April 3, 2006

Gov’t witness lied at Enron trial: defense witness

By Matt Daily

HOUSTON (Reuters) - A government witness buckled under
pressure from prosecutors and gave a fraudulent confession that
he broke the law while at Enron Corp., the first witness to
testify for former CEOs Ken Lay and Jeffrey Skilling said on
Monday.

The witness, Joannie Williamson, said her friend and former
boss at Enron investor relations, Mark Koenig, confided to her
that he had committed no crimes at the now-collapsed energy
company, even though he pleaded guilty to aiding and abetting
securities fraud and agreed to cooperate with prosecutors.

Koenig was the first of the 22 prosecution witnesses to
take the stand and testify against Lay and Skilling at their
trial for financial crimes at Enron, which has now entered its
third month.

Williamson said she was stunned when Koenig pleaded guilty,
and sought him out to find out what had prompted his
confession.

"I asked him 'What are you doing? ... You're not guilty,"'
Williamson told the jury. He responded: 'I know that, but in
order for this to work everyone needs to believe that I am,"'
she said.

Koenig had testified that Skilling knew the company had
twice used accounting tricks to beat Wall Street analysts'
earnings forecasts, and that he and Skilling had lied to
investors to protect Enron's stock price.

Defense lawyers have argued that many of the former Enron
employees who struck plea deals with the government to testify
against Lay and Skilling were not really guilty of any crimes,
but they did not have the money to mount a strong legal defense
and feared long prison sentences if they were convicted of
crimes.

Skilling, 52, is expected to take the stand in his own
defense later this week, according to his defense team, and
Lay, 63, will follow shortly.

Skilling faces 28 counts of conspiracy, fraud and insider
trading and Lay faces six counts of conspiracy and fraud linked
to the demise of the company that was once the seventh largest
in the United States.

Prosecutors dropped a handful of charges last week in an
effort to streamline their case.

Enron collapsed into bankruptcy in December 2001 after its
use of off-balance sheet deals to hide billions of dollars in
debt and inflate profits came to light.

The defense teams have argued that Enron was not engaged in
a massive fraud, but was brought down by a "run on the bank"
after investors learned its former Chief Financial Officer
Andrew Fastow had skimmed millions of dollars in fees from his
side deals done with the company.

Two other witnesses, former Enron regulatory affairs
specialist Scott Stoness and Diann Huddleson, also testified
regarding issues surrounding Enron's California operations.

The defense lawyers kept their questions to those witnesses
narrowly focused in a bid to undermine specific assertions
prosecutors had made during the two months they presented their
case to the jury.

Lay's lead lawyer in the case, Michael Ramsey, missed the
morning session and is scheduled to undergo medical procedures
on Tuesday related to a stent that was inserted into an artery
after he suffered from chest pains earlier in the trial.

"We are optimistic Mike will be back at trial soon," a
spokeswoman for Lay said.

Ramsey, 65, had the stent inserted about two weeks ago but
did not miss a day of the trial for that procedure.

(Additional reporting by Erwin Seba)