Houston – Last-minute changes to quarterly earnings reports that prosecutors contend were ordered by Enron Corp. chief executive Jeff Skilling to improve the company’s reputation on Wall Street were accurate, and not the result of improper tapping of company reserves, a defense expert testified Wednesday.
“The whole process of financial reporting, in a company as large as Enron, to get financial statements out … is an enormous undertaking,” said Walter Rush, an accounting expert hired by Skilling. “And people are scrambling, trying to get these estimates put together.
“There are changes going on up to the very last second. It is universal. Every company goes through this.”
Rush was the second consecutive accounting expert to take the stand, following University of Southern California professor Jerry Arnold, who testified for Enron founder and former chief executive Ken Lay.
They are among the last defense witnesses, as lawyers for the two top chiefs at Enron expect to conclude their case early next week, the 15th week of their federal fraud trial.
Mark Koenig, former head of investor relations at Enron, testified early in the trial that he believed top Enron executives were so bent on meeting or beating earnings expectations to keep analysts bullish on the company’s stock that they made or knew of overnight changes to estimates. Paula Rieker, Koenig’s former top lieutenant, said Koenig told her Skilling ordered abrupt last- minute changes to two quarterly earnings reports to please analysts and investors.
“They could have just had a bad number,” Rush said, referring to Koenig’s and Rieker’s testimony about a late-night change in a fourth-quarter 1999 report that boosted earnings per share from 30 cents to 31 cents.
Arthur Andersen, Enron’s outside accounting firm, already had the 31-cent number days earlier, Rush said.
“They could have been a couple steps behind the way the process was evolving,” he said of Koenig and Rieker.
