HOUSTON: Enron Corp was a ‘ticking time Bomb’ in its final months, as top executives lied to the public about the billions of dollars in losses it faced, prosecutors said on Tuesday at the start of the trial of former chief executives Ken Lay and Jeffrey Skilling.
“To the outside world, Enron appeared to be a picture of corporate success,” prosecutor John Hueston told the jury in his opening arguments. “Inside the doors of Enron, things were terribly wrong.”
The government’s case, the culmination of four years of investigation by the US Justice Department’s Enron Task Force, contends Messrs Lay and Skilling schemed to hide the company’s mountain of debt stashed in off-the-books partnerships and lied to analysts and investors as it hurled toward bankruptcy in Dec 2001 in a scandal that rocked the financial world.
The Enron name became synonymous with corporate greed and a wave of corporate scandals that went on to snare HealthSouth, WorldCom, Global Crossing and Adelphia and led to the passage of the 2002 Sarbanes-Oxley Act that toughened financial reporting and auditing requirements for publicly owned companies.
Mr Lay, 63, who headed the company as CEO and chairman for 15 years, and Mr Skilling, 52, who also served as CEO, are charged with more than three dozen counts of conspiracy and fraud.
When Lay returned to the CEO post in August 2001 that Skilling had vacated after holding it only a few months, “He is told the (the company) is the equivalent of a ticking time bomb, that Enron is facing billions of dollars in losses,” Hueston said.
“His response? He steps to the microphone and falsely assures the investing public” that the company is healthy, Hueston said.
Lay took home $220 million in salary and from the sale of Enron stock from 1999 through 2001, Hueston said, while Skilling pocketed $150 million.
Skilling has been charged with insider trading for his stock sales. Lay will face a separate trial later on charges he misused bank loans to buy Enron stock.
The two men have denied any wrongdoing and laid the blame for Enron’s demise on the financial misdeeds of former Chief Financial Officer Andrew Fastow.
Fastow has pleaded guilty to conspiracy and agreed to cooperate with prosecutors in exchange for a maximum 10-year prison sentence. —Reuters
