Houston – Enron Corp. founder Kenneth Lay worried in 2001 that the company’s mounting financial problems would jeopardize its credit rating and inquired about managing its accounting to avoid a downgrade, a former Enron treasurer testified Wednesday.
Former Treasurer Ben Glisan Jr. testified that Lay assigned him to feel out credit-rating agencies about how large accounting writedowns could be without jeopardizing Enron’s rating.
“That’s backwards,” Glisan said in the fraud and conspiracy trial of Lay and former Enron CEO Jeffrey Skilling. “What should occur is we should take the charges that we needed to take and then deal with the consequences.”
Glisan said Lay and Skilling knew Enron, then a reputed powerhouse, was actually weak and faced multibillion-dollar losses and writedowns on poorly performing or overvalued assets. Skilling abruptly resigned in mid-August 2001, Lay resumed as CEO, and those problems grew, Glisan said. The company tumbled into bankruptcy proceedings in December 2001.
Glisan also said Lay and Skilling misled Wall Street in 2001 about the nature of Enron’s business, describing it as a “logistics” company rather than as an energy trader. Glisan said “logistics” indicated Enron made money by delivering commodities and could sustain its growth. A trader is vulnerable to market volatility and therefore a more risky investment, which Glisan said could translate into a lower credit rating and stock price.
Glisan is the last major government witness in its case against Lay and Skilling. The defense is expected to begin next week presenting its evidence – which it says will include testimony from Lay and Skilling.
