Two former Arthur Andersen accountants assigned to Enron testified Monday that Enron kept key information hidden from outside auditors to help hide its losses and artificially inflate its earnings numbers. John Sult and Thomas Bauer, who were among the army of Andersen accountants that worked with Enron, kicked off the eighth week of the Ken Lay/Jeff Skilling trial. Both men said they didn't see documents showing Enron's creative accounting while they were working with the company — if they had seen the papers, they said they would have raised serious concerns about the way Enron was being run.
Sult led an Andersen team that autited Azurix, Enron's failed water business. He said Enron avoided reporting hundreds of millions of dollars in losses by telling Andersen it planned a $1 billion growth strategy for Azurix when, in reality, the company was getting out of the water business. The move let Enron avoid a "goodwill impairment," an accounting rule that would have required it to report that Azurix was actually worth $700 million less than its market value. Sult said the reality was "completely opposite of what I was told at the time as well as what was in public statements."
Bauer, who worked the books for Enron's trading division, said Monday that Enron hadn't told him it was using reserves to help meet its earnings goals. Prosecutors showed jurors a January 2001 e-mail from Enron accounting executives that discussed plans to use the company's reserves "for the purpose of beating the analysts' estimates," which Bauer said he hadn't known about. He also said he was "shocked" when he learned about the so-called "global galactic list" of Enron's side deals, which former Enron CFO Andrew Fastow said he drew up. Had he seen it, the list would have "caused concern over the integrity of [Enron's] management," Bauer told jurors.
The global galactic list was the focus of Bauer's cross-examination yesterday: Defense lawyers have been suggesting that the list was a fake, and Monday they tried to make Bauer into a handwriting expert, alleging that ex-Enron chief accountant Rick Causey's initials on the list were forged. Skilling lawyer Randy Oppenheimer displayed Causey's initials on a large screen in the courtroom next to examples of his signature and asked Bauer whether the letters looked different. Bauer said they looked different, but noted he's not an expert; Oppenheimer then suggested similarities between Fastow's handwriting and Causey's initials.
Today, ex-Enron treasurer Ben Glisan is expected to take the stand. Glisan worked closely with Fastow and was the first Enron executive to be sentenced to jail time; he's serving a five-year sentence for conspiracy, but will be allowed to testify in a suit rather than prison clothes.
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