Lay’s ‘They’re on to us’ remark scrutinized

HOUSTON — With a pivotal government witness waiting in the wings, a defense lawyer in the Enron fraud trial sought Monday to cast doubt on a former executive’s dramatic claim that CEO Jeffrey Skilling fretted in 2001 that “they’re on to us.”

Kevin Hannon, a former Enron Corp. broadband unit executive, testified last week that Skilling made the remark when analysts criticized sales Enron made to partnerships run by its own chief financial officer, Andrew Fastow.

But under cross-examination Monday by Skilling lawyer Mark Holscher, Hannon conceded it was possible Skilling was just being sarcastic because he was miffed that the boutique firm catered to short-sellers — people betting that Enron stock would fall.

Holscher asked Hannon whether it was possible Skilling was “dripping with sarcasm” when he made the statement in a May 21, 2001, meeting with other top Enron executives. “Anything’s possible,” Hannon replied.

Using a marker and a large sketch pad, Holscher listed other executives — as many as 17 — who might have been at the meeting. He asked Hannon whether anyone followed up on Skilling’s dramatic statement.

“Not that I’m aware of, no,” the witness answered.

The cross-examination took place as prosecutors prepared to call Fastow to the stand, perhaps as early as Tuesday. Fastow was seen walking into the Houston federal courthouse at midmorning, accompanied by his lawyer.

The testimony of Fastow, who pleaded guilty in 2004 to two counts of conspiracy and has agreed to serve up to 10 years in prison for his crimes, is among the most highly anticipated of the Enron trial.