Skilling Cross Examination Ends with Challenge, Denial
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On Tuesday, in a series of exchanges that earned a rebuke for both sides from U.S. District Court Judge Sim Lake, Skilling maintained that Enron was not subject to wild swings in commodity prices, such as had occurred before the California energy crisis, because it was not a trading company, but rather functioned as an intermediary that packaged services for commodity buyers and sellers, the Associated Press reports.
Berkowitz repeatedly cut him off during this discussion when Skilling said the issues weren’t that simple. “We’re going to be here all day, Skilling said. “We’re on fundamentally different planes here.”
Kenneth Rice, a top trader and former CEO of Enron’s broadband unit, had testified in February that Skilling told him Enron’s stock would get “whacked” if the market perceived Enron as a trading company. “I didn’t think “trading company” reflected, in my view, what Enron was,” Skilling said Tuesday, according to the AP.
“And you were communicating that to the marketplace?”, Berkowitz asked.
“That’s correct,” Skilling answered.
Yet, according to testimony from prosecution witness Timothy Belden, a former Enron trader who ran the company’s Western desk, Enron was primarily a trader and profited to the tune of $1 billion in the aftermath of California’s energy deregulation. Berkowitz asked Skilling whether Enron made the bulk of its profits from speculative trading. “Yes or no,” the prosecutor demanded.
“Mr. Berkowitz, I think we tried very hard, very hard to communicate specifically the risk positions that were being taken with our business,” Skilling replied the AP says.
Berkowitz also questioned Skilling on Tuesday about the complex structures called “Raptors” that Enron used to move losses from the balance sheet. Skilling testified that he thought they were legitimate hedging devices, the Los Angeles Times reports.
Berkowitz presented minutes of an Enron directors’ meeting that Skilling attended which said that the Raptors “mitigated equity losses of $460 million.” Berkowitz presented Skilling with a list of 13 underperforming assets that was prepared by Enron’s financial group. He asked Skilling to compare it with the investments put into Raptors. All 13 were put into the Raptors, but Skilling said there were other assets in the financial vehicles as well, the Wall Street Journal reports.
Skilling said that he did not know that the assets in the Raptors were underperforming because he had been out of town for most of the three months of 2001 that were at issue. “I was not aware of a huge problem,” he said, according to the Journal.
Skilling was also grilled on Tuesday about a personal investment in a photo company, owned by an ex-girlfriend, that Skilling never told Enron about, even though Enron did business with the company, the AP said. On Wednesday, when questioned by his own defense attorney, Daniel Petrocelli, in testimony that eased tension in the courtroom, Skilling said that he had forgotten about the investment and didn’t know that the company did much business with Enron. His defense attorney, asked, “You got the numbers wrong?”
“Yes,” Skilling replied.
Referring to the previous day’s exchanges, Petrocelli told the AP,“ I think it’s been a very genteel trial. The prosecutor was determined to get ‘yes and no’ types of answers and not let Mr. Skilling elaborate, and that’s going to cause lots of interruptions.”