HOUSTON – Former Enron Corp. Chief Executive Jeffrey Skilling on Tuesday addressed prosecution testimony that painted him as an earnings-obsessed leader so bent on meeting or beating Wall Street expectations that his minions resorted to fraud with his knowledge.
The ex-CEO denied that he spearheaded a conspiracy that in part included fudging Enron's books before the company sought bankruptcy protection in December 2001.
"You are a smart guy, aren't you?" his lead lawyer, Daniel Petrocelli, asked the ex-CEO known for a swaggering bravado while leading Enron's transformation from a stodgy pipeline company to an energy heavyweight in the decade before it crashed, in one of the most scandalous business failures in history.
"Yes," Skilling replied matter-of-factly.
"Are you smart enough to mastermind this kind of conspiracy and pull it off without getting caught for years?" the attorney pressed.
"I don't think so," Skilling said.
Skilling's testimony is among the most highly anticipated in the federal criminal trial — equal only to that of his co-defendant, Enron founder Kenneth Lay, who aims to testify later in the case. Skilling began testifying Monday and is expected to be on the stand for several days.
Lay and Skilling are accused of repeatedly lying to investors and employees about Enron's financial health when they allegedly knew fraudulent accounting created a facade of success.
The two men say there was no fraud at Enron other than that committed by former Chief Financial Officer Andrew Fastow and a few others, who skimmed millions from secret side deals, and that bad publicity as well as lost market confidence sank the company.
Prosecutors allege Skilling pre-determined that Enron's earnings would grow up to 20 percent annually and resorted to accounting tricks to manufacture profits when business operations weren't up to snuff.
Skilling sought to erase his image as an overly demanding CEO who expected top performance at all costs. He acknowledged he had high expectations, but described himself as a negotiator with business heads when setting earnings targets. He said Wall Street would understand if companies missed expectations if they had a reasonable explanation.
"Are you just ordering these people: 'You come up with this number. We need it. I don't want to hear anymore. I'm Jeff Skilling?'" Petrocelli asked.
Skilling laughed, then said, "No."
Skilling later addressed one of the most notorious elements of the Enron scandal — partnerships created and run by Fastow to conduct deals with the energy company.
Fastow testified last month that Skilling told him, "Get me as much of that juice as you can," regarding the personally lucrative partnerships the ex-CFO used to manipulate Enron's finances.
Skilling said he didn't recall making that statement. "I don't use the word 'juice' in that context," he said.
Fastow had testified that Enron turned to the partnerships to buy its poor assets and investments so the energy company could hide debt and boost earnings. But Skilling said Fastow pitched the partnerships as a quick buyer for Enron assets, which the ex-CEO thought would benefit shareholders.
"Was LJM a puppet of Enron?" Petrocelli asked.
"No, it wasn't," Skilling said.
Skilling described Enron's pre-scandal, halcyon days, using terms such as "very strong competitive performance" and "solidifying our cost position." He sounded much like the company cheerleader jurors heard on hours of audiotapes of conference calls with analysts played earlier in the trial.
The government alleges his optimism hid bad news in 2000 and 2001.
"In 1999, given that you're ahead of everybody else, was there any reason why the company needed to start breaking the law in order to continue that growth?" Petrocelli asked.
"No," Skilling replied.
But a string of prosecution witnesses — including Fastow and seven other ex-executives who pleaded guilty to crimes — said they and Skilling lied to investors or hid bad news. Skilling said Tuesday he never told anyone to cheat or lie, and prosecution witnesses earlier acknowledged he didn't issue such explicit orders.
"Did you tell them you didn't want to know about it, just take care of it, hit the numbers, or whatever?" Petrocelli asked.
"No," Skilling replied, noting that prosecution witnesses lied to jurors when they said he participated in such schemes.
Skilling also addressed allegations from other prosecution witnesses that he ordered — or knew about — fraudulent moves to increase Enron's reported earnings-per-share for the fourth quarter of 1999 and the second quarter of 2000 in order to ensure the company met or beat Wall Street performance expectations.
Paula Rieker, Enron's former No. 2 investor relations executive, testified that her boss, former investor relations chief Mark Koenig, told her Skilling twice ordered those last-minute increases. Koenig didn't go that far when he testified, saying only that Skilling had authority to do so.
And Wesley Colwell, former chief accounting officer for Enron's profitable trading division, said he wrongly dipped into reserves to increase second-quarter 2000 earnings to 34 cents from 32 cents because he understood Skilling and other top executives wanted to impress Wall Street.
Skilling said Tuesday he had "absolutely no recollection" of the fourth-quarter 1999 increase. He called the alleged skullduggery behind the 2000 increase "absurd" because Enron's trading profits had already pushed earnings above Wall Street expectations.
Skilling has yet to be cross-examined.
Skilling is charged with 28 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces six counts of fraud and conspiracy.
If convicted of all counts, Skilling faces a maximum of 275 years in prison and tens of millions of dollars in fines. But an actual prison sentence would likely only be 20 years or more. Lay faces a maximum of 45 years in prison if convicted of the six counts against him.