Skilling's last shot at credibility
Enron's former CEO tries to rebut government assertions during re-direct questioning from his attorney.
By Shaheen Pasha, CNNMoney.com staff writer

HOUSTON (CNNMoney.com) In his eighth day of testimony, Enron's former chief executive Jeffrey Skilling was excused from the stand, but not before he reasserted his belief that he did his best to uphold his duty to Enron shareholders.

During re-direct, Skilling attempted to methodically refute the government's allegations that he misrepresented the health of its broadband and retail energy businesses to keep the company's stock price high.

Former Enron CEO Jeffrey Skilling heads to the federal courthouse in Houston.
Former Enron CEO Jeffrey Skilling heads to the federal courthouse in Houston.
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Lead defense attorney Daniel Petrocelli swiftly took the defendant point-by-point through charts provided by the government that Skilling contends distort the facts and indicate a lack of understanding regarding the way business is conducted.

Government prosecutor Sean Berkowitz's cross-examination had focused on upbeat projections Skilling made to analysts in 2001 that were particularly bullish on the growth of the retail energy and broadband businesses.

Under re-direct, Petrocelli played a portion of the video clip in which Skilling told analyst that his projections were all forward-looking a portion of the video that the prosecution had not shown. Skilling turned to the jury and explained that the Securities and Exchange Commission encourages companies to provide shareholders with financial assumptions in order to provide as much information as possible. He added that companies generally provide projections but add a caveat to let Wall Street know that the estimates may change.

"The SEC says that but it appears the Department of Justice doesn't apparently like it," Skilling said, throwing a jab at the prosecution.

Out of context

He also testified that Berkowitz presented incomplete charts or took documents out of context to suggest that Enron moved portions of the retail energy unit into its profitable wholesale business to hide mounting losses.

Skilling testified Wednesday that the move was intended to improve efficiencies and he didn't believe that the retail unit was suffering from losses. To prove that point, the defense presented documents that indicated that the retail business was showing gains, not losses as the government contends, by the third quarter of 2001.

"The whole concept of how (these charts) show a business that's failing just represents a misunderstanding of how the business is put together," Skilling said.

He also reiterated his previous frustration when Berkowitz presented a transcript of a speech by Arthur Levitt that said that financial documents are vital for the public to make financial decisions and if a financial report can't be explained to the average person, it isn't appropriate. The document caused Skilling, whose temper had been simmering for much of Tuesday, to finally erupt into anger.

Thursday, however, Skilling explained calmly that the charts Berkowitz was referring to were not finalized documents and weren't released to investors. He said the documents were used to imply that Enron was keeping cookie jar reserves in order to bolster earnings if Enron fell short of expectations an allegation he vehemently denied.

"You could not just pull out reserves," he testified. "The whole characterization of reserves as a cookie jar is demonstratively untrue."

Throughout morning testimony, the defense indirectly tried to tackle the prosecution's contention that Skilling's testimony was "tailored" and rehearsed to provide a plausible explanation for the allegations against him.

While neither Petrocelli or Skilling have directly referenced the accusation, during times where Skilling was confused by a question Petrocelli asked, Petrocelli would laughingly joke "We really don't rehearse, do we?" to which Skilling, also laughing, would reply "No, we don't rehearse."

It was a subtle move but an effective one as laughter broke out in the courtroom and the jurors smiled from their box.

After Petrocelli's redirect, prosecutor Berkowitz got the opportunity to ask some more questions of Skilling. He started with questions about gifts Skilling made to his ex-girlfriend Jennifer Binder in 1998 that weren't reported and that may have violated the company's code of ethics, and possibly IRS gift tax exemption laws.

Skilling testified that the Internal Revenue Service has combed through his tax returns and filed no charges against him for any violations.

"What does this have to do with fraud at Enron Corporation? Just out of curiosity," Skilling asked, as he visibly became more irritated at the line of questioning.

Berkowitz just handed him the company's code of ethics in response, implying that his dealings with Binder, whose company Photefete also had dealings with Enron, were unethical. The government has used this line of questioning to chip off more of Skilling's credibility with jurors by showing that even in the smallest details, he had conflicts of interest within Enron.

In the absence of any solid documentation to prove that Skilling and his co-defendant, Enron founder Kenneth Lay, masterminded a massive fraud that toppled Enron in late 2001, jurors will have to measure the credibility of Skilling's testimony versus the 22 government witnesses who have testified against him.

Petrocelli, in a brief re-direct after Berkowitz's re-cross, asked if he regretted not disclosing his investment in Photofete with Enron's board of directors.

"In retrospect I should have filled something more out on that conflict," he said. "It didn't occur to me at the time, Dan."

"Do you feel bad about it?" Petrocelli pressed on. "Yes," he responded.

Believability and likability

In a case of "he-said, she-said," it all comes down to who the jury believes. And for Skilling, his believability is tied to his likability.

Skilling will be followed by a line of character witnesses before Lay takes the stand as early as late Monday.

Skilling faces 28 charges of conspiracy, fraud and insider trading while Lay faces six counts of conspiracy and fraud.

Legal experts say the defendants could face 20 to 30 years behind bars if convicted of the charges. Lay will also face an additional trial for bank fraud once jurors begin deliberations on the current trial.

Enron was once the seventh-largest corporation in the U.S. It declared bankruptcy in December 2001, costing 4,000 employees their jobs and resulting in billions in losses for investors.

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.