At the Enron trial in Houston Monday, federal prosecutors began their cross-examination of former Chief Executive Officer Jeff Skilling, focusing on his sales of Enron stock just before the company collapsed in late 2001.
All last week Jeff Skilling's own attorney asked him questions on the stand, allowing the defendant to give lengthy explanations of his actions and what he thought had gone wrong at Enron. He repeatedly declared his innocence and blamed others for the demise of the once powerful energy-trading company.
However a new phase of testimony began Monday when Chief Enron Task Force Prosecutor Sean Berkowitz began his cross examination of Skilling, zeroing in on sales of Enron stock before he left the company in August, 2001, and an attempt to sell more stock a few weeks later.
Skilling blamed the terrorist attacks of September 11, 2001, for his attempts to sell in the month after he left Enron. However, prosecutors have a recording of a call Skilling made to a broker on September 6, several days before the terrorist attacks.
SKILLING: I would also like to sell 200,000 shares of Enron.
BROKER: You would like to SELL 200,000 shares?
Skilling, however, denied he had used insider knowledge of Enron's financial weakness to make his decision to sell. He also denied knowing that his former wife and his fiancé at that time were also selling their Enron holdings.
Investors lost tens of millions of dollars in December 2001 when Enron collapsed. Especially hard hit were Enron employees, thousands of whom had most of their retirement savings in Enron stock.
In his questioning prosecutor Berkowitz blamed Enron's demise on huge investments the company had made in foreign assets that turned out to be overvalued. When the need for cash came around, he said, Enron could not sell these assets and reclaim the money it had invested. Prosecutors contend that Skilling and former Chairman Ken Lay, who is on trial with Skilling, knew Enron was in trouble but kept telling analysts that all was well in order to maintain the stock price.
Berkowitz also questioned Skilling about financial schemes run by Andrew Fastow, the former Enron Chief Financial Officer, who pleaded guilty to fraud and testified for the prosecution earlier in the trial under a plea bargain agreement. Fastow described how he and his colleagues hid Enron losses by moving assets from shell companies back and forth to make losing enterprises look profitable. Berkowitz asked Skilling how he, as a hands-on manager, could not have known what Fastow and others were up to. But Skilling remained resolute in denying any knowledge of wrongdoing.
Enron was once ranked as the seventh-largest U.S. corporation and its collapse is considered one of the biggest financial failures in U.S. history. Jeff Skilling faces 28 charges and Len Lay six charges in the federal indictment brought against them. They each could serve more than 20 years in prison if convicted on all charges.