Lawmakers hope to clear up conflicting Enron testimony

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Posted 8:37AM on Tuesday, February 26, 2002

WASHINGTON - Former Enron chief executive Jeffrey Skilling, whose veracity has been questioned by lawmakers, faces questioning before a skeptical Congress again Tuesday - this time along with other Enron officials whose versions of events conflict with his. Sherron Watkins, the vice president who warned former chairman Kenneth Lay in August of potentially serious accounting problems, is testifying at the same time as Skilling - who has stated he knew few details of questionable transactions involving a partnership used to hide more than $1 billion in debt. Lawmakers want to bring together Skilling, Watkins and Jeffrey McMahon, Enron's current president and chief operating officer, to put the same questions to each of them and compare their answers at a hearing of the Senate Commerce Committee. All three testified, separately and under oath, this month before a House investigative panel. Other top Enron executives, including Lay, have invoked their Fifth Amendment right against potential self-incrimination and refused to testify. "We are determined to understand what happened at the Enron Corporation," said Sen. Byron Dorgan, D-N.D., whose Commerce subcommittee on consumer affairs is investigating the energy-trading company's collapse and bankruptcy, the biggest in U.S. history. "The witnesses we will hear from Tuesday, and the format in which they will appear, promise to be very helpful in that effort." Watkins told the House panel on Feb. 14 that she believed Skilling and former chief financial officer Andrew Fastow - along with Enron's auditing firm, Arthur Andersen LLP, and its outside legal advisers - "did dupe Ken Lay and the board." She called Skilling "a very intense, hands-on manager" and said she "would find it hard to believe that he was not fully aware" that the partnerships run by Fastow were largely financed by Enron stock, contrary to normal accounting practices. A week earlier, before the same subcommittee, Skilling testified that he was assured by others at Enron that the transactions "were correct." According to McMahon's Feb. 7 testimony, he was transferred out of his job as treasurer shortly after he complained to Skilling about the partnerships in a meeting on March 16, 2000. Skilling has said he couldn't recall details of key conversations that subordinates, including McMahon, testified they had with him concerning Enron's finances. Watkins' warnings to Lay went largely unheeded, but eventually the Houston-based company had to face the fact that its stock price was heading down in the recession. Highly risky and volatile investments that Enron had transferred to the complex web of partnerships would have to be publicly disclosed as heavy losses. The slumping Enron stock - which traded at around $83 early last year but slid to less than a dollar a share in late November - was all that was backing up the investments. The resulting wave of stock sales by nervous investors abandoning the company pushed it to file for bankruptcy court protection on Dec. 2. Investors nationwide lost money and thousands of Enron employees were stripped of their retirement savings in accounts loaded with Enron stock as it plummeted. The Justice Department and the Securities and Exchange Commission are investigating Enron and the role of its auditor, Arthur Andersen. Rep. Billy Tauzin, R-La., chairman of the House Energy and Commerce Committee, has said he doesn't believe Skilling's testimony and has suggested that the former official could face formal accusations of perjury by federal prosecutors. Skilling's attorney, Bruce Hiler, has disputed Tauzin's statements. Philip Hilder, a lawyer representing Watkins, said Monday that "she's looking forward to testifying." McMahon "has cooperated fully with all of the investigations" and will continue to do so, said his attorney, Michael Levy.