Trial, Day 12: One heck of an ATM

Enron's former managing director of investor relations, Paula Rieker, testified Tuesday that Ken Lay just might have been one of the bad guys, alleging that she directly confronted Lay about misleading outsiders, but he continued doing so anyway. It was Rieker's first day of testimony in the trial of ex-Enron Chariman Lay and former CEO Jeff Skilling.

The spotlight was largely on former Enron Chairman Ken Lay Tuesday as a former company executive accused him of repeatedly misrepresenting the company's financial health to investors, analysts and even employees.

Paula Rieker , former managing director of investor relations and corporate secretary in the months before the company collapsed into bankruptcy, told jurors that in one case she even corrected Lay and he still continued to misrepresent the truth about Enron's retail business.

She is the fourth witness in this conspiracy and fraud trial of her former bosses Lay and former CEO Jeff Skilling.

Rieker, who appeared poised on the stand and often looked over and spoke directly to the jury, said that she had the opportunity to travel with Lay to speak to investors and analysts.

In response to questions from prosecutor John Hueston, she said Lay told outsiders that Enron Energy Services, the retail division, was strong.

"I told Mr. Lay a significant amount of the earnings came from the sale of stock by EES and not from core activities," Rieker said, meaning it was one-time revenue that did not indicate EES was strong. She said Lay did not change his pitch.

Rieker said the decision to make EES look like it was growing bothered her, so she talked to her former boss, investor relations head Mark Koenig. Koenig told her, "You may not agree with it, but your job is to deliver the company message," she testified. In another instance, Rieker said Lay misled analysts by pretending he didn't know the name of Raptor, the financial deal whose failure cost shareholders $1 billion. She also testified about two days in October 2001 when Lay told the board of directors, analysts and employees that the company had no cash flow and liquidity concerns; then, the next day, he reported to the board that "liquidity is tight."

The section of Rieker's testimony that might have had the greatest impact on jurors involved Lay's withdrawals from a revolving Enron loan account even as the company took a nose dive. For example, the day a proposed Enron-Dynegy merger failed — Enron's last chance at avoiding bankruptcy — Lay took $1 million out of the account. Bruce Collins, one of Lay's lawyers, asked Rieker if that million wasn't a relatively tiny amount compared with the hundreds of millions of dollars creditors were calling in at the same time: "No sir," she said. Rieker also told jurors how the Enron board was given a report in early 2002 showing that Lay sold more than $70 million in Enron stock as the company imploded.

Asked if she could recall any specific board member's reaction, Rieker said, "John Duncan exclaimed that 'Mr. Lay was using Enron as a damn ATM machine.' " By the time Rieker repeated that, after an objection in mid-sentence, it seemed that every juror was taking notes.

Rieker, who pleaded guilty in 2004 to insider trading for selling 18,000 shares of Enron stock based on information about the failing Enron Broadband Services, is expected to remain on the stand all day today.