Alleged Skilling Quote Shocks Courtroom

"It seemed to indicate the investment community was beginning to understand how Enron made money," an ex-broadband executive charges.

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In what could wind up being the turning point in the trial of former Enron chiefs Ken Lay and Jeff Skilling, a former top executive stunned the courtroom during the last ten minutes of testimony on Thursday when he testified that Skilling told other top executives ”they’re on to us,” according to the Associated Press.

Skilling’s statement allegedly came in response to a published note by a research analyst that was critical of the company’s sales to partnerships run by then-CFO Andrew Fastow, according to the Associated Press. Fastow is expected to testify next week.

Kevin Hannon, then chief operating officer of the company’s struggling broadband unit, told jurors that several minutes before Skilling made that seemingly incriminating statement at a May 2001 meeting of senior Enron executives that was also attended by Lay, he said that he had ”brought Andy here” to talk about the partnerships, which were called LJM1 and LJM2, according to the wire service.

At the meeting, ”Fastow said, ‘LJM is a good deal for me,”’ Hannon reportedly told the court. ”As I remember, (Fastow’s comment) was met by stunned silence.”

Prosecutor Cliff Stricklin then asked Hannon: ”Did Mr. Skilling say anything?”

”Yes. He said, ‘They’re on to us,”’ Hannon replied, according to AP. ”It seemed to indicate the investment community was beginning to understand how Enron made money.” Hannon is expected to continue to testify on Monday, when he will most likely be cross-examined.

Earlier on Thursday, Hannon said several company officials briefly mulled the idea of trying to buy WorldCom to help prop up the financials of one of the energy giant’s struggling units.

During a brainstorming session on March 7, 2001 held at Houston’s St. Regis Hotel and attended by Skilling, Enron Broadband Service (EBS) officials were desperately seeking relief from Skilling from a first quarter earnings target that wasn’t going to be met because business was much weaker than anticipated, according to the Houston Chronicle.

“We talked about doing acquisitions of [another] company … we looked at the potential of buying WorldCom,” Hannon said, according to the paper. However, the discussion didn’t last long, as the idea was scuttled. Hannon told jurors that Skilling said buying WorldCom was a “non-starter,” according to the paper.

Rather, Skilling recommended folding part of EBS into the profitable wholesale division, which the paper noted was a strategy described earlier this week during the trial. “It would hide the problem,” Hannon said, according to the Chronicle.When prosecutor Cliff Stricklin asked if this tactic would have solved the problem, Hannon replied, “No, I think it would have made it worse.”

Earlier in the day, David Delainey, a top former Enron Corp. executive, described a structure dubbed “Raptors,” as “odd.” He said Raptors involved placing Enron stock into several off-balance-sheet partnerships to serve as reserves that could be tapped to offset potential losses, reported the Associated Press.


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