Enron’s Skilling OK’d concealing losses

HOUSTON – Former Enron Corp. CEO Jeffrey Skilling approved a ploy to hide hundreds of millions of dollars in losses rather than reveal the catastrophic state of a core business, a former top executive testified on Tuesday.

The former executive, David Delainey, told the jury at the trial of Skilling and former CEO Ken Lay that Enron’s retail arm was hit by a US$200 million liability because of a 2001 ruling by the California electricity regulator. Delainey said he and others took to Skilling a controversial proposal to hide the retail losses in Enron’s profitable wholesale trading business and justify the move as an operational change.”I increasingly got cold feet on that,” he said.”There was no business purpose to this other than to hide the loss and I knew that was not proper.”At a March 2001 meeting, Delainey said he told Skilling the deal “lacked integrity,” prompting an angry response from others, including former chief accounting officer Richard Causey.”(Skilling) looked at me and said ‘what do you want to do?’” Delainey said.”And what did you take that to mean?” prosecutor Kathryn Ruemmler asked.”‘Get in line,’” Delainey replied, and hide the loss.The testimony appeared to be very damaging to Skilling’s contention that he knew of no wrongdoing at Enron, which collapsed into the then-largest US bankruptcy in history in December 2001.Skilling faces 31 charges of conspiracy, fraud and insider trading at the trial, and Lay faces seven charges of conspiracy and fraud.Both men could face decades in jail if convicted.Much attention at the trial, now in its fifth week, has been focused on the transfer of hundreds of millions of dollars in losses to Enron’s wholesale group from the retail division, Enron Energy Services, which Skilling touted to analysts as a huge success story.Delainey, 40, is a Canadian citizen who became CEO of Enron’s North American wholesale trading business and later CEO of Enron Energy Services.He pleaded guilty to insider trading in 2003 and is cooperating with prosecutors, who could recommend a shorter sentence than the 10-year prison term he faces.- Nampa-ReutersDelainey said he and others took to Skilling a controversial proposal to hide the retail losses in Enron’s profitable wholesale trading business and justify the move as an operational change.”I increasingly got cold feet on that,” he said.”There was no business purpose to this other than to hide the loss and I knew that was not proper.”At a March 2001 meeting, Delainey said he told Skilling the deal “lacked integrity,” prompting an angry response from others, including former chief accounting officer Richard Causey.”(Skilling) looked at me and said ‘what do you want to do?’” Delainey said.”And what did you take that to mean?” prosecutor Kathryn Ruemmler asked.”‘Get in line,’” Delainey replied, and hide the loss.The testimony appeared to be very damaging to Skilling’s contention that he knew of no wrongdoing at Enron, which collapsed into the then-largest US bankruptcy in history in December 2001.Skilling faces 31 charges of conspiracy, fraud and insider trading at the trial, and Lay faces seven charges of conspiracy and fraud.Both men could face decades in jail if convicted.Much attention at the trial, now in its fifth week, has been focused on the transfer of hundreds of millions of dollars in losses to Enron’s wholesale group from the retail division, Enron Energy Services, which Skilling touted to analysts as a huge success story.Delainey, 40, is a Canadian citizen who became CEO of Enron’s North American wholesale trading business and later CEO of Enron Energy Services.He pleaded guilty to insider trading in 2003 and is cooperating with prosecutors, who could recommend a shorter sentence than the 10-year prison term he faces.- Nampa-Reuters