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US Senate grapples with Skilling over Enron collapse

The embattled former president of Enron Corp hit back at Congress on Tuesday, accusing lawmakers of grand-standing and wasting the public's time as they upbraided him for claiming to know so little about the largest ever US bankruptcy.

Jeffrey Skilling, who resigned just months before the company collapsed in early December, was sandwiched between two Enron whistleblowers as the latest congressional hearing into the Enron debacle got off to a frosty start.

Current Enron president Jeff McMahon shook Skilling's extended hand as they sat down before the Senate Commerce subcommittee. But, Enron vice president Sherron Watkins -- who says Skilling must have known about the company's financial problems -- avoided making eye contact with him.

"The entire management and board of Enron have been labeled everything from hucksters to criminals," Skilling said in an opening statement. "These untruths shatter lives and do nothing to advance the public understanding of Enron."

Skilling did not dispute calculations he made $66 million from sales of Enron stock from February, 1999 to June, 2001.

He still had the money but, faced with 36 separate lawsuits, did not know how much he would get to keep. "It's my expectation that I will probably spend the next five to 10 years of my life battling those lawsuits," Skilling said.

Once the seventh largest US company, Enron's collapse is the subject of probes by 10 congressional committees, the US Justice Department and the Securities and Exchange Commission.

CONTRADICTORY TESTIMONY

The three key witnesses, gathered together for the first time, gave sometimes contradicting testimony with senators mostly critical of Skilling's version of events.

"It's unbelievable what we have heard," said Byron Dorgan, the North Dakota Democrat who chairs the consumer affairs subcommittee.

Maine Republican Sen Olympia Snowe said it was "very difficult to comprehend" how Skilling failed to see the red flags warning of Enron's troubles.

Another lawmaker said he was skeptical of Skilling's disclaimer of responsibility and the perception that former Enron chief financial officer Andrew Fastow played the pivotal role in the company's collapse.

"If the theory is that Fastow went rogue somewhere, deep in the jungles of Enron, and was the sole agent of the apocalypse, I just don't buy it," said Sen Peter Fitzgerald, an Illinois Republican.

Watkins has said she believes former Enron chairman Kenneth Lay was duped by Skilling and Fastow. Neither Lay nor Fastow have testified to Congress, instead exercising their constitutional right not to incriminate themselves.

"I NEVER DUPED KEN LAY"

Skilling denied deceiving the chairman: "I never duped Ken Lay. I heard Ms. Watkins testify to her opinion, I have no idea what the basis is for that opinion."

Watkins continues to hold Skilling accountable. "I believe that Mr Andy Fastow would not have put his hands in the Enron candy jar without an explicit or implicit approval to do so from Mr Skilling," she told the Senate panel.

Watkins and McMahon tried to sound the alarm within Enron about questionable accounting practices and special off-balance sheet partnerships linked to its failure.

McMahon, as treasurer in 2000, raised concerns about the partnerships run by Fastow but was brushed off and moved to a new job at Skilling and Fastow's suggestion.

Skilling told a House panel on February 7 that he believed the company was financially sound when he resigned on August 14, citing personal reasons.

In the months after Skilling's departure, Enron disclosed losses related to the special partnerships and had to restate earnings back to 1997 before filing bankruptcy on December 2.

A special internal board of inquiry commissioned by Enron has said the partnerships it examined were used to hide debt, inflate profits and enrich certain high-ranking employees.

Skilling said he knew about some of the partnerships, but relied on advice from accountants and lawyers that the transactions were proper. "I believed we were reducing the risk to the company."

Defiant throughout, Skilling said, "I have not lied to the Congress or to anyone else about my recollection of events while I was at Enron."

Watkins did pin more blame on the former chairman, Lay, than she did in previous testimony, saying she had been frustrated by his lack of action when she raised accounting problems with him in August last year.

"I believe that Enron had a brief window to salvage itself this past fall and we missed that opportunity because of Mr. Lay's failure to recognise or accept that the company had manipulated its financial statements," Watkins testified.

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