Risk & Compliance

Skilling on Sarbox: ”We Had It Before”

Former Enron CEO maintains that when it came to accounting controls, the energy giant was ''significantly ahead'' of the pack.
Stephen TaubApril 10, 2006

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“It’s funny that Sarbanes-Oxley, that’s one of the protections to make sure there isn’t another Enron, we had it before,” maintained former Enron chief executive officer Jeffrey Skilling on his first day of testimony, according to the Houston Chronicle.

Skilling — on trial in federal court in Houston with his former colleague Kenneth Lay — reportedly told jurors that as a consultant, and later as Enron’s CEO, he visited many companies, and that when it came to accounting controls, the energy giant was “significantly ahead” of the pack.

In fact, asked by his attorney Daniel Petrocelli whether he would consider himself “a control freak,” Skilling reportedly responded, “It’s more accurate to call me a controls freak than a control freak.”

Skilling also told the court that his former company was rated BBB+, “just three levels above junk,” and that’s just the way Enron executives wanted it, reported the Chronicle. The newspaper observed that according to Skilling, this was evidence that Enron was a growth company — if it were higher-rated, Enron would have had to return more to shareholders — but also that it was vulnerable to short sellers.

The former executive reportedly spent considerable time during the afternoon session explaining to jurors how the company was structured. “Enron was much more than a trading company,” Skilling reportedly asserted, adding that it had a “very small” risk position.

Skilling also reportedly maintained that he was unaware of the company’s huge financial problems until the publication, in October 2001, of a Wall Street Journal article headlined “Enron Taps $3 Billion from Bank Lines.” According to the Chronicle, Skilling continued, he knew that creditors would be lining up to get paid, making it much harder for the company to borrow money.

Asked about his reaction, Skilling told jurors that later that day, he started drinking, and that the following week he had difficulty getting up in the morning, the Chronicle reported.

Skilling also reportedly testified that he planned to “put up $70 million” of his own assets to help Enron through its financial crisis and that other former executives, including Cliff Baxter and Lou Pai, also considered kicking in millions. According to the Chronicle, the emergency-financing plan fell through when Baxter said he couldn’t do it, Skilling testified.

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