow had maintained that the project — in which Enron held a 65 percent stake — should be mothballed and written off, according to the Chronicle. The newspaper added that according to Cline, the facility was a viable entity, but on cross-examination he acknowledged that he did not take part in high-level discussions in Houston about the fate of the plant.

Long after Enron declared bankruptcy, the Chronicle observed, the company recouped a mere $20 million from the sale of the facility.

Mark Metts, former executive vice president of corporate development, maintained that under the aegis of a so-called Project Summer, Enron attempted to sell many international assets for a total of more than $7 billion, reported the Chronicle. Prosecutors have alleged that the LJM partnerships, controlled by former CFO Andrew Fastow, were a dumping ground for many of these assets, which otherwise would have dragged down Enron’s balance sheet.

Fastow reportedly testified that he knew of no such project, and Metts told jurors that indeed, the finance chief was kept out of the loop. Regarding the ultimate disposition of that $7 billion-plus of international assets, Metts added, “My belief is we got very close.”

All this is a prelude, of course, to the appearance on the witness stand of the defendants themselves; Skilling may testify in his own defense as early as Wednesday, according to the Associated Press.