Aide says Enron CEO hid losses

HOUSTON – Former Enron Corp. CEO Jeffrey Skilling gave misleading information to Wall Street analysts about the earnings of a highly touted business unit in 2001, the company’s former head of investor relations testified Thursday.

Skilling did not disclose in conference calls with analysts that the Enron retail energy division had suffered $726 million in first-half losses from its contracts, and insisted that the unit was profitable, Mark Koenig told jurors.

Those losses had been moved into the Enron wholesale division, which was making enough money to absorb them – but that accounting change was not initially disclosed to analysts, Koenig said.

“It would have been a big surprise, a negative surprise, a large surprise to investors” had they known the truth, he said.

Analysts did get a surprise when Skilling gave a sarcastic response to a hedge-fund worker frustrated with Enron’s lack of details in its reports.

Prosecutors played for the jury a tape of the worker asking Skilling during an April 2001 conference call why Enron had not published more detail on its finances.

“You’re the only financial institution that can’t produce a balance sheet or a cash flow statement,” complained Richard Grubman of Highfields Capital Management.

“Thank you very much,” Skilling answered. He then added, “We appreciate it,” and called Grubman an obscene name.

Lay laughed aloud; Skilling simply smiled. Several jurors laughed, then a few appeared to sneak peeks at Skilling when the moment of levity was over. Outside court, Skilling lead lawyer Daniel Petrocelli said he was not worried about the tape and would have played it himself if the prosecution had not.