Artlandish: Weekend Arts Calendar
Daily-ist: Friday, March 12th
What If Houston Had Three Baseball Teams?
Three witnesses testified yesterday in the trial of Ken Lay and Jeff Skilling: one who criticized ex-Enron CFO Andrew Fastow's side deals, one who helped create them and one who had no idea who Fastow was.
The one who criticized was Vince Kaminski, a former risk analyst at Enron who testified that ex-Enron Chairman Lay and ex-CEO Skilling ignored his concerns about side deals run by Fastow. Kaminski said his first bad reaction to the LJM side companies, which were created to help hide Enron's risky investments and losses, came in mid-1999 when he objected to a plan to hedge a stock gain with Enron stock in one of the LJM partnerships. He offered to write up his opinion of the danger of that deal, but his boss told him not to; the next month, Skilling called Kaminski and told him there had been complaints that Kaminski "acted more like a cop preventing people from executing transactions than helping them." Skilling transferred Kaminski out of the risk research group.
In October 1999, Kaminksi was working on LJM's Raptors deals and said he saw violations of the Raptor charters and asked for more documentation, which he did not receive. A few weeks later, he took the podium at an upper management meeting and said, "I believe what Andy Fastow did was not only improper, but I believe it was terminally stupid. And what Enron should do is come clean." He was ushered from the podium, but he said other managers told him they agreed with his views. The next day, Lay told Enron employees that all upper-level managers were united behind Fastow and the Enron board.
The witness who helped with the side deals, Chris Loehr, worked for Enron and the LJMs. He said he knew some things he was doing were wrong, including backdating certain documents and removing language from a contract that dealt with an illegal side deal. Loehr said Fastow told him he had promises that LJM would profit from deals no matter what, and he also testified that the Arthur Andersen auditors he dealt with seemed not to want to know details. They would tell Loehr, "I didn't hear that," or "Hear no evil, see no evil," he said. When Fastow decided to try to sell some of Enron's side deal structures, Loehr said he thought that was a horrible idea. "This was some of Enron's dirtiest laundry," Loehr said. "(It was) saying, 'This is how we've hidden hundreds of millions of dollars.'"
And the witness who didn't know Fastow was Johnnie Nelson, a former Enron pipeline employee who said Lay betrayed him and his co-workers who kept their savings in Enron on the chairman's advice. Nelson testified that he had worked for Enron since 1980 and trusted Lay; in 2000, his co-workers' Enron stock was getting more valuable, so he put his entire 401(k) in Enron stock. As the stock price took a nose dive in late 2001, Nelson watched a tape of a meeting in which Lay told employees he'd "look into everything," so Nelson decided not to sell his stock. He ended up losing most of his $500,000 retirement fund.
"You can't tell this jury that Mr. Lay lied to you, can you?" Lay attorney George "Mac" Secrest asked the down-to-earth Nelson."My personal opinion is, he did," Nelson said. He said Lay promised the company would rebound.
Kaminski's testimony will continue today. He'll be followed on the stand by Sherron Watkins, the whistleblower who warned Lay of coming accounting scandals in an August 2001 memo.
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