Skilling: Lay and I Made a 'Good Team'

HOUSTON – Former Enron Corp. CEO Jeffrey Skilling spoke up for company founder Kenneth Lay for the first time in the executives' fraud and conspiracy trial Wednesday, saying the two were a "good team" that never knowingly broke the law.

The ex-CEO has focused on addressing prosecution testimony damaging to himself since he took the witness stand on Monday.

Even though most criminal counts pending against him and Lay allege crimes that occurred at different times before Enron crashed in scandal in December 2001, an overarching conspiracy count alleges they participated in a sprawling effort to portray Enron as strong when they knew accounting tricks hid bad news and weak ventures.

Skilling told jurors neither he nor Lay perpetuated such a ruse.

"Did you and Ken Lay ever discuss doing something you knew to be forbidden by law?" Skilling's lead lawyer, Daniel Petrocelli, asked Wednesday.

"No," Skilling said, adding later, "It is completely untrue."

Lay aims to testify later in the trial.

Skilling also described how he and Lay differed as leaders. He said they were "a good team" with different strengths. Skilling said he often talked to investors and credit rating agencies, but spent the bulk of his time on internal issues — strategy, budgets and policy — and "tried very hard to keep up to speed on what was happening." Skilling also said he was more involved with Enron's domestic businesses, particularly the wholesale division that encompassed energy trading.

"Because I'd built that company, I was much more familiar with it than Ken was," he said.

Lay was more involved in Enron's international ventures and much more visible with government officials, Skilling said.

"I think most people would agree, I was not particularly good at dealing with government officials, so I think it was a particularly good team," he said.

Skilling added that he and Lay tried to meet for up to an hour once a week, but they didn't socialize. "I'm just not a real kind of social person, I don't socialize a lot," he said.

Skilling insisted he was never aware of anyone committing crimes at Enron during his time with the company.

"I was aware of no illegal activity occurring at Enron Corporation," he said.

The ex-CEO, in his third day on the stand Wednesday in his fraud and conspiracy trial, continued addressing prosecution testimony that painted him as an earnings-obsessed leader so intent on wowing Wall Street that his subordinates resorted to fraud with his knowledge.

He addressed one of the most notorious elements of the scandal that included Enron's swift descent into bankruptcy protection in December 2001 — partnerships created and run by former Chief Financial Officer Andrew Fastow to conduct deals with the energy company.

The indictment against him alleges Skilling knew Fastow and former Enron Chief Accounting Officer Richard Causey hatched side agreements guaranteeing that Fastow's personally lucrative LJM partnerships wouldn't lose money on deals with Enron.

Fastow testified last month that Skilling gave him verbal "bear hugs" approving two deals, and said Causey assured him Skilling knew about other side deals the ex-CFO memorialized in a handwritten list.

On Wednesday, Skilling denied that he was ever told about the list or gave any verbal assurances that would have eliminated any risk to LJM, making the purported asset sales disguised loans.

"Were you ever told about any secret side deals between Enron and LJM?" his lawyer, Daniel Petrocelli, asked.

"No," Skilling replied.

Fastow has 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 quick buyers for Enron assets, which the ex-CEO thought would help the energy company manage risk while benefiting shareholders.

"Was LJM a puppet of Enron?" Petrocelli asked Skilling on Tuesday.

"No, it wasn't," Skilling said.

Skilling's highly anticipated testimony is expected to stretch into next week.

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 Fastow and a few others who skimmed millions from secret scams, and that bad publicity as well as lost market confidence skewered the company.

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.