Lay could testify next Tuesday; legal experts say Skilling's testimony could cause legal problems for him


Saturday, February 9th 2002, 12:00 am
By: News On 6



WASHINGTON (AP) _ Even though his former protege was hammered by Congress, former Enron chairman Kenneth Lay may decide to testify after all to the Senate next week.

Sen. Byron Dorgan, D-N.D., chairman of a Senate Commerce subcommittee, says discussions over Lay's possible are proceeding favorably.

Lay decided last Sunday not to testify at two scheduled congressional hearings, after a number of comments by senators and House members on TV talk shows about alleged criminality, including one that Lay had to know Enron was a giant pyramid scheme.

Lay's testimony would follow a difficult three-hour appearance for former Enron chief executive officer Jeff Skilling, who was told bluntly by some lawmakers that they didn't believe his story.

Skilling told a House subcommittee Thursday that he knew few details about the web of partnerships that brought the energy trading company to ruin. He insisted he was never warned of problems with the partnerships and was unaware Enron was using off-the-books partnerships to ``conceal liabilities or inflate profitability.''

Use of the partnerships kept hundreds of millions of dollars in debt off Enron's balance sheet.

ABC News reported Friday night on a meeting Skilling attended of one of the partnerships, LJM2, in Palm Beach, Fla., in October 2000. The report, based on an interview with LJM2's office manager, is an ``unsupportable attack'' against Skilling, said his lawyer, Bruce Hiler.

``My client walked into a meeting in Palm Beach, and gave about 10 or 15 minutes of remarks on Enron; he then left the meeting and went to the airport,'' Hiler said. ``He did not see any materials that were used or passed out that the meeting. As part of his job responsibilities he would on occasion speak to third-party investors with whom Enron may deal.''

The office manager said in the ABC interview that she checked Skilling into a hotel. Hiler said Skilling went to the room for a conference call, but left and went to the airport when the call was over.

Asked whether Skilling was willing to come back to Capitol Hill for more questioning, spokeswoman Judy Leon said: ``He's responding to all the invitations.''

Two attorneys who have watched the Enron scandal unfold see Skilling's decision to testify as risky.

``If he and his lawyers don't further clarify how a man in his position would not have known about the facts that caused Enron to restate its financials, then in my opinion a jury may react the same way the congressional panel reacted to his testimony,'' said Lee Hamel of Houston, who has been doing white-collar criminal defense work for 34 years.

``Skilling may be found criminally culpable if prosecutors can prove that he deliberately closed his eyes to the obvious,'' said Mark J. Krudys, a former federal prosecutor who has handled securities fraud cases.

``Prosecutors explain this form of culpability by equating the actions of a defendant to an ostrich, an image easily understood by jurors.''

Four other current and former Enron executives have invoked their Fifth Amendment right against self-incrimination, as has David Duncan, the chief auditor for the Enron account at the Arthur Andersen accounting firm.

Powerful Wall Street players are being pulled into the congressional investigation of Enron's collapse.

Rep. Billy Tauzin, R-La., whose House Energy and Commerce Committee is investigating Enron, said the company had promised bond-sale business to Merrill Lynch & Co. and First Union Corp. in exchange for their investments in some of Enron's questionable partnerships.

Merrill Lynch, the nation's biggest brokerage firm, helped Enron raise nearly $400 million for one of the partnerships from pension funds and other big investors.

Lawmakers also are questioning the role of analysts, some of whom became celebrities and stars of financial television networks as the bull market of the past decade drew in millions of ordinary investors.

The problem, as critics see it, is that financial analysts may give biased advice because they hold substantial positions in company stocks they recommend and their investment firms do lucrative financial work for the same companies.