Leading off the government's case in Skilling and Lay's fraud trial, Mark Koenig told jurors the two men were closely involved in company operations and sought to boost Enron's stock price, which depended heavily on impressing stock analysts.
Koenig walked jurors through several drafts of a July 2000 press release in which quarterly earnings were raised from 32 cents per share to 34 cents because Enron executives wanted to beat Wall Street estimates by 2 cents.
"We thought it would maintain or increase the stock price," Koenig testified.
While Koenig did not say Skilling or Lay ordered a fraudulent change, he said he discussed the July 2000 change with Skilling, then the company's president, who had to approve any changes to the financial figures.
In another case, in January 2000, Enron changed its quarterly earnings from 30 cents per share to 31 cents after analysts had unexpectedly raised their estimates to the higher level, Koenig said.
On the morning of Jan. 19, 2000, Koenig said, Lay told him "he went to bed and we were 30 cents, and when he awoke, he was watching one of the business stations, and he saw that it was 31 cents."
He said Lay told him he had received a voice mail explaining the change. "He understood the issue, fairly matter-of-fact," Koenig testified.
A bedrock of Lay and Skilling's defense, as explained to jurors in , is that the books were never cooked at Enron, and that the company collapsed because of a market panic and relatively minor wrongdoing by a few employees. Lay has also said publicly that he believed the company was strong and that Enron was in no danger of failure.
Daniel Petrocelli, arguing for Skilling, went so far as to suggest 13 of the 16 Enron executives who have pleaded guilty to federal crimes were innocent but caved in to intense pressure from zealous federal prosecutors.
"This is not a case of hear-no-evil, see-no-evil," Petrocelli said, at times animatedly jabbing his finger at the jury. "This is a case of there was no evil."
Koenig is one of 16 Enron executives who have pleaded guilty to crimes and agreed to cooperate with the government. The defense has also suggested many of the executives were pressured by prosecutors into striking deals when they were not guilty and will tell the government anything it wants to hear.
Koenig, 50, pleaded guilty in August 2004 to aiding and abetting securities fraud, saying he knew Enron masked losses in a highly touted and unprofitable retail energy unit by folding it into the division that included the company's trading unit.
Koenig, who has not yet told jurors of his admitted crimes, said in response to questioning by prosecutors Wednesday that he knew it was wrong to tinker with the earnings figures.
Skilling faces 31 counts of fraud, conspiracy, insider trading and lying to auditors in the collapse of Enron, which left thousands jobless and cost investors billions of dollars. Lay faces seven counts of fraud and conspiracy.
Koenig described the pair as intimately aware of how the company was performing compared with its peers and said they read analysts' reports regularly.
When one analyst "didn't always have a real favorable opinion of Enron" and asked Lay a lot of questions, Koenig said Lay asked whether they could disinvite that analyst to future analyst gatherings.
Attempting to bolster the prosecution's argument that Lay and Skilling abused positions of public trust, prosecutor Kathryn Ruemmler asked Koenig earlier why shareholders needed to know Enron's true financial condition.
"Their investment is at stake," he replied.
Koenig's career at Enron spanned 17 years, eventually rising to the position of executive vice president in charge of investor relations. He remained for several months past its bankruptcy filing. His testimony is expected to continue at least through the end of the week.