Ex-Enron exec says numbers fudged
HOUSTON — Former Enron Corp. chiefs Kenneth Lay and Jeffrey Skilling are basing their defense against fraud and conspiracy charges on their insistence that no fraud occurred within the scandal-ridden company’s doors.
But the first former top executive turned felon to testify against them told a different tale in court Wednesday.
Former investor relations head Mark Koenig, a stern type with closely clipped hair and eyeglasses, said he joined Enron’s obsession with meeting or beating Wall Street expectations, feeling the ever-present pressure to keep the stock price up even if he had to mislead analysts to do it.
Koenig also said his former bosses knew about last-minute changes to earnings figures just before they were publicly disclosed to ensure Enron always made the numbers — though he didn’t call either a crook.
Investors didn’t get the true financial picture of the onetime seventh-largest company in the two years before Enron imploded in December 2001, Koenig said. Prosecutor Kathryn Ruemmler, in an effort to bolster the government’s contention that Lay and Skilling abused their positions of public trust, asked Koenig why it was important to tell investors the truth about how Enron’s finances.
“Their investment is at stake,” he replied.
Koenig’s career at Enron spanned 17 years, eventually rising to chief of investor relations. In that capacity, he stroked Wall Street, handled quarterly conference calls with Lay and Skilling, and wooed new investors.
He told jurors he lost his job in May 2002, several months after thousands of others were laid off upon Enron’s bankruptcy filing. His testimony will continue Thursday.
Neither Lay nor Skilling showed any visible reaction to Koenig, who is among 16 ex-Enron executives to plead guilty to crimes and cooperate with prosecutors in exchange for recommendations of lenient punishments. The former chief executives’ lawyers contend that most of the government’s so-called cooperators — including Koenig — admitted to crimes they didn’t commit because they were intimidated by zealous prosecutors and feared lengthy prison terms.
Koenig told jurors about two instances in which Enron’s expected quarterly earnings per share changed to match or beat those expected by Wall Street.
In July 2000, several drafts of a quarterly earnings press release pegged earnings at 32 cents per share. Then suddenly a draft — which became the final version — jumped to 34 cents. Wall Street expected 32 cents, and Enron wanted to beat it, he said.
“There was a determination made to report 34 cents that quarter,” Koenig said, noting he had discussed it with several executives, including Skilling.
“Who had the authority to make that determination?” Ruemmler asked.
“I believe Mr. Skilling did,” Koenig replied.
In another instance, in January 2000, Enron added a penny to its fourth-quarter 1999 earnings of 30 cents per share after analysts unexpectedly raised their expectation to 31 cents, Koenig said.