Former Enron treasurer Ben Glisan Jr. took the stand in the Ken Lay/Jeff Skilling trial Tuesday, telling jurors that he helped make Enron look like it wasn't having serious financial problems — and that his former bosses not only knew about the trouble, but lied to the public about it.
Glisan, who is serving a five-year prison term for conspiracy to commit wire fraud and securities fraud, said ex-Chairman Lay and ex-CEO Skilling misled investors repeatedly about Enron's financial health. Prosecutor Kathryn Ruemmler asked him specifically about an August 2001 conference call in which Lay and Skilling gave investors an overly optimistic view of things;
"Mr. Skilling said . . . 'the company's in great shape.' Was it?" Ruemmler asked."No, it was not," Glisan quickly replied.
"Mr. Lay said 'The company is probably in the strongest and best shape that it's ever been in.' Was it?," the prosecutor asked in rapid fire.
"No, it was not," Glisan came back.
Glisan said by the summer of 2001, the company was suffering from excessive debt and overvalued international assets and was manufacturing cash flow and earnings to make things appear to be fine — an allegation repeated by witnesses over the last few weeks — and he said Lay and Skilling knew about the problems and did their part to misrepresent them. He said one of his main jobs as Enron treasurer was creating financial structures to help artificially produce earnings or cash flow: One such structure took bank loans and treated them as cash flow, while another took debt off the books to make Enron appear healthier than it really was. Glisan said keeping up appearances was always important at Enron, but it "became particularly acute when the stock price began to decline" in 2001.
The artificially inflated asset values, Glisan said, led Enron to claim its overseas holdings were worth $10 billion when they were really estimated at $5.5 billion. The potential $4.5 billion write-down it would have taken to get the books straight was "a larger loss than we could have stomached," he said, and would likely have hurt the company's credit rating. So, although Glisan said Lay knew about problems with international assets, the chairman said they were good investments. "Enron had a vast appetite for capital. We borrowed a lot of money. In 2000, we borrowed approximately $20 billion. To borrow that level of money, you have a very strong credit rating," Glisan said.
Glisan is unusual among the former Enron executives because he is under no cooperating agreement with the government. He's testified about Enron's accounting practices before: In 2004, during testimony about Enron's investment in a group of Nigerian power-producing barges, Glisan said one of the most financially rewarding and challenging things about his work at Enron was creative accounting that let the company hide its problems from investors and analysts.
Also on the the stand Tuesday was Ronald Barone of Standard & Poor's in New York, who told jurors that Lay reassured him about Enron's stability shortly before the company collapsed. Barone said Lay told him in October 2001 that Enron had "scrubbed the books" and wouldn't take any more write-downs of assets past $1 billion the company had already revealed. Barone oversaw the analysts who rated Enron's credit.
Glisan will continue his testimony today and possibly Thursday. The prosecution is expected to wrap up its case next week.
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