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Enron witness: Executives fudged numbers

HOUSTON - Bent on matching or beating Wall Street expectations, Enron Corp. fudged its earnings figures with the knowledge of executives Jeffrey Skilling and Kenneth Lay, the company's former chief contact for investors testified Wednesday.

Leading off the government's case in Skilling's and Lay's fraud trial, Mark Koenig told jurors the two men were closely involved in company operations and sought to boost Enron's stock price, which depended heavily on impressing stock analysts.

Koenig walked jurors through several drafts of a July 2000 press release in which quarterly earnings were raised from 32 cents per share to 34 cents because Enron executives wanted to beat Wall Street estimates by 2 cents.

"We thought it would maintain or increase the stock price," Koenig testified.

While Koenig did not say Skilling or Lay ordered a fraudulent change, he said he discussed the July 2000 change with Skilling, then the company's president, who had to approve changes to the financial figures.

In another case, in January 2000, Enron changed its quarterly earnings from 30 cents per share to 31 cents after analysts had unexpectedly raised their estimates to the higher level, Koenig said.

On the morning of Jan. 19, 2000, Koenig said, Lay told him "he went to bed and we were 30 cents, and when he awoke, he was watching one of the business stations, and he saw that it was 31 cents."

He said Lay told him he had received a voice mail explaining the change. "He understood the issue, fairly matter-of-fact," Koenig testified.

A bedrock of Lay's and Skilling's defense, as explained to jurors in opening statements Tuesday, is that the books were never cooked at Enron, and that the company collapsed because of a market panic and relatively minor wrongdoing by a few employees. Lay has said publicly he thought the company was strong and that Enron was in no danger of failure.

Koenig is one of 16 Enron executives who have pleaded guilty to crimes and agreed to cooperate with the government. The defense has suggested many of the executives were pressured by prosecutors into striking deals when they were not guilty and will tell the government anything it wants to hear.

Koenig, 50, pleaded guilty in August 2004 to aiding and abetting securities fraud, saying he knew Enron masked losses in a highly touted and unprofitable retail energy unit by folding it into the division that included the company's trading unit.

Koenig, who has not told jurors of his admitted crimes, said in response to questioning by prosecutors Wednesday that he knew it was wrong to tinker with the earnings figures.

Koenig's testimony is expected to continue at least through the end of the week.

[Last modified February 2, 2006, 02:15:36]