Former Enron CEO Faces Stormy Time on Stand
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JIM LEHRER: The Enron trial. Former CEO Jeffrey Skilling was cross-examined today about his role in the collapse of the former energy giant. Skilling took the stand in his own defense last week to refute charges of conspiracy, fraud and insider trading. Enron’s founder, Kenneth Lay, is also on trial for his role in the company’s 2001 bankruptcy.
Joining us now is Bethany McLean, who’s been in the courtroom. She’s editor-at-large of Fortune magazine and co-author of the book “The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron.”
Bethany McLean, welcome.
BETHANY MCLEAN, Co-author, “Smartest Guys in the Room”: Hi, Jim. How are you?
JIM LEHRER: Fine. What was the most significant thing Skilling said or did today in that courtroom?
BETHANY MCLEAN: I thought the most significant thing was less anything specific that he said, but rather how markedly his demeanor changed. We saw a very different Jeff Skilling on direct than the Jeff Skilling that we saw on cross-examination.
On direct, he was very confident, very smooth, walking through details of the business with precise recollection. And on cross-examination, you heard “I don’t recall” out of his mouth almost every other sentence. And he was very almost meek, very subdued.
JIM LEHRER: Was there a point or a purpose to — a discernible point or purpose to the prosecution’s attack on him today, the approach they took?
BETHANY MCLEAN: I think what they were trying to do is to make jurors question his credibility. In the end, a lot of the important moments of this trial come down to one person’s word or several people’s word against somebody else’s.
There are very few written notes corroborating some of the really critical meetings. And you’ve had this parade of government witnesses who have testified to Jeff Skilling being present at moments of wrongdoing. And all of these government witnesses, of course, have their own reasons to cooperate.
And then you’ve got Jeff Skilling telling a radically different story, often, of some events. And so, in the end, a lot of this is going to come down to: Who does the jury believe? And so I think a lot of what the prosecution was trying to do is to dent Jeff’s credibility.
JIM LEHRER: And the bottom line of Skilling’s defense is that he didn’t know anything wrong was going on, is that correct?
BETHANY MCLEAN: It’s actually even more extreme than that. It’s not that he didn’t know anything wrong was going on; it’s that there was nothing wrong. It’s not that he didn’t realize there were problems; it’s that there were no problems.
JIM LEHRER: All right, so when the — when you say he was more ill at ease, a lot of “Oh, I don’t remember” and all of that, was there anything specific they were trying to get at, at the time, and that it was important for him when he said, “Hey, I don’t recall this, I don’t recall that”?
BETHANY MCLEAN: They were trying to get at the notion that Jeff Skilling was responsible for signing off on the deals that Andy Fastow did with his investment partnership, and this has always been a big question, because there are all these signature sheets with Jeff Skilling’s name left blank on them.
And Skilling has always sworn that he didn’t know he was supposed to sign off on these transactions. And it’s another moment that goes to the heart of how much did Jeff know about the deals that Andy Fastow was doing with Enron?
JIM LEHRER: And these deals are crucial to the case, because they were taking Enron money and investing that money in other projects, right, in a way that Enron was supposed to make money but couldn’t, is that about it?
BETHANY MCLEAN: That’s fair enough. They were doing — it was an outside partnership that was doing deals with Enron, deals that contributed to Enron’s bottom line, to both its cash flow and its earnings.
And Skilling has claimed that nothing was wrong with Enron, that the company never had to stretch to meet Wall Street’s earnings targets, yet, on the flip side, the prosecution has shown that over and over again deals Enron did with LJM were the reason that the company made its numbers for a given quarter or year.
JIM LEHRER: How much longer is the cross-examination expected to go?
BETHANY MCLEAN: I think it’ll go at least another day, potentially a little built longer than that. Sean Berkowitz, the government lawyer who is doing the cross-examination, said that his cross would last no longer than Dan Petrocelli’s direct examination. And the direct examination was four days, so we may have a little while to go.
JIM LEHRER: Is it possible to characterize where the testimony is right now? I don’t mean, who do you believe, or any of that sort of stuff; nobody can answer those kinds of questions. But just what is the overall aura of what’s happened thus far?
BETHANY MCLEAN: Well, I think the government put on a strong case. They had a parade of cooperating witnesses, all of whom testified to wrongdoing at Enron. I think Jeff Skilling put on a good show of defending himself by offering the jury another narrative to believe, because in the end I think the jury does have to believe a story. They have to believe either a story of Enron is this corrupt company or they have to believe Jeff Skilling’s narrative.
And I think Skilling offered a pretty convincing narrative last week. And now it’s up to the prosecution to damage that narrative. And I think they did do some damage around the edges today, and we’ll see what happens tomorrow.
JIM LEHRER: Damage to his credibility, rather than to his story line?
BETHANY MCLEAN: Damage to his credibility and a little bit to his story line. One of the really key things with Skilling, you have to believe — in order to buy his story — you have to believe that he left Enron, quitting abruptly as the company’s CEO, purely for personal reasons, not because he believed there were problems at the company. And then you have to believe that a completely healthy company went bankrupt three or four months later.
And so you already have to — you really have to believe Jeff Skilling to make the leap to those two points. And so anything the prosecution can do to — many times today, several times today, for example, that show how Skilling said one thing and then said another thing at different moments of testimony. So anything they can do like that to make jurors question him goes right to the heart of the case.
JIM LEHRER: All right. Take us further down the line, in terms of what’s supposed to happen after Skilling and the rest of the trial.
BETHANY MCLEAN: Well, I think next we’re going to see a parade of character witnesses testifying to what a great guy Jeff Skilling was. I think after that Lay is likely to testify, although there seemed to be some level of growing questions about whether he actually will take the stand.
One of the really unfortunate things in this case has been that Lay’s lead lawyer, Mike Ramsey, has had to be out of the courtroom due to some problems with his heart. And, you know, you can’t help feeling for Ken Lay on that one, no matter what you think of the guy, because it’s just an unfair situation. So there have been some questions with that, whether Lay will actually take the stand.
And then, after that, you’ll have some expert witnesses who will testify to why these strange financing systems that Enron used were really innovative and new, rather than fraudulent. And then you’ll have some rebuttals. And then you’ll have the drama of closing arguments, which the judge has limited to six hours each, and then we’ll have jury deliberations. And who knows how long that could last?
JIM LEHRER: But we’re talking a matter of weeks still, right, not days?
BETHANY MCLEAN: We are. I think most people expect the case to last at least until early- to mid-May. And then it will be in the hands of the jury after that.
JIM LEHRER: OK. Bethany, thank you very much.
BETHANY MCLEAN: Thank you so much.