The first witness took the stand this week in the government's fraud and conspiracy trial against former Enron Corp. chairman Kenneth Lay and chief executive Jeffrey Skilling.
The former head of investor relations, Mark Koenig, testified that both former chief financial officer Andrew Fastow and former accounting chief Richard Causey defended the company's aggressive accounting when other managers challenged them. Prosecutors are hoping to use Koenig's testimony to prove Skilling and Lay's fraud was motivated by greed.
Koenig said that at one particular meeting in September 2001, he told Lay that investors had been asking him about Enron's financing, including its true debt level. Koenig testified that managers candidly discussed the threat posed by problems with off-the-books entities and said that during the third quarter of 2001, Enron's balance sheet miscategorized more than $1 billion as one-time losses.
Facing cross-examination come the close of the week, published reports say that Koenig held firm to his statements that Skilling and Lay deliberately hid losses from investors and doctored the company's earnings to match what analysts expected.
Koenig pleaded guilty to securities fraud in 2004 and faces up to 10 years in prison and $1 million in fines.
Lay, 63, is charged with seven counts of fraud and conspiracy while, Skilling, 52, faces 31 counts of conspiracy, fraud and insider trading. The men are accused of lying to Enron employees and the public as part of a conspiracy to hide the truth about Enron's shaky financial position. Enron had a market value of more than $68 billion before it filed for bankruptcy in December 2001.
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