Trial, Day 16: Playing 'fast and loose with the rules'

In early 2001, Delainey was moved from the trading division to run Enron's retail division — the place where Wanda Curry found the box of money under an employee's desk — which he said was a financial mess. There, he said he found bad billing procedures, badly written contracts and $1 billion in losses and potential losses. Delainey said he came up with the idea to hide Enron Energy Services' losees by moving the risk to the profitable trading division, but then he began worrying that doing so "lacked integrity." He brought that up to Skilling and some other executives and said Skilling "looked at me and said, 'What do you want to do?'" which he took to mean he should go ahead and hide the losses. (We're sure Skilling's lawyers will portray that as Skilling trying to guide one of his wayward employees back onto the straight and narrow.) Delainey's testimony is potentially the most damaging to Skilling of any so far because he was in Skilling's inner management circle and he claims he directly confronted Skilling about his misgivings. So far, most of the other witnesses had limited or no direct contact with Skilling.

With regard to Lay, Delainey said the former Enron chairman told him he saw a late August 2001 memo from Margaret Ceconi, who had been laid off from the company. In the memo, Ceconi warned about fraud in moving retail losses to make the retail division seem profitable — exactly what Delainey was concerned about having done. Through details like that, prosecutors hope to show Lay was aware of the problems Enron was having; Lay's attorneys have said other people, not Lay, read such documents.

Also on the stand Tuesday was Timothy Belden, a former Enron trader, who talked about speculative trading during the West Coast energy crisis, saying "chaos drove the high prices and the high prices drove our profits." Belden will be cross-examined first today, followed by Delainey.