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The Honolulu Advertiser
Posted on: Friday, April 21, 2006

Prosecutors hammer away at Skilling's character

By Carrie Johnson
Washington Post

Former Enron CEO Jeffrey Skilling, left, and his attorney, Daniel Petrocelli, right, make their way back to court. Enron founder Kenneth Lay likely will take the witness stand as early as Monday morning.

JESSICA KOURKOUNIS | Associated Press

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HOUSTON Federal prosecutors concluded their questioning of former Enron Corp. Chief Executive Jeffrey Skilling yesterday by accusing him of skirting tax laws and violating the company's ethics code based on investments he made in a former girlfriend's Internet startup company.

Prosecutor Sean Berkowitz argued that Skilling backdated checks to a woman he had once dated to avoid paying gift taxes, an issue that government lawyers claim strikes at the heart of the witness's credibility. This week, prosecutors introduced evidence that Skilling invested more than $180,000 in PhotoFete, a now-defunct electronic photography business that won $450,000 in contracts with Enron. Skilling expressed little recollection of the investment, which he deemed too "small" to remember years later.

Lawyers for Skilling, 52, pointed out that the Internal Revenue Service had scoured his finances and had never brought criminal charges. They added that no such charges appear in his indictment, which includes 28 counts of fraud, conspiracy and insider trading. Skilling asserted that he had shelled out more than $66 million in tax payments in the past several years.

"I have paid every dollar of tax that I believe I owe the U.S. government," Skilling told the jury in a forceful tone.

Later, in response to a question about his relationship with the company's founder, the witness asked, "What does this have to do with fraud at Enron?"

Berkowitz replied that Skilling had run afoul of internal conflict-of-interest rules for not disclosing the investments in writing to then-Enron Chairman Kenneth Lay and the company's board of directors. Skilling apologized, said he "probably should have been more diligent on this," and added that the disclosure "didn't occur to me."

Skilling's character was the issue for most of yesterday, as his lawyers called half a dozen witnesses to attest to his integrity and to counter the government portrayal of a man who they say led a plot to deceive investors about Enron's financial health.

One such witness, Carol Baxter, is the widow of Skilling's best friend, dealmaker Cliff Baxter, who committed suicide in early 2002, as investigations of the company's collapse into bankruptcy protection heightened. Baxter said she discussed Skilling's exhaustion with him three months before he abruptly resigned from Enron in August 2001 offering a measure of support for Skilling's statement that he departed for personal reasons, not because he knew the company was on the verge of disaster, as prosecutors contend.

Skilling's former wife, Susan Skilling Lowe, testified that she sold $14 million worth of Enron options in November 2000 without talking to Skilling about the sale. Prosecutors pointed out that Skilling sold $21 million in Enron stock a month earlier and that his current wife, Rebecca Carter, sold $1.65 million one month later all around the time a deal to sell Enron's underperforming international assets cratered. Lowe disputed the idea of a link, saying she rarely talked with Skilling except on issues related to their three children.

"I really didn't pay much attention to Jeff or Enron," Lowe said, drawing laughs from courtroom spectators.

Defense lawyers said fellow defendant Lay likely will take the witness stand as early as Monday morning, marking another crucial moment in the 12-week-old trial. Lay faces six charges related to his leadership between August 2001 and the December 2001 bankruptcy. As such, he is expected to spend fewer than the eight days Skilling was on the stand, Lay lawyer George "Mac" Secrest said.