Tags: Enron | ex-CEO: | Foresaw | Problems

Enron ex-CEO: I Foresaw No Problems

Thursday, 07 February 2002 12:00 AM

Skilling unexpectedly resigned as chief executive of Enron in August after pocketing an estimated $67 million from selling company stock.

"I didn't believe the company was in any imminent financial peril," Skilling told the panel adding that he did not expect the company's precipitous downfall, which started in October. The financial troubles lead to a December bankruptcy that has left thousands out of work and retirement accounts of employees and many outside investors wiped out.

"We believed fiercely in what we were doing," said Skilling. "I am devastated by, and apologetic about, what Enron has come to represent."

The House Energy Committee's oversight and investigation subcommittee heatedly questioned Skilling for hours in the high point of a day-long series of key witnesses testifying about Enron's complex web of special partnerships.

A key focus of the hearings was why Skilling did not take action after Jeffrey McMahon, then Enron's treasurer, approached him in March 2000 with concerns about the company's dealings with the complex, off-the-books LJM partnerships.

"It was my understanding that the purpose of the transactions was to provide a real hedge," said Skilling. "I was not aware of any financing arrangements designed to conceal liabilities or inflate profitability."

In earlier testimony Thursday, McMahon, Enron's president and chief operating officer, told the congressional panel that he had met with Skilling nearly two years ago to report that the situation with complex partnerships that led to Enron's downfall was becoming a problem.

McMahon said during the meeting with Skilling "that the situation had gotten to the point where it was untenable" for McMahon's staff.

At issue was that key company officials, most notably then Chief Financial Officer Andrew Fastow, had stakes in one or more of the SPEs, representing a conflict of interest. These partnership arrangements were constructed to move debt off the company books to inflate earnings.

Fastow resigned in October shortly after these partnerships came under the scrutiny of the Securities and Exchange Commission. According to media reports, Fastow earned possibly more than $30 million through these arrangements.

McMahon was asked repeatedly by Rep. Edward Markey, D-Mass., about how many such partnerships there were and how much debt they concealed, receiving a terse "so you don't know" each time he was unable to answer. "All we know so far is the tip of the iceberg," Markey said.

In an earlier appearance before the committee Thursday, Fastow declined to answer any questions involving the company's bankruptcy, invoking his Fifth Amendment rights against self-incrimination.

Also taking the Fifth Amendment after they were called before the House Subcommittee on Oversight and Investigations were former Enron Managing Director Michael J. Kopper, former Managing Director of Enron Global Finance Richard Buy, and Richard Causey, chief accounting officer.

An unidentified former Enron staffer outside the Energy Committee room Thursday said she and other employees were "unceremoniously dumped like so much garbage" when the company went bankrupt in December. The bankruptcy was the largest in U.S. history.

Witnesses were greeted Thursday morning by subcommittee Chairman Rep. James Greenwood, R-Pa., who cited the Book of Proverbs from the Bible - "He that troubleth his own house will inherit the wind" - a reference to Enron executives and their activities that led to the collapse of the energy giant and its Dec. 2 filing for bankruptcy.

"Mr. Fastow, aided by a number of those witnesses subpoenaed here today, shared in huge fees totaling in tens of millions of dollars to arrange and participate in bizarre transactions that were, at the least, imprudent and at worst, contrary to the very interest of the company, shareholders and investors they were duty-bound to serve," Greenwood said.

Thursday's appearances marked the first time since Enron's collapse that past and current company executives presented themselves to a congressional panel. While many of those called arrived in answer to a subpoena, Skilling's testimony was voluntary.

Former Chairman Kenneth Lay abruptly canceled his own testimony earlier this week, after his attorney complained of a prosecutorial atmosphere on Capitol Hill. Lay subsequently was subpoenaed to appear before two congressional committees next week.

Lawmakers were eager to hear from Skilling, who was in charge of overseeing the off-the-book partnerships set up by Fastow.

On Wednesday, Rep. Billy Tauzin, R-La., committee chairman, said congressional investigators found substantial evidence of crimes by Enron and its management.

In addition to more than 10 congressional investigations, inquiries are under way by the Securities and Exchange Commission and the Labor Department. The Justice Department has opened a criminal investigation.

Enron filed for Chapter 11 protection Dec. 2 in the nation's largest bankruptcy, putting more than 4,000 of its employees out on the street. The workers lost thousands of dollars of savings in the company's 401(k) retirement plan.

Copyright 2002 by United Press International.

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Skilling unexpectedly resigned as chief executive of Enron in August after pocketing an estimated $67 million from selling company stock. I didn't believe the company was in any imminent financial peril, Skilling told the panel adding that he did not expect the company's...
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2002-00-07
Thursday, 07 February 2002 12:00 AM
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