Government probes Skilling on stock sales

By Matt Daily

HOUSTON (Reuters) – A federal prosecutor grilled Jeffrey
Skilling on Monday at his criminal trial about tens of millions
of dollars the former Enron chief executive reaped from sales
of the doomed energy company’s stock.

Sean Berkowitz, head of the Enron Task Force, accused the
former executive of discussing with former Enron CEO and
chairman Kenneth Lay a whistle-blower’s note about possible
accounting fraud at Enron shortly before Skilling sought to
sell 200,000 shares of stock.

The meeting between Lay and Skilling took place on August
22, 2001, Berkowitz said, a week after Skilling resigned from
Enron and whistle-blower’s Sherron Watkins sent Lay a letter
citing financial abuses the company.

Skilling denied Lay told him about the letter or that Lay
was scheduled to meet with Watkins later that same day.

“I didn’t hear about it, the note, until it was published
in the newspapers that following January,” Skilling said.

Skilling, 52, faces 28 charges of conspiracy, fraud and
insider trading, and Lay, 64, faces six charges of conspiracy
and fraud linked to the collapse of the Houston company into
the then-largest ever U.S. bankruptcy in December 2001.

Under often tense questioning, Skilling stuck to his
contention he did not remember placing the order to sell
200,000 Enron shares on September 6, 2001 and denied he would
have done so based on knowledge the company had launched an
investigation into Watkins’ allegations.

“I didn’t know about any investigation into accounting
improprieties,” he said.

Skilling is accused of using insider information to sell
nearly $63 million in company stock. He has said he sold those
shares for tax purposes, or to help pay for the $4 million
construction of his house in Houston.

The September 6 order was never executed, although Skilling
did sell 500,000 shares later that month because he said he
feared the market turmoil following the September 11 attacks
against the United States.

Both Skilling and Lay have blamed the collapse of Enron,
once the nation’s seventh largest company, on a crisis of
investor confidence after it was revealed its former Chief
Financial Officer Andrew Fastow skimmed millions of dollars
from partnerships he operated.

Fastow, who agreed to serve a 10-year prison sentence under
a deal with prosecutors, testified earlier at the trial that he
used those partnerships, with Skilling’s blessing, to hide
billions of dollars in Enron debt and inflate its earnings.

Skilling testified for four days on his own behalf last
week and is expected to undergo several days of cross
examination this week.

Lay is also expected to take the witness stand in his own
defense later in the trial, which began in late January.

Berkowitz also suggested Skilling told his ex-wife and his
then-girlfriend to sell Enron stock in the second half of 2000
when the company’s shares were trading near their highest ever
level.

Skilling, who sold about $19 million in stock during that
period, said he was unaware that either woman had made the
sales.