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Government probes Skilling on stock sales

Posted on: Monday, 17 April 2006, 12:50 CDT

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.

Source: REUTERS

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