HOUSTON – Former Enron Corp. Chief Executive Jeffrey Skilling ended lengthy testimony in his federal fraud trial Thursday by denying a new government accusation — that he may have cheated on his taxes.
Skilling calmly said he didn't recall backdating a $10,000 gift check to an ex-girlfriend to avoid paying taxes on it in 1998, and he told jurors that he has heard nothing from the Internal Revenue Service despite repeated reviews of his tax returns.
"I paid my taxes," he testified — more than $66 million from 1997 through 2004.
Several other witnesses were scheduled to testify before Skilling's co-defendant, Enron founder Kenneth Lay, takes the witness stand Monday or Tuesday.
Skilling, 52, has repeatedly denied during 7 1/2 days of testimony that he lied to investors about Enron's financial strength or approved accounting tricks to meet earnings targets and impress Wall Street in the years before the company spiraled into bankruptcy proceedings in December 2001.
The former-CEO acknowledged his anger at the government for pegging him as a liar and a crook, and often struggled to keep his temper in check when grilled about his truthfulness by prosecutor Sean Berkowitz.
"You can never say everything you want to say," an admittedly exhausted Skilling said outside of court. "I feel I had a fair opportunity to explain a lot of the questions."
Lay, 64, praised his co-defendant's efforts.
"He did great," Lay said. When asked if he was prepared for his turn, he replied, "Oh, yeah. Ready."
Skilling is charged with 28 criminal counts of fraud, conspiracy, insider trading and lying to auditors from 1999 through 2001. Lay faces six counts of fraud and conspiracy from the period after Skilling abruptly resigned from Enron in mid-August 2001 until the company filed for bankruptcy protection four months later.
Prosecutors allege Skilling and Lay repeatedly lied to investors and employees about Enron's health when they knew their optimism hid weak business ventures and accounting tricks obscured debt and inflated profits.
The two defendants say no fraud occurred at Enron, and bad publicity and vanishing market confidence sank the company.
For more than two months, Skilling's lawyers have assailed most government witnesses for lacking hard evidence in accusing the ex-CEO of fraud. But Skilling's testimony has been equally devoid of notes, e-mails or other tangible proof to corroborate his assertions that the witnesses lied or misconstrued situations to be illegal.
Brian Wice, a Houston defense attorney who has observed much of the trial, said the government threw no knockout punches at Skilling in its examination of him, and whether Skilling is convicted on all or some criminal counts depends on whom the jurors believe.
"This is a case that turns on credibility," Wice said.
Berkowitz brought up the tax allegation on Thursday during his second pass at cross-examining Skilling. The issue stemmed from another the federal prosecutor first raised on Tuesday regarding Skilling's investment in an ex-girlfriend's online photo-sharing company, which did business with Enron.
Neither issue is related to charges against Skilling, but the prosecutor used them to challenge the ex-CEO's honesty.
Skilling told jurors Tuesday he invested $60,000 in the company and didn't inform Lay or Enron's board in writing. He also told the Securities and Exchange Commission several years ago that the photo company had a $3,000 contract with Enron.
Berkowitz showed jurors he actually invested $180,000 in the company, and it did $450,000 in business with Enron.
Skilling later said he was taken off guard when Berkowitz raised the issue, but since remembered that he told Lay about it at the time and got his numbers wrong when he first testified about it.
On Thursday, Berkowitz asked about two $10,000 gift checks Skilling wrote to the same ex-girlfriend — check No. 277 dated December 1997, and No. 276 dated March 1998. Berkowitz asked if Skilling actually gave both amounts to the woman in March 1998, but backdated one check to December to avoid paying taxes on a gift of $10,000 or more.
Skilling said he didn't remember the checks, but insisted he has paid all the taxes he owes. In a resigned voice, he asked if Berkowitz was suggesting he shirked paying his taxes.
"I'm suggesting, sir, that you backdated a check to avoid paying taxes to the IRS," Berkowitz replied.
"I told you I don't recall that," Skilling said, adding that he "never shirked from my duty to pay taxes to the United States of America."
Skilling had told jurors he dated the woman in 1997 and 1998 — after he divorced his first wife. When Berkowitz pressed him Thursday on when the relationship ended, he said they remained friends and occasionally dated after that.
"What does this have to do with fraud at Enron Corporation? Just out of curiosity," Skilling asked with a sliver of sarcasm.
"Can you answer my question, Mr. Skilling?" Berkowitz said.
"We continued to have a relationship, yes," the ex-CEO said.
Then the prosecutor addressed Enron's code of ethics, which required approval of executives' investments in companies that did business with Enron and which Skilling acknowledged "probably" applied in his situation — particularly given the personal connection.
"You asked what this had to do with fraud at Enron," Berkowitz said.
"OK, now I understand," Skilling replied.
The prosecutor then asked if the ex-CEO expected jurors to "rely on your word here, sir?"
"That's right," Skilling said.
His ex-wife, Sue Lowe, testified to say she and her current husband, a stockbroker, sold $14 million in Enron stock options in October 2000 without prompting from Skilling. She acquired the options as part of their 1997 divorce settlement, she said.
Prosecutors have pushed Skilling about the sale, and he denied advising his ex-wife to order it two months after the collapse in August 2000 of an elaborate plan at Enron to unload most international assets — many of which were underperforming — to a group of Middle Eastern investors. That same month, the company's stock hit its all-time high of $90.
Lowe said she and her current husband "sold the options because we were nervous about the stock market" and "wanted to move our money into bonds."
Under cross-examination, Lowe said she did not know Enron's shares were trading near their all-time high at the time of the options sale.
"I did not follow the stock," she said.
Under questioning from Skilling lawyer Randy Oppenheimer, Lowe acknowledged that she had agreed to testify reluctantly, but confirmed that prosecutors never asked her about the sale.