HOUSTON – Jeffrey K. Skilling struggled to keep his temper in check on yesterday, repeatedly accusing a federal prosecutor of not allowing him to answer questions more fully during his second day of cross-examination.
Prosecutor Sean M. Berkowitz continued to pick away at the credibility of Skilling, a former Enron chief executive accused of conspiring to defraud investors before the company collapsed in December 2001. Berkowitz pressed Skilling to acknowledge that he participated in schemes to manipulate end-of-quarter earnings results and was closely involved in moving troubled assets into an off-the-books financing structure called Raptors.
Skilling, 52, is expected to be on the stand through tomorrow. That will set the stage for the expected testimony of his co-defendant, former Enron chairman Kenneth L. Lay, 64, who could take the stand as early as April 26.
In his two days of cross-examining Skilling, Berkowitz, the 38-year-old director of the Enron Task Force of the Justice Department, has adopted an aggressive stance. In doing so, he appears to be trying to provoke a sharp reaction by mocking Skilling's own words and repeatedly seeking to limit him to short answers.
Skilling flashed his temper yesterday in one heated exchange about the use of reserves to fill earnings shortfalls, refusing to stop talking when Berkowitz said he was going to move on to another line of questioning.
Skilling was set off by the prosecutor's suggestion that he used reserves like a “cookie jar to help Enron report the earnings it wanted for any given quarter,” which Skilling denied last week during questioning by his lawyer.
“Let's move on,” Berkowitz said.
“Let's not move on; let's talk about financial reports,” Skilling said. “There have been no financial reports; this is an intra-company reserve estimate,” he added, referring to Berkowitz's assertions about reserves. “How can you have a mistake on a financial report when the report is not coming out for another two months?”
Berkowitz quickly retorted. “I know it's difficult for you to sit here and answer questions,” he said, turning away from Skilling. “And I know at times you overreact to people who are critical of the company. But we are going to move on.”
The prosecutor's comment elicited loud groans from the front row of the courtroom, where several of Skilling's family members were seated.
Berkowitz sought to bolster the government's case that Skilling and Lay authorized and encouraged the use of improper accounting and financial transactions to cover up troubles at Enron and lied to analysts about the performance of Enron's businesses.
Berkowitz pressed Skilling over whether he had instructed Enron accountants to manipulate the company's quarterly earnings to meet or exceed analysts' expectations. Witnesses testified earlier in the trial that Enron pulled money from reserves in the fourth quarter of 1999 and then in the second quarter of 2000 to make up earnings shortfalls.
Skilling denied that he knew anything about the change in 1999, testifying yesterday that “there is a good chance it did not occur.”
In the second quarter of 2000, acting on an expressed desire by Skilling to beat analysts' estimates, Enron accountants pulled $14 million from a reserve account to push up the company's quarterly earnings to 34 cents a share from 32 cents, two witnesses testified in the trial.
Skilling testified last week that when he arrived back from a vacation in Africa he learned that the quarter was “coming in hot” and told Enron's chief accounting officer, Richard A. Causey, to “shoot for 34” cents.
Berkowitz suggested yesterday that Skilling had acted improperly. Skilling responded that the reserves from which Enron pulled the money “are not typically locked until right before the end of the quarter.”
Berkowitz played an audiotape of Skilling's previous testimony before the Securities and Exchange Commission, during which Skilling said he never gave any instruction that caused quarterly earnings to change. “I would comment by saying something like, “oh, wow, or gee, that's interesting,' ” Skilling testified to the SEC.
“That was a lie, wasn't it, sir?” Berkowitz asked.
“No, that was absolutely correct,” Skilling said. “Did I ever give anyone any instruction to change the results of the quarter? I did not.”
Earlier, the prosecutor spent an extended period questioning Skilling about the troubles that Enron was facing in a group of “merchant assets,” which included power plants and other businesses.
“This is like looking at the baseball rankings and saying, “Let's look at the bottom two teams,' ” Skilling protested at one point when Berkowitz showed the courtroom an internal presentation.
“Let's not talk about baseball, Mr. Skilling,” Berkowitz retorted. “Let's talk about Enron.”
But Skilling insisted that it was a misrepresentation because the presentation did not show assets that were performing well.
Skilling insisted that he was not aware that assets that had been placed in the Raptors had declined precipitously in value.
“You did learn at some point, did you not, that they were underwater to the tune of $500 million in first quarter of 2001?” Berkowitz asked.
Skilling responded that he had been out of town during most of those three months and was not sure that he attended many of the Monday morning management meetings where he would likely have been told about the Raptors problems.
