Enron's ex-chief delivers robust defence

The appearance of Mr Jeffrey Skilling, the "control freak" and combative former chief executive officer of Enron, before the House Energy and Commerce Committee had been eagerly awaited and did not disappoint. At least not from a theatrical point of view.

Whether light was cast by him on the collapse of the company is another matter but lawyers, politicians and bankrupted former employees packed the committee room for the show.

Mr Skilling was at least willing to testify, unlike Mr Andrew Fastow, his protégé and the former chief financial officer of the company, who also appeared in Congress on Thursday in response to a summons but then, with three other former executives, pleaded the Fifth Amendment. Mr Fastow's extraordinarily lucrative role as head of partnerships set up by Enron, and who knew about it, is central to the hearing. He was alleged to be creaming off commissions worth tens of millions for deals involving his firm and was fired immediately after the stock collapse.

Mr Skilling's defence was Manuel-like - "I know nothing. I know nothing" about wrongdoing, he insisted - and almost breathtaking in his contention that, when he left the company last August, ostensibly to spend more time with his family, there was nothing wrong with it. "On the day I left on August 14th, I believed the company was in strong financial condition," he said. "I wasn't there when it became unstuck." Unstuck, it has to be said, because the company under his watch overstated its profits by $600 million (€523.6 million) at least, and maybe more.

His interlocutors were having none of it. "People in far inferior positions to you could see the cracks in the walls, feel the tremblers, feel the windows rattling. And you want us to believe that you sat there in your office and had no clue that this place was about to collapse?" said subcommittee chairman Mr James Greenwood (Rep, Pennsylvania).

Mr Skilling even insisted that the Enron collapse was undeserved, a matter of a "classic run on the bank" by nervous investors exacerbated by the firm's unfortunate lack of liquidity. It was a classic ploy, blame the media. But he did not explain why the firm seems to be worth far less than it owes and is likely to produce nothing for shareholders and massive losses for creditors.

A Harvard Business School graduate and former Enron consultant, Mr Skilling was hired by the company's founder, Mr Kenneth Lay, in 1990. He quickly became known as a cleverand ruthless manager and a passionate advocate of Enron's involvement in new forms of commodities trading. He became a favourite of Mr Lay's, and was promoted last February to chief executive.

The Enron internal report on the collapse by the University of Texas law school dean, Dr William Powers, found Mr Skilling, who cashed out shares worth $67 million last year, knew and approved of the various suspect partnerships used to conceal liabilities from deals that had gone wrong. The report says he attended many of the meetings at which they were discussed.

Mr Skilling defended the practise of using partnerships as a standard business method of hedging risk and denies he knew they were, in fact, totally controlled by Enron and its employees in breach of the tax requirement that they should have a degree of outside capitalisation. He also denied awareness of Mr Fastow's supposed claim that these were entirely risk-free entities because Mr Skilling had guaranteed that any losses would be covered.

Mr Jeffrey McMahon, now president of Enron and chief operating officer, but once Mr Fastow's deputy, testified he went to see Mr Skilling to complain that he was being forced to negotiate contracts on behalf of Enron with Mr Fastow as head of an outside partnership while answering to him as his boss. Mr Skilling recalled the conversation as one about personalities and Mr McMahon's concern about how Mr Fastow would cut his bonus. Three days later, Mr McMahon was transfered.

. Mr Jordan Mintz, senior inhouse lawyer, was also ringing alarm bells about Mr Fastow's role. But the truth is neither man was sufficiently concerned to take his worries to Mr Lay or directly to the board. And meanwhile Mr Skilling prepares his defence for the seemingly inevitable civil and criminal trials with the old Nixonian strategy of "plausible deniability".