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Former Enron Chief Skilling Takes Stand, Declares Innocence

Posted on: Monday, 10 April 2006, 21:00 CDT

HOUSTON _ The most prominent white-collar crime trial of the era reached a pivotal point Monday as the brainy executive behind Enron Corp. testified in his own defense and in the defense of his corporate creation.

Enron was one of America's top companies, filled with brilliant businessmen like himself who were done in by the media, hostile investors and a bad apple serving as chief financial officer, a defiant Jeffrey Skilling told jurors.

Subdued as he described its flameout and animated as he lectured the jury on its business strategy, Skilling spent four hours explaining why he disagrees with the prevailing view of Enron as a crooked house of cards.

"Enron was the finest corporation in the world," the 52-year-old Skilling said. "We were making the world better."

Skilling's much-anticipated testimony comes nearly five years after Enron collapsed in an accounting scandal that brought down a powerhouse accounting firm and shook the world's confidence in U.S. financial markets. He faces 28 criminal counts of conspiracy, fraud, lying to auditors and insider trading. Co-defendant Kenneth Lay, Enron's former chairman, faces six counts of fraud and conspiracy. Skilling's testimony is expected to continue into next week.

On Monday, Skilling appeared calm and reasonable. From the witness stand, he pointed out his family members in attendance and showed little of the aggression that marked his tenure at Enron. "In some ways, my life is on the line, so I'm nervous," he said as his testimony began at 10:30 a.m.

When asked by his lawyer, Daniel Petrocelli, "Are you innocent or guilty?" Skilling didn't hesitate. "I am absolutely innocent," he said, adding later, "The charges against me are wrong. I will fight those charges til the day I die."

Since the trial opened with jury selection Jan. 30, prosecutors have brought 22 witnesses supporting the charges. Skilling is accused of concealing Enron's faltering finances through deceptive accounting and deliberate lies, propping up the stock price so he could cash in Enron shares.

Some of Skilling's most compelling testimony came as he described Enron's rapid failure in the fall of 2001. Asked about TV images of freshly dismissed employees filing out of the headquarters building here with their belongings, Skilling said, "You wanted to die."

Skilling said his decision to step down as chief executive in August 2001, inadvertently contributed to Enron's downward spiral. His departure, he said, had nothing to do with doubts about the company's future, but rather feelings of burnout, combined with his desire to reconnect with loved ones. "I'll always regret that I left when I left."

He offered to come back to Enron as its stock plunged in October 2001, amid doubts about its financial reporting, but Lay and others running the company turned him down. "They were hoping this would blow over," he said. "I was devastated."

He started pulling together investors to rescue the company, attempting to recruit Chicago billionaire Sam Zell among others and pledging most of his net worth, he said. But the effort failed.

Soon after, federal lawmakers and regulators came after him, he said. "The witch hunt had started."

Skilling said he felt obliged to explain the "facts" behind Enron's plunge, testifying before Congress and the Securities and Exchange Commission repeatedly, even when advised to assert his Fifth Amendment rights. "I didn't think I needed a lawyer," he told jurors.

At one point Monday, Petrocelli peppered Skilling with rapid fire queries aimed at demonstrating his client took no steps in the aftermath of Enron's fall that would suggest a guilty conscience: Did he destroy documents? Move money offshore? Leave town? Dump stock? Get his story straight with other alleged conspirators? "No," Skilling answered.

He even had kind words for Andrew Fastow, the former Enron finance chief who has pleaded guilty and testified against Skilling earlier in the trial. "He was a good guy," Skilling said. "He was very good at what he did. He had a good sense of humor."

When he realized years afterward that Fastow had indeed secretly stolen money from Enron, he said, "I was almost physically sick when I saw that."

"You misjudged this man all those years?" Petrocelli asked him.

"Yes," Skilling solemnly replied.

Skilling at one time was among the most admired executives in the country.

After joining Enron in 1990, he set out to remake it from a staid utility into an innovator filled with ambitious dealmakers in his own image. He pushed to deregulate old markets and exploit new ones, de-emphasizing hard assets such as pipelines and power plants in favor of trading commodities that ranged from natural gas to broadband.

On Monday, he stood beside charts explaining some of his strategies, speaking directly to the jury, as he did during much of his testimony. He implied at several junctures that he was oversimplifying for their benefit, telling them at one point, "It's a lot more complicated in real life," and explaining how he was often told certain jargon he favored was "too hard to understand."

Skilling told jurors he has prepared for this moment "12 hours a day, seven days a week for at least two years," and said being indicted was a mixed blessing since at least it ended the uncertainty. He described turning himself in to the FBI, and being ushered onto an elevator along with Ben Glisan, an Enron executive who had pleaded guilty and already started serving time.

The meeting was no coincidence, Skilling suggested. He turned to the shackled inmate and asked him, "How's it going, Ben?"

"He said, `Not so good,'" Skilling recalled.

Skilling grew up in New Jersey and suburban Chicago, graduating from West Aurora High School in the shadow of his brother, Tom. He went on to Southern Methodist University, and Harvard Business School. He started working with Enron as a McKinsey & Co. consultant and had never before run a business of any size when Lay, then Enron's chief executive, put him in charge of trading operations 16 years ago.

Skilling embraced unconventional ideas, and fostered a rough-and-tumble corporate culture where results mattered above all else. Wall Street cheered when he took over the CEO post from Lay at the end of 2000.

Unlike Lay, Skilling was closely involved in operating the off-the-books partnerships run by Fastow. Skilling previously has denied much of what Fastow told the jury, including the existence of a handshake agreement between the two men ensuring the side deals would make money for Fastow.

Petrocelli said Skilling still has "a lot of ground to cover," and promised to march through the indictment step by step before yielding his client to what could be a lengthy cross-examination by Sean Berkowitz, head of the government's Enron task force.

"We're right on schedule," Petrocelli said after court ended for the day. "We accomplished what we set out to do."

Skilling declined to comment as the left the courthouse.

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Source: Chicago Tribune

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