HOUSTON – An ex-Enron executive testifying against his former bosses Jeffrey Skilling and Ken Lay sparred with a defense lawyer Tuesday, insisting that it was "wrong" for the company to boost reported earnings to match Wall Street estimates.
Mark Koenig stood his ground under an often combative cross-examination by Skilling attorney Daniel Petrocelli over the company's raising of 1999 earnings per share by a penny, which he testified to earlier and prosecutors have portrayed as an intentional bid to mislead to investors.
Petrocelli asked Koenig, former head of Enron's investor relations, to concede that the company could legitimately find additional earnings after learning of the Wall Street estimates.
"There is nothing wrong with that, right?" Petrocelli asked Koenig.
"That is wrong," Koenig shot back. "I think that's wrong. To go back and sharpen the pencil and find another penny of earnings, I don't think that's fairly presenting the quarter."
The point is central to the prosecution theme of the case that Skilling and his boss Ken Lay spun a web of lies to convince investors and the public that Enron was in good financial health even as it spiraled toward bankruptcy.
Lay and Skilling are charged with fraud and conspiracy in Enron's collapse, the largest corporate bankruptcy of its time and the first in a wave of corporate scandals to rock Wall Street.
Koenig pleaded guilty in 2004 to aiding and abetting securities fraud under an arrangement with prosecutors that calls for him to testify against his former bosses in exchange for possible leniency when he is sentenced.
The former executive, the first witness in Skilling and Lay's high-profile trial, has spent four days on the witness stand. On Monday he broke down in tears after Petrocelli accused him of lying to try to protect himself and questioned him about his children.
Petrocelli made an apparent reference to that moment on Tuesday after another testy exchange, telling Koenig: "You're being tough on me, but fair enough, I might have been tough on you yesterday.
Skilling and Lay have pleaded not guilty and said the company did not engage in any widespread illegal activity, except for some crimes committed by former Chief Financial Officer Andrew Fastow and his team.
Defense attorneys say it was Fastow's misdeeds that brought down the company by triggering a panic on Wall Street when they became public.
Fastow and 15 other former Enron executives have pleaded guilty to Enron-related crimes, and many are expected to testify against Skilling and Lay in the coming weeks.