Witness: Enron Executives Knew of Inflated Earnings
MICHELE NORRIS, host:
In Houston today, jurors in the Enron trial heard a sixth day of testimony from the failed company's former head of investor relations, Mark Koenig. Koenig's job made him Enron's ambassador to Wall Street. He was the person to call if there were questions about the company's earnings, operations or forecast. Last week, he testified that Enron's earnings were sometimes changed at the last minute to please Wall Street, and that Enron's top executives, Ken Lay and Jeffrey Skilling, knew what was going on. Skilling's lawyer has spent the last four days trying to undermine that testimony.
Joining us now from Houston is NPR's Wade Goodwyn. Wade, tell me, how is Mr. Koenig holding up after four days of cross-examination?
WADE GOODWYN reporting:
Well, he's holding up pretty well. He's been a very tough witness for the defense to cross-examine, mostly because he comes across as so composed and knowledgeable. Today in particular the defense lawyers have gotten sharp with him, but not only does he hold the line, he often gets in effective jabs himself that help the government and hurt the defense. For example, when defense lawyers try to portray some of these conference calls with analysts as innocent, Koenig will speak up and say why he thinks these calls were, in fact, so misleading that they were criminal.
NORRIS: Mr. Koenig's appearance as the prosecutor's first witness was a bit of a surprise. Why was he chosen?
GOODWYN: Well, he's in charge of investor relations. It doesn't sound like an important title, but he had an important job. He related to the analysts whose opinions helped shape Enron's stock price, and so he was sitting in on all these conference calls between Jeff Skilling and the analysts during the last two years of Enron's life, and the government is especially focusing on the last year, 2001, and what Skilling was telling the analysts in these phone calls about what kind of financial shape Enron was in. Luckily for the government, all of these calls were recorded, so there's no dispute about what was said, which is often the first line of defense in these white collar trials. No, I didn't actually say that, or I didn't really mean that. In this case, the jury gets to hear exactly what Jeff Skilling and Ken Lay were saying, word for word.
NORRIS: So what was said?
GOODWYN: Different things in different calls, but the theme is the same. Koenig testified that he and Skilling misled analysts by not revealing the true financial situation of two of the company's biggest divisions, retail and broadband. For example, the retail division, which was called Enron Energy Services, they lost more than a quarter of a billion dollars in just one quarter. But instead of coming clean, Koenig testified that Enron secretly transferred those losses into its very profitable wholesale division. And in the conference calls, the jury heard Skilling tell analysts about all the tremendous performance of Enron Energy Services and Enron's broadband division, but Koenig said the analysts weren't getting the full story.
NORRIS: The defense strategy here is to prove that not only are Skilling and Lay innocent but that the other Enron executives who pleaded guilty are innocent, too. That seems like a pretty bold strategy.
GOODWYN: It's an audacious strategy. The defense theory is that except for CFO Andrew Fastow and two of his lieutenants in finance, nobody else at Enron committed any crime. There was a moment earlier in the week where during cross- examination Koenig got a little teary when Skilling's lawyer, Daniel Petrocelli, asked him how old his children were when Koenig pleaded guilty.
That kind of emphasized for the defense the pressure Koenig was under. Petrocelli tried to demonstrate to the jury that Koenig was in fact innocent, that he was coerced by the government. But that meant Koenig kept repeating the fact that he was guilty and describe all the ways he was guilty. And some of those acts involved Mr. Petrocelli's client, Jeff Skilling, being in the room, sitting right next to him and participating in those acts.
NORRIS: And Ken Lay and Jeffrey Skilling, what's their demeanor been in the courtroom?
GOODWYN: Mr. Skilling's demeanor, he looks tense. Mr. Lay looks grim. I think the ramifications of this trial are beginning to set in. Mr. Skilling's wife at one point began to cry during a break, and she had to be consoled. So just how high the stakes are for everybody is becoming apparent.
NORRIS: Thank you, Wade.
GOODWYN: My pleasure.
NORRIS: NPR's Wade Goodwyn, speaking to us from the courthouse in Houston.