Witness Skewers Enron's Skilling

Tells Court That Former Exec Gave False Estimates To Wall Street

(AP)  A former top trader who once enjoyed a place in former Enron Corp. chief Jeffrey Skilling's inner circle testified Tuesday that Skilling set earnings targets to please Wall Street and then expected division heads to meet them.

Skilling also led an effort in early 1999 to redefine Enron as a company with consistent growth rather than a trading company with less predictable growth because analysts who influence stock prices supported stability, said Kenneth Rice, the prosecution's second witness in the fraud and conspiracy trial of Skilling and Enron founder Kenneth Lay.

"Mr. Skilling told me on several occasions our stock would get whacked" if the market perceived Enron as a trading company, Rice said Tuesday, his first day on the witness stand.

He said Enron's obsession with maintaining a lofty stock price fueled efforts to maintain Wall Street support.

Prosecutors contend Lay and Skilling lied about Enron's financial health when they knew complicated finance structures hid debt and inflated profits. The defense teams say negative publicity and loss of market confidence, not fraud, fueled the company's collapse.

Rice ran Enron's highly touted broadband unit before it crashed into bankruptcy proceedings with the parent in December 2001. He pleaded guilty to securities fraud in July 2004.

He said the broadband unit never lived up to its hype, had paltry cash flow and millions in losses after he, Skilling and others unveiled it with much fanfare at a January 2000 analyst conference.

But when he told Skilling in late 2000 that 2001 losses would reach $110 million, almost double the $60 million in losses for 2000, Skilling told him to limit them to $65 million.

Rice said he felt he had no choice but to agree, even though the business was flailing.

"Mr. Skilling would simply say, in fact he did say, 'This is the number, this is what the number is going to be,"' Rice said.

Rice appeared comfortable, though he focused on jurors or prosecutor Sean Berkowitz rather than the defendants. Skilling watched him intently, while Lay took notes. Rice had yet to be questioned by the defense.

He described Skilling as a hands-on boss, who saw broadband as an important venture that could help increase Enron's stock price.

Rice said the broadband unit struggled in 2000 and 2001 to contain losses at the level Skilling told Wall Street to expect and show progress in gaining market share.