by admin » Fri Mar 03, 2006 9:32 am
Here is an article about the Enron Trial. The point I try to make with articles like this is that here in Canada, trials like this do not exist. Not because white collar crime does not exist in Canada, but because our particular Canadian system allows white collar crime, almost encourages it. Regualtors cannot and will not stand up to some of the powerful and concentrated interests in Canada. I look forward to the day when this may change.
Posted 3/1/2006 11:16 PM Updated 3/2/2006 2:07 PM
Ex-Enron exec says he was "in denial" about fraud
By Greg Farrell, USA TODAY
HOUSTON — A key witness in the government's trial of former Enron CEOs Ken Lay and Jeff Skilling explained Thursday morning how he went from being in "denial" about Enron's manipulation of its earnings statements to acceptance that he was guilty of participating in a fraud.
David Delainey, 40, the former head of Enron Energy Services (EES), described how he met with the FBI several times after Enron's collapse and how he tried to avoid incriminating himself. "I was in denial as to the conduct I was involved in," he said under cross-examination by Lay attorney Mike Ramsey. "I was very hopeful that the whole thing would pass me by, but it didn't."
Ramsey suggested that the only reason Delainey pleaded guilty to one count of inside trading was not because he had committed any crime, but because he didn't want to defend himself from multiple charges in a long trial. But Delainey insisted he was guilty and that he would have been convicted if brought to trial.
"I was taking responsibility for my actions," he said. "My dad told me a long time ago, if you're in a hole, quit digging."
At another point in his cross-examination, Ramsey described as a "nutcake" a disgruntled former employee who had figured out that Enron Energy Services was hiding losses.
That former employee, Margaret Ceconi, had written a long letter to Enron's board of directors in August 2001 citing millions of dollars in EES losses that had been magically scrubbed from the division's books. But rather than tackle any of the substantive issues raised by the letter, Ramsey asked Delainey about a confrontation he had with Ceconi at a bar in July 2001, shortly after she'd been dismissed.
Delainey testified that he was having a drink with several colleagues at Mia Luna in a fashionable section of Houston. Ceconi approached him, he recalled, and said, "I don't know how you guys made your second quarter numbers. You must have manipulated results."
The verbal exchange led to a shoving match outside the restaurant between Ceconi and an EES employee, Angela Schwartz. Ramsey suggested the confrontation was a "fistfight," but Delainey, who stayed inside, only said he'd heard there was some shoving.
On re-direct, prosecutor Kathryn Ruemmler asked about Ceconi's whistle-blowing letter to the board. She showed Delainey an email chain showing that the memo had been passed to CEO Ken Lay, CFO Andrew Fastow, and Enron president Greg Whalley.
"This letter, from the 'nut job,'" asked Ruemmler sarcastically, "is being circulated to the highest levels of Enron, isn't it?"
"It appears so, yes," said Delainey.
Kevin Hannon, another former Enron executive who has pleaded guilty and is cooperating with the government, was scheduled to testify Thursday afternoon.
The trial is proceeding so quickly that prosecutors said Wednesday they probably wolud be finished presenting their case by the end of March, two months ahead of the original schedule.
As part of the accelerated schedule, prosecutors said they plan to call their star witness, former Enron chief financial officer Andrew Fastow, early next week.
The disclosures followed a full day of cross-examination of government witnesses by defense lawyers. Daniel Petrocelli, Skilling's lead attorney, spent Wednesday afternoon hammering at statements made Tuesday by David Delainey, former head of Enron Energy Services.
Delainey, a boyish-looking Canadian who rose rapidly through Enron's management ranks from 1998 to 2001, admitted that he lied repeatedly to employees and the investing public during his tenure at Enron.
Petrocelli tried frequently to rattle him by pointing out inconsistencies between statements made before and after his decision to plead guilty to one count of inside trading. But Delainey stood by his allegations that Skilling headed a conspiracy to hide the true financial condition of the Enron from analysts and the investing public.
In particular, Delainey pointed to a meeting in Skilling's office on March 29, 2001, as a moment he regretted. At that meeting, he, Skilling and other managers sat around a table and agreed to move the operations of EES over to the company's wholesale group. Delainey maintained that the entire reason for the move was to hide $200 million in EES losses from investors.
"I wish on my kids' lives that I had stepped up from that table and walked away," he said.
Petrocelli showed the witness a copy of the accounting rule that allowed companies to move operations from one business segment to another if it made sense. Didn't Enron have a strong reason to combine its retail business with its wholesale operations, he asked.
"It wasn't very strong," Delainey replied. "It was completely outrageous at the end of the day."
Delainey admitted that when he first heard of the plan to transfer the losses from his division to another Enron unit, it seemed like a clever way of solving the problem.
"But over the following 24 hours, it seemed we were using accounting as an excuse not to tell our shareholders what was going on," Delainey testified Wednesday. "After thinking about it for 24 hours, I knew it was wrong."
The government has accused Lay and Skilling of heading a conspiracy in 2000 and 2001 to deceive investors about the financial condition of Enron. In the first five weeks of the trial, prosecutors have focused on bullish statements the two men made about Enron Broadband Services and EES. Several witnesses have testified that the two units were bleeding money.