Special report: Enron on trial Full coverage
Enron: Does it hurt to be nice?
Former corporate secretary Paula Rieker's politeness could undermine her testimony.
By Bethany McLean, FORTUNE senior writer

HOUSTON (FORTUNE) - Is a pattern developing? The defense keeps witnesses on the stand some multiple of the length of time that the prosecution does -- two or three times as long. It's not clear that there's a formula, but if there are going to be exceptions to this rule, Paula Rieker -- facing her third day on the stand Thursday -- is not going to be one of them.

The former Enron investor relations deputy, who served as corporate secretary during Enron's final months, faced just one day of questioning from the prosecution, and is now on her second day of cross-examination, with Lay lawyer Bruce Collins still not finished yet -- and Skilling counsel Dan Petrocelli (or another O'Melveny & Myers lawyer) waiting in the wings for his turn.

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It now looks like Rieker will remain on the stand into next week. At the end of Wednesday's court proceedings, the prosecution objected to the lengthy cross-examinations, and asked Judge Sim Lake to slap a time limit on them.

The judge snapped back that this was a criminal trial, that Lay and Skilling were fighting for their freedom, and that he wasn't going to impose any such constraint. Then, he noted that if the prosecution would stop objecting so much, the trial would move more quickly.

It's not entirely clear, though, that all the time Collins spent with Rieker on Wednesday served Ken Lay perfectly. Collins did point out that when Lay made repeated assurances about Enron's liquidity, he could have been relying on statements made by Andy Fastow and Ben Glisan, Enron's former chief financial officer and former treasurer (who have both pled guilty and are expected to testify for the prosecution).

He also pointed out that Enron's board defended its decisions to back Fastow's LJM partnerships, thus providing Lay with cover for his own support of Fastow. And he got Rieker to admit that Enron's accountants and lawyers signed off on many of the company's moves.

But on many points Collins wanted to make, Rieker stymied him. On several occasions, when Collins tried to rush Rieker into agreeing with his point, she stopped and corrected him instead. He missed few opportunities to accuse her of being uninformed -- neither an accounting nor finance expert.

"That's about all you know," he said at one point, in a tone that came across as condescending. "No, sir, that is not all I know," she shot back. It's interesting to speculate: How is Collins' attitude playing with a heavily female jury?

There was a bit of Rieker's testimony that served as a microcosm for a much larger issue. It came when Collins focused on a board meeting in the fall of 2001 -- a board meeting in which more than 30 people were present when a slide was presented showing all the EES losses that had been stashed in Enron's wholesale business.

Collins made a big point of noting that no one objected: "That was exposed to everybody in that room...not one person expressed, 'oh, this is wrong, this is hiding losses'...there wasn't a single person in that room that hinted or suggested anything wrong."

And that was certainly true, on many occasions when questionable things were happening at Enron. Will the fact that so many people stood by silently so often make it harder for the jury to believe anything was really wrong? Maybe so.

I was reminded, though, of a comment a Houston investor made about Enron over dinner Tuesday night. He said that he thought the company's failure was caused by a cascade of small events, events that no one stopped, and that everything could have been different if even one person had spoken up. As he added, there are lots of times in human history where the same is true.

In other Wednesday news...does it hurt to be nice? Maybe. Collins pointed out several cases where Rieker's words at the time appeared to contradict her testimony now. "Your leadership has been invaluable," Rieker wrote in an e-mail to Ken Lay on the day Dynegy's short-lived deal to purchase Enron was announced. She signed the e-mail, "My best, Paula."

"You would not have praised Mr. Lay...if you had believed he had been engaged in wrongdoing, would you?" Collins asked. Rieker paused, and then said that was not entirely accurate. There were times when she "fell into the role of being a good corporate citizen," she said. Collins then asked if she'd ever told Lay directly that he had done anything wrong. She said that there were times when she said things, but conceded that no, she didn't say it in those words.

Later, he showed Rieker an e-mail she sent to Andy Fastow in October 2001 that concluded: "Hang in there."

"I have a lifelong training of being nice to people," Rieker responded. "I didn't think it was my role to punch Andy in the stomach." Will the jury see her as a liar, or as a polite woman who was trying to make the people around her feel better?

Wednesday's most hilarious moment (OK, maybe you have to be an Enron geek or a postmodernist to appreciate this) came in a 'what's-in-a-name?' argument between Rieker and Collins. The topic was whether it mattered to investors to know the name "Raptor." (Raptor was the name Enron gave the structured-finance vehicles it used to book and lock in gains on dicey investments; the Raptors had to be unwound in the fall of 2001 after the price of the Enron shares supporting them plunged.)

The courtroom argument involved Enron's surprising announcement that it was taking a $1-billion-plus charge in the third quarter, with part of the charge described as involving the unwinding of a "previously disclosed entity." Which naturally prompted investors to ask directly: What entity?

Enron had refused to answer the question. (Lay told an analysts meeting that he wasn't even sure the vehicle had a name, though Rieker testified he had explicitly discussed it with the Enron board just a few days earlier.) Collins argued that since Raptor had only been disclosed previously in the footnotes to Enron's SEC filings as an "entity" (definitely not as a scary-sounding Raptor), Lay's failure to identify the vehicles as Raptor simply didn't matter. "Just giving it a name didn't provide any information," insisted Collins. "...Because it had a name, versus calling it an 'entity,' that would make all the difference?"

The defense lawyer suggested that Enron might have reasonably referred to Raptor as "the entity referred to in footnote 16" -- the footnote that discussed Enron's LJM deals -- or called it "Brontosaurus" or "Eagle."

But Rieker insisted it was important. The use of the name, she said, would have "cast light" on the fact that Raptor was different from LJM, and that it had its own potential risks to Enron. This information, Rieker testified, would have helped investors.

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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.