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Under questioning from skeptical lawmakers, Jeffrey Skilling says he knew nothing of Enron's financial problems when he resigned.
By Washington Post
February 8, 2002
WASHINGTON -- Enron Corp.'s former chief executive told a skeptical House subcommittee Thursday that he was unaware of financial problems at the company when he left four months before it collapsed, a position contradicted by two senior Enron executives who testified they repeatedly warned him about conflicts of interest that enriched some insiders.
"I did not believe the company was in any financial peril," said Jeffrey Skilling, who testified under oath after Andrew Fastow, the company's onetime chief financial officer, and three other senior executives cited their Fifth Amendment protection against self-incrimination in refusing to answer questions.
Skilling, who resigned unexpectedly Aug. 14, said he was unaware that Fastow and other Enron officials collected more than $40-million from off-the-books partnerships whose failure last fall led to the company's collapse.
Jeffrey McMahon, a former Enron treasurer, and Jordan Mintz, a senior attorney, testified that they had tried to tell Skilling their concerns that the partnerships benefited Fastow and others, not Enron.
Skilling firmly denied knowing about any wrongdoing or efforts to conceal Enron's losses from investors.
"I was not aware of any financing arrangements designed to conceal liabilities or inflate profitability," he said in his opening statement to the House panel. "The financial statements issued by Enron, as far as I knew, accurately reflected the financial condition of the company."
But Skilling frequently responded, under questioning, that he could not recall being present at crucial meetings or events.
Rep. James Greenwood, R-Pa., chairman of the House Energy and Commerce subcommittee on oversight and investigations, was unconvinced by Skilling's portrayal.
"A massive earthquake struck Enron right after your departure," Greenwood said. "People in far inferior positions to you could see the cracks in the walls, feel the tremors, feel the windows rattling. And you want us to believe that you sat there in your office and had no clue that this place was about to collapse?"
The most dramatic moment during Skilling's three-hour appearance with two Enron directors came when he described a long visit at his home by his "best friend," J. Clifford Baxter, Enron's former vice chairman, a week before Baxter committed suicide last month. He said Baxter was heartbroken and upset that his reputation had been ruined by the avalanche of bad publicity over the company's collapse.
Asked whether Baxter had expressed concern to him about the partnerships, Skilling said Baxter had raised the issue early last year. "He and Andy had a very strained personal relationship," Skilling said of his friend and Fastow. "He said, "I don't think you should be doing anything for Andy Fastow.' "
He added that Baxter let it be known around the company that he thought the partnerships were troubling.
Skilling is the most prominent former Enron executive to answer questions from Congress, which is investigating the company's demise. Skilling repeatedly said he was in the dark about any improprieties, but also rankled lawmakers with his inability to recall his specific role in the off-the-books partnerships that are at the heart of the financial scandal.
For instance, he testified that he did not remember attending a meeting two years ago in which Enron's board of directors discussed the formation of one of the partnerships.
But when Greenwood brandished a copy of the meeting's minutes, which confirmed Skilling's presence, the former CEO hedged his answer, saying, "I could have been there for a portion of the meeting. Was I there for the entire meeting? I don't know."
Similarly, he suggested he may have not been present during another key meeting, when Fastow described how Skilling was required to personally approve one of the now-suspect partnerships. Although Enron minutes indicate that he was present, Skilling said there was a power outage that day and that it "was dark, and people were walking in and out of the room all the time."
Subcommittee members expressed doubts about Skilling's testimony, with several saying they did not believe his assertions that he was unaware of any looming problems at the company before he resigned. Some sought to portray him as an unfeeling robber baron whose ill-fated leadership of Enron drained the pockets of millions of ordinary investors and company employees.
In testimony before Skilling's appearance, Enron lawyer Mintz said he wrote memos to executives outlining his qualms about the partnerships, calling them "sweetheart deals." But he said another Enron executive, Richard Buy -- who took the Fifth Amendment on Thursday -- advised him not to push Skilling on the matter and, "not to stick my neck out."
"I was very frustrated and disappointed," Mintz said. "I was concerned that they were trying to sell investors inside information."
Mintz also testified that he tried last May to get Skilling to sign documents approving transactions between Fastow's partnerships and Enron. But Skilling wouldn't meet with Mintz, so he dropped the effort. Skilling said he didn't recall ever seeing the memo.
McMahon, who is now Enron's president, told lawmakers that he met personally with Skilling in the spring of 2000 to complain that some of the partnerships were riddled with conflicts of interest. He said two Enron executives in particular, Fastow and Michael Kopper -- who also refused to testify Thursday -- had financial stakes in the deals that compromised their allegiance to the company.
According to notes that he prepared for his meeting with Skilling, McMahon wrote that the partnerships were "untenable" and that "I was pressured to do a deal that is not in the best interests of shareholders."
Thursday, McMahon said Skilling gave the impression that he would fix the problem.
Instead, three days later, McMahon was notified that he was being transferred to a new job at Enron. Skilling never did anything to rearrange the partnerships.
Skilling, however, told a different story about his meeting with McMahon. In his testimony, he said McMahon had come to him to complain about his pay package, not about conflicts of interest.
AUTOPSY RESULTS: Former Enron vice chairman J. Clifford Baxter, 43, had taken a pain reliever, an anti-depressant and a sleeping aid before he shot himself to death after the company's collapse, an autopsy report said Thursday.
-- Information from the Associated Press was used in this report.