April 11, 2006

Enron’s Skilling denies secret deal with CFO

By Matt Daily

HOUSTON (Reuters) - Former Enron CEO Jeffrey Skilling
strongly denied on Tuesday he had a secret pact with Andrew
Fastow to protect the former chief financial officer from
losing money on side deals he made with Enron.

Skilling, in his second day of testimony at his trial in
federal court, also took aim at statements made by several
other government witnesses that linked him to illicit dealings
at the company, which was once the seventh largest in the
United States.

Last month, Fastow testified that his LJM partnerships
bought poorly performing Enron assets in order to hide billions
of dollars in losses at Enron while inflating its earnings.

Fastow, who struck a cooperation agreement with prosecutors
and will serve a 10-year prison sentence, said he had a "bear
hug" agreement with Skilling that Enron would make sure LJM did
not lose money on the deals.

"I had no agreement with Andy Fastow that would guarantee
him a rate of return on a project. It is inconceivable,"
Skilling said under questioning from his lawyer Daniel

Skilling, 52, and former Enron CEO and Chairman Kenneth
Lay, 63, are charged with lying to analysts and investors about
the financial disarray at the company that collapsed in
December 2001 into then-largest ever U.S. bankruptcy.


Skilling remained composed and calmly answered questions,
often addressing the jury directly, as Petrocelli led him
methodically through the indictment.

But on one occasion, Skilling showed a flash of the temper
for which he was well-known inside Enron.

"That is absurd," he blurted out in response to
Petrocelli's question about allegations of false earnings. He
quickly caught himself, saying, "I'm sorry -- that's not true."

Skilling told the jury he never ordered subordinates at the
energy company to illegally falsify profits to please Wall

"Did you ever have a single conversation where you sat down
with anyone at Enron, where you said in so many words, 'Look
we're not cutting it, we need to break the law'?" Petrocelli

"No, I never did that," Skilling answered.

That testimony was designed to counter allegations from
former Enron investor relations executives Mark Koenig and
Paula Rieker and former Enron accountant Wesley Colwell, who
said Enron used accounting tricks to increase earnings in 1999
and 2000.

Skilling has portrayed Enron as a healthy, vibrant company
even up until his resignation in August 2001, less than four
months before Enron filed for bankruptcy.

He and Lay contend Enron collapsed after investors lost
confidence and triggered a "run on the bank" after learning
Fastow had skimmed tens of millions of dollars from the
partnerships he operated.

Skilling faces 28 charges of conspiracy, fraud and insider
trading, and Lay faces six charges of conspiracy and fraud.

Both men have pleaded not guilty and face decades in prison
if convicted at the trial, which began at the end of January.

Skilling also contradicted testimony from Enron's former
risk specialist, Vincent Kaminski, who said Skilling told him
he had been transferred to a different department because he
was "acting more like a cop" preventing Enron from doing deals.

Instead, Skilling testified he was trying to reassure
Kaminski that he was no longer needed in the group.

"So I told Vince he didn't have to worry, we have plenty of
cops in (the group)," Skilling said.