Skilling on the Skillet

Well, at least he said something. After seeing a string of top Enron Corp. executives invoke their Fifth Amendment rights, a congressional subcommittee on Feb. 7 gave former CEO Jeffrey K. Skilling credit for actually testifying. But his I-know-nothing "Sergeant Schultz" defense, as one Congressman dubbed it, raised far more questions than it answered. Now congressmen want Skilling to explain the inconsistencies between what he and others are saying. Here are some places he might start.

Did Skilling know that off-balance-sheet partnerships involving then-Chief Financial Officer Andrew S. Fastow and other execs were hiding losses and inflating earnings?

WHAT OTHERS SAID: Documents from a May 1, 2000, meeting of the board finance committee, attended by Skilling, showed that a presentation about one of the off-balance-sheet vehicles, Raptor 1, specified that it "does not transfer economic risk but transfers profit and loss volatility."

Furthermore, a document presented during an Oct. 26, 2000, meeting for investors in Fastow's so-called LJM partnerships made it clear that accelerating earnings recognition for Enron was one of the purposes of the partnerships.

Skilling's attorney confirms that Skilling gave a speech at that meeting.

WHAT SKILLING SAID: "I was not aware of any financing arrangements designed to conceal liabilities or inflate profitability," he testified. He didn't recall a discussion about Raptor not transferring risk at the May meeting and said he did not see the documents at the October meeting, which he attended only briefly.

Did Skilling ignore warnings about problems at the partnerships?

WHAT OTHERS SAID: Former Treasurer Jeffrey McMahon said he told Skilling on March 16, 2000, in a 30-minute meeting, that in having to represent Enron in negotiations with Fastow--his boss and a partnership owner--he felt pushed to do deals not in shareholder interests. McMahon was soon offered a new job at Enron. Whistleblower Sherron S. Watkins said former Vice-Chairman J.Clifford Baxter, who recently committed suicide, complained "mightily" to Skilling about the partnerships.

WHAT SKILLING SAID: He was never warned about accounting or financial problems in the partnerships, and he disputed the others' characterizations of the warnings. He recalled that McMahon had "some concerns about his compensation" because Fastow could affect his review and bonuses. And he insisted McMahon's "promotion" wasn't related to his LJM complaints. Skilling recalled only one talk with Baxter on the deals. While Baxter told him the related-party transactions looked bad, Skilling said Baxter knew of no problems with the partnerships.

But wasn't Skilling supposed to oversee the troubling partnership deals?

WHAT OTHERS SAID: Board members Robert K. Jaedicke and Herbert S. Winokur Jr. testified before Congress that they thought Skilling was supposed to review the deals as part of Enron's control process. Minutes of an Oct. 6, 2000, finance committee meeting show that Fastow told the board that Skilling's approval was part of the controls.

WHAT SKILLING SAID: He was not required by the board to review and approve all transactions done with Fastow's partnerships. Moreover, he said he "can't recall" the part of the finance committee meeting where controls were discussed. He noted that the power had gone out and the room was dark for some period. His lawyer pointed to minutes from prior board meetings and a recent report by a special board committee detailing controls that did not include Skilling.

Why didn't Skilling sign deal-approval sheets involving LJM transactions?

WHAT OTHERS SAID: Enron lawyer Jordan Mintz said he wrote Skilling seeking his signature on LJM deal-approval sheets--which he believed policy required. Skilling never responded. Calls to Skilling's secretary for a meeting were also ignored.

WHAT SKILLING SAID: He didn't recall seeing the documents or Mintz's memo. And since the deals were already done when Mintz wrote his letter, his signature wasn't needed. He also claimed the approval sheets "provided" for his signature, but did not require it.

Did Skilling allow other Enron executives to be involved in the partnerships, in violation of the company's code of conduct?

WHAT OTHERS SAID: At least one deal-approval sheet shows that Enron finance executive Michael J. Kopper was negotiating on behalf of the LJM partnership against Enron, apparently in violation of the company's code of conduct. Furthermore, a private placement memorandum for LJM2 indicated that Kopper and Ben F. Glisan Jr., another senior Enron financial officer, would be acting both as owners and managers of the partnership.

WHAT SKILLING SAID: He did not know that Kopper, Glisan, or other Enron employees had financial stakes in some of the partnerships. He testified that he knew only that Kopper was involved in managing some of them.

Was Skilling involved in restructuring the Raptor vehicles, which let Enron avoid $500 million in pretax charges?

WHAT OTHERS SAID: According to the board committee's report, evidence from some senior Enron employees showed Skilling was aware of the problems and was "intensely interested" in the resolution of Raptors' issues. He even called one of the accountants working on the restructuring to thank him when it was done.

WHAT SKILLING SAID: He told the board's investigators he was informed only generally about the Raptors' problems and had no real involvement. He told Congress he may have called the accountant, but when asked if he had approved Raptor's restructuring, he responded: "Not to my recollection."

By Wendy Zellner in Dallas

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