Next U.S. witness should perk up Enron trial
Koenig testimony due to wrap up next week; Rice, former head of broadband services, could take stand.
By Amanda Cantrell, CNN/Money staff writer

NEW YORK (CNNMoney.com) - Mark Koenig, the former head of investor relations at Enron, faces a seventh day on the witness stand when the criminal trial of ex-Enron executives Ken Lay and Jeffrey Skilling resumes in federal court in Houston next week.

Throughout his testimony, Koenig has maintained that Skilling and Lay deceived investors and Wall Street analysts about the true state of Enron's financial health.

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The two former CEOs, who are being tried on roughly three dozen counts of conspiracy and fraud, maintain they did nothing wrong.

Koenig, the first witness in the trial, has faced 3-1/2 days of cross-examination. Lawyers for Lay and Skilling have attacked the credibility of Koenig's testimony to the government as well as statements in his 2004 guilty plea. Koenig pleaded guilty in August 2004 and faces up to 10 years in prison and $1 million in fines.

Lay's attorney Mike Ramsey and Skilling's attorney Dan Petrocelli have attempted to discredit Koenig's earlier testimony that Lay and Skilling deliberately hid losses from investors and doctored the company's numbers to match what Wall Street analysts expected.

The cross-examination has taken longer than expected because of the defense's request to play in full pre-recorded audio and video tapes of Enron's calls to Wall Street analysts and meetings with employees that were held in 2001, when the company's troubles came to light. Enron's bankruptcy in December 2001 was the largest in the nation's history at the time.

Skilling said Enron was in "great shape"

Jurors heard several such tapes during testimony on Wednesday and Thursday. In the tapes, Skilling frequently proclaimed the company to be in "great shape," while Lay told employees in late 2001, "I think the few months and the next several years are going to be great for Enron and great for Enron's employees."

Jurors must now decide whether Skilling and Lay were deliberately hiding losses and lying to investors at the same time.

Attorneys for the defense asked permission to play the tapes in full, arguing that the snippets jurors heard when government prosecutors questioned Koenig were out of context. "The feel of the case is as important as the 'think' of the case," Ramsey told reporters outside the courthouse yesterday.

Said Petrocelli, "We want the jury to see what happened in real time. You cannot take a sentence out of a one-hour conversation and put it in an indictment. That's common sense."

Petrocelli said future witnesses' testimony will likely cover shorter periods of time in Enron's history than that of Koenig. The prosecution has complained that the defense attorneys' decision to play the tapes in full has brought the trial, which is expected to last several months, to a near standstill.

"Now that the tapes have been played, I think the pace will pick up a bit," said Petrocelli.

The frequently dry proceedings produced some amusing moments. At one point, Petrocelli was asked to wash off his cologne after a juror complained that the scent was overwhelming, according to an item by Houston Chronicle reporter Mary Flood on the paper's blog about the trial.

It is expected that jurors in the trial will finally hear from the government's second witness next week following the conclusion of the defense's cross-examination of Koenig.

The government will call its next witness, believed to be Ken Rice, following Ramsey's cross-examination of Koenig, which is expected to conclude on Monday. Rice is the former CEO of Enron's troubled Internet unit, Enron Broadband Services (EBS).

Rice pleaded guilty to a single count of securities fraud in 2004, agreed to pay nearly $15 million in fines and now faces up to 10 years in prison. He is expected to support Koenig's testimony that he knowingly misled investors about growth prospects for EBS with the blessing of Enron's senior management.

Attorneys for the defendants have suggested that the government's witnesses pleaded guilty only under coercion from the government and that there was no company-wide illegal activity at Enron, apart from crimes committed by Andrew Fastow, the company's former chief financial officer, who also pleaded guilty.

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Find out what former Enron employees are doing now, and what they think about Skilling and Lay. Click hereTop of page

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.