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Enron's Skilling nixed Fastow maneuver: witness

Posted on: Tuesday, 4 April 2006, 18:35 CDT

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.

Source: REUTERS

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