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. Last Updated: 07/27/2016

Ex-Enron Chief: I Never Saw It Coming

WASHINGTON -- As U.S. government investigators look for the roots of Enron's demise, the Enron chief executive who quit just months before the company collapsed broke his silence to deny any responsibility or wrongdoing.

Jeffrey Skilling, who resigned as chief executive in August after a decade at the company, said in an interview Friday that he had been stunned by Enron's subsequent descent and by revelations that his former chief financial officer and right-hand man made more than $30 million from dealings with investment partnerships related to the company.

Skilling said that he had never invested in such partnerships and disputed assertions by people close to Enron that he had been counseled against entering into them. But he said the partnerships, now the subject of government investigations, were the idea of the former chief financial officer, Andrew Fastow.

While shareholders and employees who suffered big losses have filed suits against Enron, Skilling sold some of his holdings shortly before the collapse. Skilling disclosed that he sold about 500,000 shares of Enron stock on Sept. 17. Based on trading that day, the sale would have brought about $15 million. That was his only sale of Enron stock after his resignation, he said.

"We're all trying to figure out what happened," Skilling said. "This was a tragedy. I had no idea the company was in anything but excellent shape."

Based on a conversation with a senior Enron executive after he quit, Skilling said the company lost out on the opportunity to obtain $3.5 billion to $4 billion in financing when it was most needed because of provisions unusual in such contracts.

Skilling, a former consultant at McKinsey & Co., joined Enron in 1990 and helped transform it into the largest energy-trading company in the world. The company began to unravel in October as it disclosed losses and reductions in equity partly because of dealings with investment partnerships involving Fastow.

The U.S. Securities and Exchange Commission soon began a formal investigation, and last month Enron said it had overstated almost $600 million in profits over the last five years. A rival Houston energy trader, Dynegy Inc., agreed Nov. 9 to rescue Enron, but called off the merger later that month. Enron collapsed in the face of looming debt payments and the refusal of many energy-trading customers to continue to do business with it.

Skilling, who has spent two days giving sworn testimony to the SEC, said said he did not believe he would face sanction or criminal charges. "I didn't do anything wrong," he said.

Skilling said that four things brought Enron down: Admissions of serious accounting errors, investor concerns about "suggestions of self-dealing," a "total loss of confidence by the financial sector in Enron," and what Skilling described as clauses unusual in routine financing arrangements that cut off access to loan facilities in the event of a "material adverse" change at Enron. The result, he said, "was a classic run on the bank."

Skilling said he could not say what the clause was that hurt Enron's ability to borrow more money, but that based on a conversation he had with Greg Whalley, who was named Enron's president and chief operating officer after Skilling resigned, the clause was an "unexpected" find in a routine document.

Enron officials have said the partnerships involving Fastow were a means to allow the company to hedge its exposure to some of its investments. Skilling said he did not have details about the partnerships, but he said the deals with Fastow were partly set up "to save Enron money."

Fastow's group might be willing to give Enron a better price because it was more familiar with the assets being traded, he said. The familiarity "reduced some of the uncertainty," he said.

But he said he was stunned when he read a regulatory filing by Enron on Nov. 8 that said Fastow had made more than $30 million off the deals. He said he was also surprised to learn that at least several other Enron executives had been investors in the partnerships. "I, along with a lot of people, were surprised when the 8-K was released," he said.

An Enron filing with the SEC last month reported that transactions with the Fastow partnerships added $517.9 million to Enron's pretax profits in 2000. The same filing said the company's restated after-tax net income for the year was $847 million, but did not give a pretax figure. Applying a normal tax rate to that figure would imply pretax income of about $1.3 billion, indicating that the Fastow partnerships provided about 40 percent of the company's profits.

However, Skilling said Friday that the Fastow partnerships had a very small impact on Enron's profits last year. "I would guess it's de minimus," he said.

A special committee of Enron directors is now reviewing the partnership transactions, and in the Nov. 8 filing the company said it was reviewing whether controls ordered by the board were properly carried out. "I think that's the question," Skilling said. "I don't know."

According to a regulatory filing, the company's board required every transaction with the Fastow partnerships to be reviewed and approved by the office of the chairman -- which Skilling said included him, the chief accounting officer and the chief risk officer. On Friday, Skilling could not say whether those approvals took place for every deal.

He also said that to his knowledge, no directors or public officials of Enron invested in or did business with any of the partnerships, and he said the structure of the initial Fastow partnerships were approved by the board.

Skilling said that neither he nor his lawyers have been contacted by the Justice Department. Told that several U.S. attorneys have indicated interest in Enron's collapse, Skilling replied: "I would think they should be. I mean, it's a big company." Asked to elaborate on what he meant, he said: "I take that back."