Risk & Compliance

Lay “Focused on Grand Policy”

A former Enron counsel testifies that Jeffrey Skilling and Kenneth Lay focused on strategy, relying on the advice of others for financial reporting.
Stephen TaubApril 6, 2006

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Former Enron general counsel James Derrick spent his second day on the stand Thursday, helping defense attorneys distance former chief executives Jeffrey Skilling and Kenneth Lay from former CFO Andrew Fastow and the controversial partnerships that he created to help shield Enron’s financial problems.

Derrick said Skilling never avoided signing off on documents, such as some of the supplemental approval sheets of the LJM partnership deals, according to The Chronicle. That would suggest Skilling had no concerns about the legitimacy of the deals and trusted Fastow.

Derrick also told jurors that Skilling and Lay relied on his advice and that of other professionals when they signed off on the company’s quarterly and annual reports, according to the paper. He also said that he could not recall either executive overruling him or others on such matters.

“In my view, Mr. Lay was focused on the grand policy, the strategic policy, thinking where [Enron] ought to be a year from now, five years from now,” Derrick testified, according to The Wall Street Journal.

Derrick was also asked about earlier testimony from Kevin Hannon, a former Enron Broadband Services executive, who recounted how in a May 2001 meeting Enron leaders realized the company was in trouble. When discussing a since widely-publicized critical analysis by Off Wall Street Consulting Inc., Hannon quoted Skilling as saying, “They’re on to us.”

Derrick, who attended the same meeting, was asked whether Skilling made that comment. “They’re on to us? No, not that I can recall,” said Derrick, according to The Chronicle.

Skilling was widely expected to take the stand on Thursday afternoon, but as the day progressed, it seemed that defense lawyers preferred to wait until next week to trot out what will most likely be riveting, pivotal testimony in the months-long trial. The Houston Chronicle noted that at least one observer though defense lawyers were purposely moving slowly on Thursday so they could hold off on Skilling until next week. (The trial is not in session on Fridays).

“He’s sucking the wind out of the clock,” one Houston defense lawyer said to the paper, referring to Lay’s attorney Mac Secrest.