Enron’s Skilling nixed Fastow maneuver: witness

By Matt Daily

HOUSTON (Reuters) – A former top Enron deal maker said on
Tuesday former CEO Jeffrey Skilling blocked a bid by the
company’s financial chief to receive preferential treatment in
bidding for Enron assets that were for sale.

The testimony by Mark Metts took aim at earlier claims by
former Chief Financial Officer Andrew Fastow that he had a
secret deal with Skilling to buy up poorly performing Enron
assets through partnerships he operated to inflate Enron’s
profits.

Metts, a former executive vice president for corporate
development, led an Enron team that was trying to sell several
assets from 1999 to 2001, including wind energy properties.

The company had narrowed down potential buyers for the wind
assets to bank UBS when Fastow became interested in bidding for
them through his LJM2 partnership, and he and Metts clashed
over concerns that LJM2 had been secretly researching the
assets.

Fastow telephoned Metts and screamed at him for 10 minutes,
Metts said, threatening to take his complaints to Skilling.

“He was very hostile in a very ‘you’re in trouble’ sort of
tone,” Metts said.

But Skilling backed Metts in the dispute, he said.

“Jeff agreed with me that the only way that LJM could
participate in the bid process is if LJM played by the same
rules as everyone else,” he said.

Skilling, 52, faces 28 counts of conspiracy, fraud and
insider trading linked to the downfall of Enron, while former
chairman and CEO Ken Lay faces six counts of conspiracy and
fraud.

Enron, once the seventh-largest U.S. company, collapsed
into bankruptcy in December 2001 after its use of off-the-books
deals — many managed by Fastow — to hide billions of dollars
in debt and pump up profits were revealed.

Skilling and Lay have said they committed no crimes at the
company and pinned its collapse on a “run on the bank” after
investors learned Fastow stole millions of dollars through his
partnerships.

Fastow testified last month that he had a “bear hug”
agreement with Skilling and former Chief Accounting Officer
Richard Causey that gave him preferential treatment to buy the
Enron assets.

He has pleaded guilty to crimes at the company and will
serve a 10-year prison sentence under a cooperation deal struck
with the government.

Prosecutors sought to downplay Skilling’s intervention in
the wind asset sale, noting that Metts had no knowledge of
several other deals Fastow had done with Enron, and suggested
Fastow’s anger was a sign the CFO had come to expect
preferential treatment.

Ultimately, Metts rejected a bid from Fastow’s LJM2 for the
wind assets, which were not sold until after Enron entered
bankruptcy.

SKILLING TESTIMONY NEARS

Defense lawyers have presented several witnesses in the
first two days of their case, keeping their questions narrowly
focused to try to chip away at the specific assertions made
during the first two months of the trial.

Both Skilling and Lay will testify in their own defense,
with Skilling’s testimony likely beginning on Thursday,
according to his lawyer Daniel Petrocelli.

Earlier in the day, defense teams sought to contradict
testimony by the former head of Enron’s Internet unit, Enron
Broadband Services, who had said Skilling told him to disguise
job cuts in 2001 by calling them “redeployments” so the company
did not have to reveal the unit’s poor performance to
investors.

Under questioning from lawyer Mark Holscher, former Enron
human resources executive Marla Barnard denied the plans to cut
240 positions from that unit were misrepresented, and that
Enron sought to find employees jobs in other parts of the
company.

The defense teams are expected to be without one of their
most experienced hands for at least a few more days, with Lay’s
lead lawyer Michael Ramsey scheduled to have surgery to clear a
blockage in his carotid artery.

Ramsey, 66, had suffered from chest pains earlier in the
trial and had a stent inserted nearly two weeks ago.