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Senators slam Skilling over Enron collapse

By NICHOLAS M. HORROCK, UPI Chief White House Correspondent   |   Feb. 26, 2002 at 9:14 PM   |   Comments

WASHINGTON, Feb. 26 (UPI) -- Former Enron Corp. CEO Jeffrey Skilling stood his ground before a Senate panel Tuesday, refuting testimony from other witnesses that he had misled Enron's Chairman Kenneth Lay, ignored early warnings of difficulties or sold large amounts of stock to avoid the crash of the company's stock last fall.

In nearly five hours before the Senate Commerce Committee, Skilling testified under oath that "I have not lied to Congress or anyone else" and insisted that he did not know about the manipulation of the company books which allegedly hid enormous debt from investors.

The hearing became testy at several points.

Sen. Barbara Boxer, D-Calif., told Skilling point blank, "I don't believe you when you say you didn't know what was going on."

Maine Republican Olympia Snow said there "is a plausibility gap" between the testimony and the enormous collapse.

When Skilling testified that he wasn't an accountant and therefore had no knowledge of the "special purpose entities" -- various spin-off companies -- using accounting procedures that incurred massive debts while producing vast profits for a small group of company insiders, Boxer asked, "Where were you educated?"

"Harvard Business School," said Skilling, bringing laughter from the room.

Skilling sat on the panel with Enron executive Sherron Watkins, the woman who wrote a memorandum that touched off internal concern at Enron last August, and Jeffrey McMahon, now Enron's president, who testified he tried to warn Skilling about the conflict of interest problems in the SPEs in March 2000.

This was the second appearance before Congress for all three.

At issue were the SPEs, partnerships set to "hedge" Enron's risky investments. The officers of the SPEs were Enron executives and they were funded by Enron stock. Enron employees negotiated with the SPEs and Enron employees acting as officers of the SPEs negotiated for the partnerships.

Andrew S. Fastow, the former chief financial officer of Enron, reportedly made $30 million from his role in one partnership and another Enron executive, Ben F. Glisan Jr., a former treasurer with Enron, reportedly turned a $5,800 investment into $1 million in profit in a matter of weeks.

Fastow invoked Fifth Amendment protections against self-incrimination at an earlier hearing.

The New York Times reported Tuesday that Glisan is allegedly cooperating with authorities. His lawyer was unavailable for comment.

McMahon testified Tuesday that he met with Skilling in March 2000 over his concern about the how these "conflicts of interests" were being handled by Enron and alerted the former CEO of the dangers. He said he left the meeting assured that Skilling would take action, but several weeks later was transferred to be president and chief executive officer of Enron's Industrial Markets group. Asked if he thought he was being shifted because he spoke out, McMahon said he concluded after Enron's collapse that might be a possibility.

Skilling denied that he had not taken action on McMahon's warning. He said he viewed it as a "compensation matter," in being sure that Enron employees in the SPEs were treated equally with those involved as officers and told Fastow that.

Sherron Watkins, now famous for her memorandum of August 200l, said she was assigned to review one of the SPEs, Raptor, and found that the assets it was relying upon to secure Enron was $700,000 in Enron stock.

"I was highly alarmed by the information I was receiving. My understanding as an accountant is that a company could never use its own stock to generate a gain or avoid a loan on its income statement," Watkins testified. "I was not comfortable confronting either Mr. Skilling or Mr. Fastow with my concerns. To do so, I believed would have been a job-terminating move."

On Aug. 14, she learned of Skilling's abrupt resignation and sent an anonymous letter to Lay, getting a meeting with him on Aug. 21. But before talking to Lay, she talked to McMahon, who told her about his warnings to Skilling in March 2000. He told her how he had been replaced as treasurer by Glisan, who also was an officer in an SPE and the man who got $1 million return on a $5,800 investment.

This was "sending the fox to guard the chicken house," she said Tuesday.

Skilling has angrily refuted Watkins accusations that he knew what was going on and said every step in the setting up of the SPEs were approved by Arthur Andersen.

Skilling also attacked the notion that his departure was caused by Enron's unfolding troubles. He claimed he didn't know the difficulties that were about to overrun this energy giant and said he left for "personal reasons," having to do with fatigue after ten years of building up the company.

He said that a Wall Street Journal story that quoted him as saying that the company's difficulties were part of the problem was "quoted out of context."

Skilling said he only sold $15 million of stock between Jan. 1, 2001 and his resignation and that the $66 million figures his insider sales represented a planned liquidation of his holdings over three years. He said he $171 million in unexercised stock options when he left Enron.

"I'll probably spend the next ten years battling lawsuits," Skilling said, referring to the dozens of stockholder suits against Enron that name him, "and I don't know how much I'll have left."

Boxer showed a video of Skilling urging employees to buy stock at a company meeting at the same time he made those sales, but he said he saw no conflict. "I still own Enron stock."

© 2002 United Press International, Inc. All Rights Reserved. Any reproduction, republication, redistribution and/or modification of any UPI content is expressly prohibited without UPI's prior written consent.
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