Enron's Skilling denies secret deal with chief financial officer

Jeffrey Skilling

HOUSTON - Former Enron chief executive Jeffrey Skilling has strongly denied 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 Petrocelli.

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 US 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 Street.

"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 asked.

"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.

- REUTERS