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Congress to Challenge Skilling On Claims Enron Was Healthy

By Peter Behr

The Senate Commerce Committee plans to press hard on former Enron Corp. chief executive Jeffrey K. Skilling when he testifies Tuesday to back up his claims that the energy giant was healthy when he abruptly resigned this past August, congressional aides say.

“On the day I left, I absolutely and unequivocally thought the company was in good shape,” Skilling said in sworn testimony to a House subcommittee, referring to Enron’s finances at the time he suddenly resigned on Aug. 14.

Skilling, the only member of Enron’s senior management team not to exercise his Fifth Amendment right against self-incrimination, will appear along with two of his chief accusers -- current Enron President Jeffrey McMahon and whistleblower Sherron Watkins, an Enron vice president.

Their earlier testimony places Skilling at the center of Enron financial maneuvers now under investigation by the Justice Department, securities regulators and several congressional committees. Skilling denies he knew about any improprieties and said in a statement Monday that he looks forward to responding to Watkins’ accusations.

The gaps between Skilling’s version of events and others’ is the subject of intense scrutiny and will be key to any personal liability Skilling will face for Enron’s failure. Senior executives may not significantly misrepresent their company’s financial condition and may be liable if they fail to deal with major problems.

“It’s now a matter of the facts. How much did he actually know, and what red flags were there,” said Robert Prentice, business law professor at the University of Texas. A chief executive is entitled to rely on subordinates and outside accountants and attorneys -- as Skilling says he often did, Prentice said. “But he can’t see a red flag and look in the opposite direction.”

During Skilling’s six months as CEO last year, the company’s share price dropped nearly 50 percent, to $42 from $82, as some investors grew wary of Enron’s potential losses from the California energy crisis and problems in a major Internet venture.

Skilling has testified he believed these problems had been resolved when he departed, after a decade at Enron. But other former Enron executives and managers say these and other setbacks were evident months before Enron executives disclosed them last spring and summer.