Enron Prosecutors Prepare for 'Crucial' Skilling Cross-Examination

HOUSTON – When former Enron Corp. Chief Executive Jeffrey Skilling gives his much-anticipated testimony in his fraud and conspiracy trial, the stakes may be just as high for the government as they are for the one-time corporate star.

For Skilling, testimony expected to begin Monday is his chance to show jurors he is not a devious liar who spearheaded a massive fraud.

For prosecutors, it's a chance to drive home their contention that he is.

"His testimony may be his only opportunity to save himself, but at the same time, he runs the risk of sealing his fate and almost guaranteeing his conviction if jurors find his testimony incredible," said Robert Mintz, a former federal prosecutor.

Mintz said Skilling can expect cross-examination far more rigorous than softball questions he used to field from Wall Street analysts who adored Enron before the company collapsed in scandal. "His ability to handle these questions without appearing arrogant or defensive may be the key to his testimony," he said.

Skilling's co-defendant, Enron founder Kenneth Lay, aims to testify later this month.

Both are accused of repeatedly lying to investors and employees about Enron's financial health when they allegedly knew fraudulent accounting and weak business ventures lurked under the surface of their public optimism. The two men say there was no fraud at Enron other than a few executives who skimmed millions from secret schemes, and that bad publicity coupled with lost market confidence shoved the company into bankruptcy protection in December 2001.

Skilling is charged with 28 counts of fraud, conspiracy, insider trading and lying to auditors, while Lay faces six counts of fraud and conspiracy.

Skilling, 52, has maintained his innocence of any wrongdoing since the initial, explosive aftermath of Enron's swift flameout.

In lengthy testimony with Securities and Exchange Commission shortly after the bankruptcy filing, and two contentious appearances at congressional hearings in February 2002, Skilling said he knew of no accounting tricks to hide debt or inflate profits. He also insisted he believed Enron was financially strong when he abruptly resigned in mid-August 2001, citing personal reasons.

Under initial questioning by his lead lawyer, Daniel Petrocelli, Skilling won't deviate from what he said before — or he'll invite prosecutors to pounce on inconsistencies.

He'll counter allegations from prosecution witnesses that he approved use of accounting tricks to manufacture earnings and misled investors by touting weak business ventures as strong.

He'll tell jurors that he loved Enron, he offered to return to help save the company when a storm of scrutiny erupted after he quit, and he relied on accountants and lawyers who consistently said all the company's inner workings were proper, as Petrocelli noted in opening statements more than two months ago.

Whether Skilling's reputation for bristling when annoyed emerges during his testimony remains to be seen. Petrocelli has said his legal team has not tried to water down Skilling's personality because "witnesses need to be on the witness stand who they are in life."

During the televised congressional hearings — for which most ex-Enron executives, including Lay, invoked their Fifth Amendment rights not to testify as advised by attorneys — hostile lawmakers often cut Skilling off in mid-sentence. He didn't erupt in temper, but the berating sometimes prompted him to roll his eyes or shake his head in irritation.

But prosecutors likely won't try to bait Skilling or Lay and shoot for so-called "Perry Mason" moments, said Sam Buell, a former federal prosecutor with the Justice Department's Enron Task Force who is a visiting professor at the University of Texas School of Law.

"They're going to be confronted for the first time with lots of detailed questions that they didn't face before because the questioners didn't know all the facts yet," Buell said. "The question will be, how do they react to a more detailed level of inquiry that they haven't faced before?

"It's going to be the task of the cross-examiner of cumulatively undermining credibility with lots of small points, not coming up with some big bombshell that's going to leave one of these guys exposed on the witness stand in some dramatic way," Buell said. "It's just not going to happen that way."

One such point already has emerged.

Shortly before resting their case, prosecutors presented some of Skilling's SEC testimony pertaining to his Sept. 17, 2001, sale of 500,000 Enron shares for $15.5 million — the biggest of his $41 million in alleged illegal stock sales.

Skilling told the SEC he ordered the sale in response to a market roiled by the Sept. 11, 2001, terrorist attacks. He neglected to tell agency investigators that he had tried to sell 200,000 shares Sept. 6, but the transaction was held up by paperwork.

Sean Berkowitz, director of the Justice Department's Enron Task Force, will cross-examine Skilling. The Chicago federal prosecutor joined the task force in December 2003, two years after Enron failed, and less than three months before Skilling was indicted.

Throughout the trial, Berkowitz has approached witnesses methodically and without fanfare.

Sheldon Zenner, a former federal prosecutor and now a white collar defense attorney with Katten Muchin Rosenman LLP in Chicago, worked with Berkowitz when his firm hired the Harvard Law School graduate more than a decade ago.

He said his former colleague's cross will be critical because when defendants testify, jurors switch their focus to determining whether a defendant is believable from whether the government proved its case.

"If they believe him, they acquit him," Zenner said.

And although the government has presented no obviously incriminating e-mails or documents that point to the defendants' guilt, the so-called smoking gun could well be the overwhelming image of Enron as a bed of corruption.

"That's what they have to overcome," Zenner said of Lay and Skilling.