Skilling Reiterates Innocence At Trial

Former Enron CEO Jeffrey Skilling, back in the hands of his own lawyer after three days of cross-examination by the prosecution, reiterated his innocence Thursday on charges related to the company's collapse.

The government says Skilling knew Enron wrongly dipped into reserves to pad earnings when business units failed to meet income targets through regular operations.

"Did you think of reserves as a place you could just pull out money for earnings?" Skilling attorney Daniel Petrocelli asked.

"You couldn't," Skilling replied. He repeated a phrase he'd used before, that once a reserve was set aside, it was in a "lock box" and couldn't be tapped.

Several prosecution witnesses testified that they felt pressure from Skilling to use reserves to pad earnings when such funds were supposed to be used for specific expenses, like litigation costs.

During cross-examination on Tuesday, prosecutor Sean Berkowitz displayed a chart for jurors that showed more than $1 billion in reserves were "available for earnings" in the spring of 2001. Skilling bristled and insisted the prosecutor misinterpreted the document.

On Thursday, Skilling explained that the $1 billion reserve increased to $1.3 billion by the end of the first quarter of 2001, reducing reported earnings, to prepare for risks and contingencies.

"The whole characterization of reserves as a cookie jar is demonstratively untrue," the ex-CEO said.

Skilling appeared refreshed Thursday after a grueling three days of cross-examination, from which he emerged looking tired. Skilling often simmered with tension as Berkowitz repeatedly challenged his truthfulness. He could face Berkowitz again Thursday after Petrocelli finishes questioning him a second time.

That tension dissipated when Skilling was back in his own lawyer's hands.

"Do you think you're so smart that you can fool this jury?" Petrocelli asked late Wednesday.

"Of course not," Skilling replied.

Skilling's testimony is expected to wrap up Thursday, and his co-defendant, Enron founder Kenneth Lay, is expected to begin testifying as early as Monday, said George Secrest, one of Lay's lawyers.

"He's waited a long time," Secrest said after court recessed for the day.

Skilling is charged with 28 counts of fraud, conspiracy, insider trading and lying to auditors from 1999 through 2001. Lay faces six counts of fraud and conspiracy that focus on his actions after Skilling abruptly resigned from Enron in mid-August 2001 through the company's descent into bankruptcy protection four months later.

Petrocelli said up to 10 other defense witnesses are slated for brief testimony between Skilling and Lay. Next up was Carol Baxter, the widow of former Enron vice chairman and close Skilling friend Cliff Baxter, who fatally shot himself in January 2002.

Prosecutors allege Skilling and Lay repeatedly lied to investors and employees about Enron's health when they knew that their optimism hid weak business ventures and that accounting tricks obscured debt and inflated profits.

The two defendants say no fraud occurred at Enron, and that bad publicity and vanishing market confidence sank the company.

At times throughout Berkowitz's cross-examination, Skilling was prickly but held his temper. On Wednesday he bristled when Berkowitz challenged whether he mischaracterized Enron's true nature as a risky trading company, then blocked the ex-CEO from giving detailed denials.

"We're going to be here all day," a frustrated Skilling said after Berkowitz refused to let him elaborate on the nature of Enron's business and how it managed risk. "We're on fundamentally different planes here."

"This week Skilling was able to parry the dogged Berkowitz, over and over again, without losing his temper much or otherwise coming off as a monster," CBS News legal analyst Andrew Cohen said.

Several jurors smiled during the dustups, as though amused at the sparring.

The government's specific allegations include that Skilling and Lay pointedly characterized Enron as a stable company with predictable growth rather than a trading company vulnerable to market volatility because Wall Street would be more bullish on the former.

Skilling maintained Wednesday his oft-repeated stance that Enron was indifferent to wild swings in commodity prices because it was an intermediary that packaged services for commodity buyers and sellers.

"I didn't think 'trading company' reflected, in my view, what Enron was," Skilling said.

"And you were communicating that to the marketplace, correct?" Berkowitz asked.

"That's correct," the ex-CEO replied.

Berkowitz asked if investors were concerned about whether Enron made the bulk of its profits from speculative trading in markets "going crazy" in California. "Yes or no," the prosecutor demanded.

"Mr. Berkowitz, I think we tried very hard, very hard to communicate specifically the risk positions that were being taken with our business," Skilling replied.

Kenneth Rice, once a top trader and former CEO of Enron's failed broadband unit, testified in February that Skilling told him Enron's stock would get "whacked" if the market perceived Enron as a trading company.

Timothy Belden, a former top trader who ran the company's Western power trading desk, told jurors Enron was primarily a trader and profited heavily from power prices that skyrocketed during California's energy crunch in 2000-2001.

Now that Skilling has stopped talking, the jurors have a stark choice to make about his testimony, Cohen says. "If they believe him, or even most of what he has said, they should be much more forgiving toward him and his co-defendant, former Enron chairman Kenneth Lay, during the deliberations that likely will begin at the beginning of May."