Ex-Enron CEO Jeffrey Skilling's Testimony to Congress

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Prepaed Testimony of Jeffrey K. Skilling

February 7, 2002

Financial Collapse of Enron Corp.

House Committee on Energy and Commerce
Subcommittee on Oversight and Investigations
February 7, 2002
10:00 AM
2322 Rayburn House Office Building

Former President and CEO
Enron Corporation
555 13th Street, NW
Washington, DC, 20004-1109

Good morning Chairman Greenwood and members of the Committee.  Myname is Jeff Skilling.  I worked forEnron for over 10 years, leaving in August of 2001 after being CEO for sixmonths. 

During my time at Enron, I was immenselyproud of what we accomplished.  We believed that we were changing an industry, creating jobs,helping resuscitate a stagnant energy sector, and, by bringing choice to amonopoly-dominated industry, were trying to save consumers and small businessesbillions of dollars each year.  We believed fiercely in what we were doing.

But today, after thousands of people have lost jobs; thousands have lost money – and, most tragically, mybest friend has taken his own life, it all looks very different.  As proud as I was of what we tried to accomplish at Enron, as I sit heretoday, I am devastated by, and apologetic about, what our company has come to represent.  I know that no words can make things right.  Too many havebeen hurt too much.

I am here today, because I think Enron's employees, shareholders, and the public at large have a right toknow about what happened.  I have done all I can to help this investigation.  I have testified for two days at the SEC – spoken on three occasions tothe Special Board Committee – and have spoken to the staff of thisCommittee. I have not exercised my rights to refuse to answer a single question– not one.  And I don't intend to start now.

So, let me first talk about Enron and its demise.

First, contrary to therefrain in the press, while I was at Enron, I was not aware of anyinappropriate financing arrangements, designed to conceal liabilities,or overstate earnings.  Theoff-balance sheet entities or SPE's that have gotten so much attention arecommonplace in corporate America; and if properly established, they caneffectively shift risk from a company's shareholders to others who have adifferent risk/reward preference.  Asa result, the financial statements issued by Enron, as far as I knew,accurately reflected the financial condition of the company.

Second, it is my beliefthat Enron's failure was due to a classic "run on the bank:" a liquiditycrisis spurred by a lack of confidence in the company. At the time of Enron's collapse, the company was solvent and highlyprofitable – but, apparently, not liquid enough.  That is my view of the principal cause of its failure.

Now, let me address some of the questions about my specific involvement in these events.

First, I left Enron on August14, 2001 for personal reasons.  Atthe time I left the company, I fervently believed that Enron would continue tobe successful in the future.  I did notbelieve that the company was in financial peril.

Second, similarly, I did not"dump" any stock in Enron because I knew – or even suspected– that the company was in financial trouble.  In fact, I left Enron holding almost the same number of shares that Iheld at the beginning of 2001:  OnJanuary 1, 2001 – the start of my final year at Enron -- I owned approximately1.1 million shares of Enron.  OnAugust 14, the day I left, I owned about 940,000 shares. Indeed, in June of that year, I terminated an SEC-sanctioned stock saleplan, and elected to hold on to more Enron shares.

Third, with regard to theso-called LJM Partnerships, the Powers Report criticizes me for supposedly nottaking a more active role in reviewing the conflict of interest arising from theinvolvement in those partnerships of Enron's then CFO. I believed at that time that there were adequate controls in place– that the controls were being complied with and that I was discharging – tothe full extent of my mandate – my obligations to the Board with respectto this process.

Fourth and finally, the PowersReport also criticizes me for supposedly "approving" the restructuring ofcertain hedging transactions. The Report then suggests that "if the account of other Enron employees isaccurate," that transaction "was designed to conceal" losses on some ofEnron's investments and that I may have withheld information from the Boardabout that restructuring. I can state here today that I did not have any knowledge that that transactionwas designed to conceal losses, and I did do anything to withhold information from the Board

Ours was a company thatemphasized creativity, but always in a manner that relied on the advice of thebest people we could find – both those inside the company and the lawyers andaccountants outside the company who advised us. 

With that, Mr. Chairman, I amprepared to answer any questions that you may have.

Source: House Committee on Energy and Commerce

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