Today in Enron history, in 2005, two former Merrill Lynch executives were sentenced in the so-called Nigerian Barge trial.
James A. Brown, former head of the brokerage’s asset lease group, was sentenced to three years and 10 months in prison and a year’s probation. Daniel H. Bayly, former head of investment banking for Merrill Lynch, was sentenced to 2 1/2 years’ incarceration and six months’ probation.
Also today in Enron history, in 2006, Jeff Skilling wrapped up his testimony during his trial for fraud, conspiracy, and insider trading. The following is my post from April 21, 2006.
The 7.5 days former CEO Jeffrey Skilling spent on the stand in his fraud and conspiracy trial may well have been the longest of his life.
“I’m exhausted. I’m drained,” the 52-year-old former corporate star said Thursday after answering hundreds of questions. “I’ve waited a long time to say something. Now it’s in the jury’s hands.”
For him at least. His co-defendant, Enron founder Kenneth Lay, is slated to settle into the witness chair for several days starting Monday. Lay, who turned 64 last weekend, complimented Skilling’s efforts.
“He did great,” Lay said. When asked if he was prepared for his turn, Lay replied, “Oh, yeah. Ready.”
Both men hope to convince jurors that they aren’t liars and conspirators as alleged by federal prosecutors in the aftermath of one of the biggest corporate scandals in U.S. history.
The government contends Skilling and Lay repeatedly lied to investors and employees about Enron’s health when they knew their comments masked flailing business ventures and fudged financial statements.
The two defendants say no fraud occurred at Enron, and bad publicity and vanishing market confidence drove the company into bankruptcy protection in December 2001.
Skilling is charged with 28 criminal counts of fraud, conspiracy, insider trading and lying to auditors from 1999 through 2001. Lay faces six counts of fraud and conspiracy from the period after Skilling abruptly resigned from Enron in mid-August 2001 until the company failed.
During his lengthy testimony, Skilling repeatedly denied he lied to investors about Enron’s financial strength or approved accounting tricks to meet earnings targets and impress Wall Street in the years before the company spiraled into bankruptcy proceedings in December 2001.
The former-CEO acknowledged his anger at the government for pegging him as a liar and a crook, and often struggled to keep his temper in check when grilled by prosecutor Sean Berkowitz.
Skilling ended his testimony Thursday by denying that he may have cheated on his taxes.
Skilling calmly said he didn’t recall backdating a $10,000 gift check to an ex-girlfriend to avoid paying taxes on it in 1998, and he told jurors the Internal Revenue Service has repeatedly reviewed his tax returns and reported no problems.
“I paid my taxes,” he testified more than $66 million from 1997 through 2004.
Berkowitz raised the tax allegation on Thursday during his second pass at cross-examining Skilling. The issue stemmed from another the federal prosecutor first raised on Tuesday regarding Skilling’s investment in an ex-girlfriend’s online photo-sharing company, which did business with Enron.
Neither issue is related to charges against Skilling, but Berkowitz used them to challenge the ex-CEO’s honesty.
Skilling told jurors Tuesday he invested $60,000 in the company and didn’t inform Lay or Enron’s board in writing. He also told the Securities and Exchange Commission several years ago that the photo company had a $3,000 contract with Enron.
Berkowitz showed jurors he actually invested $180,000 in the company, and it did $450,000 in business with Enron.
On Thursday, Berkowitz asked about two $10,000 gift checks Skilling wrote to the same ex-girlfriend check No. 277 dated December 1997, and No. 276 dated March 1998. Berkowitz asked if Skilling actually gave both amounts to the woman in March 1998, but backdated one check to December to avoid paying taxes on a gift of $10,000 or more.
Skilling said he didn’t remember the checks, but insisted he paid all the taxes he owes.
Skilling had told jurors he dated the woman in 1997 and 1998 after he divorced his first wife. When Berkowitz pressed him Thursday on when the relationship ended, he said they remained friends and occasionally dated after that.
“What does this have to do with fraud at Enron Corporation? Just out of curiosity,” Skilling asked with a sliver of sarcasm.
Then the prosecutor addressed Enron’s code of ethics, which required approval of executives’ investments in companies that did business with Enron. Skilling acknowledged it “probably” applied in his situation particularly given the personal connection.
“You asked what this had to do with fraud at Enron,” Berkowitz said.
“OK, now I understand,” Skilling replied.
The prosecutor then asked if the ex-CEO expected jurors to “rely on your word here, sir?”
“That’s right,” Skilling said.
Eight other witnesses breezed through brief stints on the witness stand, including Skilling’s ex-wife, Sue Lowe. She said she and her current husband, a stockbroker, sold $14 million in Enron stock options in October 2000 without prompting from Skilling. She acquired the options as part of their 1997 divorce settlement, she said.
Skilling had denied advising his ex-wife to sell the options two months after the August 2000 collapse of Enron’s elaborate plan to unload poor international assets to a group of Middle Eastern investors. That same month, the company’s stock hit its all-time high of $90.
Lowe said she sold at that time because they were nervous about the market and wanted to transfer holdings to bonds. Under cross-examination, she said she didn’t know Enron’s stock was trading high when she ordered the sale.
Under questioning from Skilling lawyer Randy Oppenheimer, Lowe acknowledged that she had agreed to testify reluctantly, but confirmed that prosecutors never asked her about the sale.
Most of the eight other witnesses who testified Thursday were Skilling friends or colleagues who vouched for his honesty.