Risk & Compliance

What Enron Analysts Knew, and When

On Skilling's first day of cross-examination, prosecutor Sean Berkowitz questioned the former chief executive's disclosures to analysts while keepi...
Stephen TaubApril 17, 2006


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Prosecutor Sean Berkowitz and former Enron CEO Jeffrey Skilling were at odds Monday afternoon over what analysts knew about the company’s financial health, and when they knew it.

During the first afternoon of cross-examination, Berkowitz scoffed at Skilling’s assertion that he told analysts in 2001 that the company’s international assets were in poor shape. “Maybe I’m in Alice in Wonderland here, Mr. Skilling,” said Berkowitz, reported the Houston Chronicle. According to the newspaper, the prosecutor also suggested that Skilling misled analysts about the company’s failed attempts to sell the assets as well as their value.

Skilling reportedly countered, “I don’t think they could have been at all confused about the status of these assets.”

At one point, Berkowitz put Skilling on the spot, challenging him to find places in transcripts of conference calls where he was upfront with analysts about the issue, according to the Chronicle. Reviewing the transcript of an April 17, 2001, earnings call, Berkowitz reportedly exclaimed, “Nowhere in that call do you tell the public if you sold the assets immediately you would be losing billions of dollars, correct?”

Skilling began to flip through the transcript — seemingly flustered, the Chronicle observed — responding: “I don’t know. Let me see. I think there may have been something in the Q and A portion.”

“Take your time,” said Berkowitz, though moments later he reportedly returned to firing questions at Skilling, who never did find that passage. Responding to Skilling’s suggestion he may have made the disclosures on a different conference call, Berkowitz retorted, “If it’s in there, I imagine that Mr. Petrocelli and the lawyers on your team will find it,” according to the Chronicle.

When Skilling tried to elaborate on the timing of a study on the company’s international assets, Berkowitz reportedly interrupted: “I don’t want to hear speeches, OK?” The newspaper observed that Berkowitz kept Skilling, and Skilling’s answers, under tight control all day.

The prosecution also cast a dubious eye on Skilling’s assertions that he didn’t have complete knowledge or direct approval over the LJM partnerships run by former CFO Andrew Fastow. On direct examination, the former chief executive testified that at a board meeting in 2000 — at which, prosecutors maintain, approval of the LJM2 partnership was discussed — he was present only sporadically because he had to deal with a power and water failure in the hotel where the meeting took place.

On Monday, reported the Chronicle, Skilling maintained that he believed the LJM partnership discussed at that meeting was LJM3, which ultimately was never formed. He also reportedly said that the meeting was “pretty chaotic.”

Asked by Berkowitz why he would step out of the room, Skilling hesitantly told jurors that relocating the board meeting “was a big decision; it would have involved moving the entire board of directors,” according to the Chronicle.

“You didn’t have an assistant who could handle the logistics?” queried Berkowitz. “It wasn’t logistics,” Skilling reportedly replied, “it was a matter of whether we were going to move it or not.”

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