WASHINGTON -- Despite a reputation as a hands-on manager, former Enron Corp. chief executive Jeffrey Skilling insists he knew nothing of the self-dealing and accounting schemes that eventually engulfed the company in scandal and bankruptcy.
Skilling, who resigned from Enron in August before the company's financial problems became public, told a congressional panel Thursday that when he left he "did not believe the company was in any financial peril."
But lawmakers said they found it hard to believe that Skilling, described by some colleagues as a "control freak," could have been that much in the dark about the complex web of outside partnerships that investigators said was designed largely to conceal Enron's losses, hide its debts and make a handful of executives rich.
Two of those executives -- Andrew Fastow, former chief financial officer, and Michael Kopper, who worked for Fastow -- invoked their constitutional right under the Fifth Amendment and refused to testify Thursday before the House Energy and Commerce investigations subcommittee.
So did Richard Buy, Enron's former chief risk officer, and Richard Causey, its former chief accounting officer. Former chairman Kenneth Lay is expected to do the same next week when he appears before two other committees that have subpoenaed his testimony.
Fastow created the controversial partnerships, which investigators say were at the heart of Enron's collapse, and brought in Kopper to run one of them. Together the two made $40 million in transactions investigators say were marked by self-dealing and conflicts of interest.
A dozen congressional committees are investigating the Houston-based energy-trading company, as are the Securities and Exchange Commission and the Justice Department. Enron entered the biggest bankruptcy in U.S. history on Dec. 2.
During nearly three hours of intense questioning Thursday, Skilling repeatedly said he had no reason to believe Enron's off-the-books partnerships were a problem. He also said he did not recall a board of directors meeting in which it was made clear that he was supposed to approve all deals involving the partnerships that concealed hundreds of millions of dollars in debt and overstated the company's profits by more than $1 billion over several years.
Two Enron senior executives said they had raised serious concerns about Fastow's business dealings nearly two years ago, but were rebuffed. At the core of their concerns was what they considered to be clear conflicts of interest involving Fastow and the partnerships to the detriment of Enron shareholders.
One of them, Jeffrey McMahon, recently named to head Enron in its attempt to recover, told the lawmakers that in March 2000 he complained to Skilling that he had been put in an "untenable position" involving Fastow.
As Enron's treasurer at the time, McMahon was representing Enron in negotiating with one of the partnerships headed by Fastow, who also was McMahon's boss. "I do not believe this to be in the best interest of the (Enron) shareholders," McMahon said he told Skilling, hoping that he would take some action to resolve the situation.
"He came to you and said, 'Boss, this place stinks,"' Rep. Jim Greenwood, R-Pa., told Skilling. "He said we've got a cesspool and we're got to clean it up. ... This is the cesspool that brought the company down."
But Skilling remembered the meeting differently, characterizing McMahon's concerns as being about "an issue of compensation" and not conflict of interest. He said he assured McMahon he would look into the problem. But a short time later, McMahon was given a new job, one that he had rejected a month earlier.
"Part of fixing (McMahon's concern) was to bring in (Benjamin) Glison," said Rep. Billy Tauzin, R-La., as he pressed Skilling on the matter. "Glison found it not only easier to negotiate with Mr. Fastow, but got into bed with him."
A recent internal Enron report named Glison as one of a half dozen executives and employees brought in by Fastow and Kopper to invest in the partnerships. Glison invested $5,800 in one of the partnerships and in a few months made $1 million.
Skilling said he saw no conflict in Fastow's dual role as Enron's chief financial officer and head of one of the partnerships, noting that the Enron board had approved that relationship along with a string of control measures to protect Enron shareholders.
But two board members testified that those controls were ignored.
"Mr. Skilling reported to us that he was discharging these obligations. It now appears that he did not do so," said Herbert Winokur, chairman of the Enron board's finance committee.
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