Skilling comes out swinging
Ex-Enron CEO says he felt responsible for Enron's troubles but he never believed that the company engaged in improper conduct.
HOUSTON (CNNMoney.com) - Enron's former chief executive Jeffrey Skilling testified that he regretted his decision to leave the company in August 2001 - a decision he said could have added to Enron's eventual death spiral.
Skilling appeared troubled and pained as he recalled how he felt as Enron employees lost their jobs and it became apparent that the company was struggling to keep afloat. "It was absolutely inconceivable," said Enron's former CEO.
"How did that make you feel?" Petrocelli asked. "Like I wanted to die," Skilling said.
He said he felt responsible for Enron's troubles and while he couldn't speculate that the company wouldn't have been in the same position if he had remained as CEO, he said "I will always regret that I left."
But throughout his testimony, Skilling maintained that he didn't believe that Enron had engaged in any improper conduct. "I would know of no reason why Enron would have to resort to fraud in 1999 or any other year I was involved [with] it," he said.
He said as trouble mounted, he was increasingly distraught and eager to help Enron survive although his original offer to return to the company had been rejected by Enron's management.
"All I was doing at that time was going to pieces," he said. "It dawned on me...my company was struggling for its life."
He said he joined forces with former Enron executives Cliff Baxter and Lou Pai to raise $3 billion - using $70 million of his own funds - in order to keep Enron alive.
But the plan fell apart, Skilling testified, after Baxter backed out and he became increasingly depressed, prompting a friend to advise him "you need to get a psychiatrist and you need to get a lawyer."
Skilling took the witness stand Monday and came out swinging in the first few moments of his testimony as he declared his innocence and said he was proud of the company that he helped build.
"My life is on the line so I'm nervous," Skilling admitted, declaring, "I am absolutely innocent."
Skilling said he never considered accepting a plea bargain from the government, even as many of his former lieutenants at Enron pled guilty and testified that the company - led by Skilling - was essentially corrupt.
"It's not in my nature not to fight something like this," he said. "The charges against me are wrong. I am innocent of those charges and I will fight those charges until the day I die."
The defense has said not only were Skilling and Enron founder Kenneth Lay innocent of any crimes, but that there were no crimes to begin with at Enron, with the exception of former financial chief Andrew Fastow's shady dealings.
Later in the afternoon, Skilling testified that he was stunned when he saw documents that showed just how Fastow had stolen millions of dollars from Enron.
"For a long time I supported him," he said. "I was almost physically sick when I saw that."
A "witch hunt"
Defense attorneys have tried to downplay the testimony of witnesses for the prosecution, suggesting that the former Enron employees who testified against their one-time bosses did so under pressure from the government.
In the eleventh week of the Enron trial, Skilling's testimony is crucial in the wake of the prosecution's case, which featured a credible line of witnesses - including some of Enron's top lieutenants, who all pointed the finger to him as the one who orchestrated the massive fraud that led to Enron's collapse in 2001.
Skilling described a "witch hunt" as the public became outraged by Enron's implosion.
"People don't stop long enough to look at the facts," he said. "People are angry, people lost money, they lost jobs. The easiest thing to do is look for the witches."
Skilling said he defied his attorneys' advice and decided to testify before Congress and the Securities and Exchange Commission. He said he only invoked his Fifth Amendment rights after he found out he was a target of the Enron Task Force's investigation.
Under questioning from his lead defense attorney, Daniel Petrocelli, Skilling attempted to portray a different picture of Enron and of himself. Skilling testified that he left the company in August 2001 as he became overwhelmed with the day-to-day stress of running Enron and looked to refocus his attention on his family.
He said he believed that Enron "was the finest corporation in the world" and was confident that the company was strong in all of its major lines of business. But he acknowledged that the stock price began to fall in 2001 - a fact he attributed to the actions of short sellers – and he became increasingly frustrated that he was unable to communicate Enron's strengths to Wall Street.
Skilling said the notorious April 17, 2001 conference call tape of his exchange with Highfields Capital analyst Richard Grubman, in which he referred to Grubman as an "asshole" for questioning Enron's financials, was an example of his mounting frustration.
"The now infamous 'asshole' quote was used as an example of arrogance or something," he said. "It wasn't meant that way."
But he said it became apparent that he was exhausted and it was now time to leave.
"I felt my leaving would reestablish the company's credibility," he said. "But the reason I left was really because my head wasn't in it anymore.''
And to counteract the prosecution's characterization of Skilling as a greedy megalomaniac, Skilling faced the jury and in a humble, soft-spoken voice, described his desire to spend more time with his two sons and daughter, as well as his plans to involve himself in more charitable endeavors, building homes for underprivileged children.
He said he was shocked when the media began to raise questions about Fastow's LJM partnerships - special purpose entities that the government contends were set up to help Enron hide millions in losses. He said he believed the media stories were planted by short-sellers and he warned Enron founder Kenneth Lay that the situation would only get worse if the company didn't provide more information to the media. He said he recommended that Enron "open the kimono" and provide access to Enron's books.
Skilling added that he also called Fastow to encourage him not to avoid the media but explain why LJM had been created.
He testified that he told Fastow "get our story out," but then quickly corrected himself on the stand, adding "get Enron's story out. Tell them why it was done and why it was entirely appropriate that it was done."
Skilling said all of the LJM transactions were properly disclosed in Enron's financial statement and he "believed strongly that the transactions were proper."
But he said he became increasingly concerned in October 2001 as the media attention grew and the stock price continued to decline, prompting him to approach Lay about returning to the company.
"It would send sharp signal to the marketplace that I didn't think anything was wrong," he testified. "It was something that might have made a difference."
He said the company ultimately thought his return would be considered "one more weird thing associated with Enron" and would only cause more problems for the company. While he said he had confidence in Enron's decision, it was still hard to stay away.
"I was devastated. This was a big, big part of my life," he said. "It was devastating to be so powerless."
Lay and Skilling, who together face nearly three dozen fraud and conspiracy charges, are accused of lying to investors about the company's financial state while they enriched themselves by selling millions of dollars in stock.
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 fraud once the current trial in Houston is over.
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 of dollars in losses for investors.
For more on Skilling's defense, click here.