Former Enron chief executive officer Jeffrey Skilling acknowledged on Tuesday that the controversial LJM partnerships posed a conflict of interest because they were run by then-CFO Andrew Fastow, according to published accounts. Skilling insisted, however, that both he and the board of directors were confident that sufficient checks and balances were in place.
“There was no question that there was a conflict of interest,” Skilling testified, reported the Houston Chronicle. According to the newspaper, he told jurors that clearly, Fastow would have more information about Enron than would be customary, “so potentially, he had a leg up on the competition.”
Skilling reportedly conceded that “there was some concern that he might use that position to take advantage of people.” According to the Chronicle, however, that concern was balanced by his assertion that “the only time Enron would use this if it were in the best interest of the shareholders.”
Asked by defense attorney Daniel Petrocelli whether there was “any discussion about whether Mr. Fastow could be trusted to be an honest person in carrying out these dual roles,” Skilling reportedly replied, “I believe that was part of the discussion.”
“Was this presented in any way that it was a way to line Mr. Fastow’s pockets or to benefit Enron?” asked Petrocelli. “It was to benefit Enron,” Skilling replied, according to the Chronicle.
All reassurances aside, Skilling spent much of the afternoon distancing him from the LJM partnerships. According to the Chronicle, he estimated that he devoted about two hours each on LJM1 and LJM 2 before they were taken to Enron’s board for approval. Asked by Petrocelli about LJM2 — which was eventually funded with $386 million, according to Fastow’s testimony last month — Skilling reportedly responded, “Until all of this happened, if somebody would have asked me what the top 100 things I worked on at Enron Corp, this wouldn’t have been on the list.”
He did concur with his former finance chief that LJM2 was Fastow’s idea. But while Fastow had testified that Skilling told him, “get me as much of that juice as you can,” Skilling testified that he didn’t recall making such a statement. He added that he wouldn’t use a term like “juice” to describe LJM, the Chronicle reported.
Skilling also reportedly told jurors, “I was not of the opinion that I had any role in the direct oversight of LJM transactions.” Even so, observed the Chronicle, he testified that in May 2001 he was “becoming exasperated” with Fastow, and that he instructed the finance chief to resign either from the LJM partnerships or his role as Enron’s CFO.