Houston – Bent on matching or beating Wall Street expectations, Enron Corp. fudged its earnings figures with the knowledge of executives Jeff Skilling and Ken Lay, the company’s former chief contact for investors testified Wednesday.
Leading off the government’s case in the fraud trial of Skilling and Lay, Mark Koenig told jurors the two men were closely involved in company operations and sought to boost Enron’s stock price, which required impressing stock analysts.
Koenig walked jurors through several drafts of a July 2000 press release in which quarterly earnings were raised from 32 cents per share to 34 cents because Enron executives wanted to beat Wall Street estimates by 2 cents.
“We thought it would maintain or increase the stock price,” Koenig testified.
While Koenig did not say Skilling or Lay ordered a fraudulent change, he said he discussed the July 2000 change with Skilling, then the company’s president, who had to approve any changes to the financial figures.
In another case, in January 2000, Enron changed its quarterly earnings from 30 cents per share to 31 cents after analysts unexpectedly raised their estimates to the higher level, Koenig said.
On the morning of Jan. 19, 2000, Koenig said, Lay told him “he went to bed and we were 30 cents, and when he awoke, he was watching one of the business stations and he saw that it was 31 cents.”
He said Lay told him he had received a voice mail explaining the change.
“He understood the issue, fairly matter- of-fact,” Koenig testified.
Jurors also heard part of several Enron conference calls from 2000 and 2001 in which Koenig said Skilling exaggerated the success of Enron’s broadband division – at the time a key part of Enron’s growth strategy.
In one example, Skilling told an analyst $50 million of the revenue in Enron’s broadband division came from the sale of a type of fiber – a figure Koenig said was not part of that division’s “core operating revenues.”
Koenig said he later learned the fiber figure was actually $150 million, or nearly all of the broadband group’s revenue that quarter.
Koenig admitted misleading analysts on those calls himself.
Koenig, 50, pleaded guilty in August 2004 to aiding and abetting securities fraud, saying he knew Enron masked losses in a highly touted and unprofitable retail energy unit by folding it into the division that included the company’s trading unit.
