Statements by Skilling went unchallenged

HOUSTON — Former Enron Corp. Chief Executive Jeffrey Skilling misled employees and Wall Street about a flailing business unit’s strength in early 2001, but the unit’s former CEO said Wednesday he never corrected his boss.

“No, I didn’t want to talk about that,” Kenneth Rice told Skilling lawyer Mark Holscher in his second day testifying in the fraud and conspiracy trial of Skilling, his former boss and friend, and Enron founder Kenneth Lay.

“You never once told Jeff Skilling you were uncomfortable with any statement he made to analysts about (Enron Broadband Services), is that right?”

“Yes,” said Rice, who is among 16 ex-Enron executives who have pleaded guilty to crimes stemming from the government’s investigation of the energy company’s swift tumble into bankruptcy proceedings in December 2001.

But under additional questioning by Holscher that suggested Skilling may not have knowingly deceived anyone, Rice acknowledged there was reason for long-term optimism at his beleaguered broadband unit.

Possible deals were in the pipeline, including a letter of intent with Microsoft; acquisitions were discussed, including Enron buying a piece of AT&T and new top-level people were hired to beef up the operation, Rice said.

He discussed the Microsoft agreement with Skilling the same day as a March 2001 analysts’ conference call, Rice said. It also was “possible,” he said in response to a question, that he referred to a future in Internet-bandwidth trading as a “Fort Knox opportunity,” though he hedged and said, “I don’t think I told him that.”

Skilling smiled and cocked his head, as though he didn’t believe Rice’s answer.

“You’re standing outside Fort Knox with billions of dollars inside,” Rice said further. “The only problem is how are you going to get it out.”

Rice, once a top trader who ran Enron’s money-losing broadband venture, testified that Skilling told him to characterize layoffs at the unit in early 2001 as “redeployment” so that employees would believe they would keep their jobs and Wall Street analysts who influenced the company’s stock would remain bullish on the weakening venture.