Risk & Compliance

Government Puts No Stock in Skilling Story

Former Enron CEO claims a 500,000-share sale was due solely to concerns after September 11; prosecutors suggest that an internal probe and a possib...
Stephen TaubApril 17, 2006

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Prosecutor Sean Berkowitz began his cross-examination of Jeffrey Skilling on Monday by asserting that the former Enron CEO and his co-defendant, Kenneth Lay, were the “captains of the ship” and that Skilling has his “hand firmly on the wheel,” reported the Houston Chronicle.

Throughout the trial, prosecutors — who have charged Skilling with 28 counts of fraud, conspiracy, and insider trading — have sought to prove to the jury that Skilling was a take-charge CEO who had access to all of Enron’s major executives, including Lay, former chief financial officer Andrew Fastow, and former chief accounting officer Richard Causey.

A major issue in the government’s case is Skilling’s motivation for selling 500,000 shares of Enron on September 17, 2001, about a month after his abrupt August 14 departure from the company. In the past, noted the Chronicle, Skilling has claimed the he sold the stock due to general concerns about the stock market following the September 11 attacks; he repeated those assertions today.

Berkowitz asked whether Skilling had forgotten about trying to sell 200,000 shares of Enron on September 6 (a sale that was not completed), according to the newspaper. Skilling’s reported reply: “I don’t think I had a plan; I think I was reacting to what was going on in the marketplace at that time.”

The prosecutor also reportedly suggested that Skilling’s stock sales were his reaction to an internal probe into Fastow’s notorious LJM partnerships, as well as to a potential $1 billion write-off that Enron was facing. “I had no knowledge of an internal investigation,” said Skilling, according to the Chronicle. “I had no knowledge of a potential write-off….after September 11, I was very concerned about the company.”

Berkowitz also challenged Skilling’s weekly sale of 10,000 Enron shares, which began in November 2000 and ended the following June, the newspaper observed. Pulling out an article from the Los Angeles Times — which described stock sales by energy executives and questioned Skilling’s $62 million profit from selling stock during the California energy crisis — the prosecutor asked whether Skilling ended his stock-sale program when it came under public scrutiny. The former Enron chief executive insisted that insider trading, by himself or his family, played no part in the sales and that he wanted only to diversify his holdings.

In addition, Berkowitz reportedly grilled Skilling about his meeting with Lay on August 22, 2001, about a week after the former chief’s abrupt departure from the company.

“Isn’t it a fact that Mr. Lay called you on or around August 15 or 16, that he had received a note about accounting irregularities and that he wanted to talk to you?” he asked, according to the Chronicle. Not true, replied Skilling.

“Did you know that Mr. Lay was meeting four hours later with Sherron Watkins at 1:00?” the prosecutor continued. “No I didn’t,” came the reply.

Skilling maintained that his meeting with Lay was solely to discuss strategy, the Chronicle reported, and that he had no knowledge of Watkins’s whistle-blowing activities until January 2002.