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Witness says Lay retook CEO role

HOUSTON -- Enron Corp.'s former investor-relations chief yesterday acknowledged that founder Kenneth Lay had to jump back into nuts-and-bolts management of his company when he resumed the role of chief executive after Jeffrey Skilling resigned less than four months before Enron collapsed in December 2001.

''He had to get more involved, yes," Mark Koenig said in response to cross examination by lead Lay lawyer Michael Ramsey in his sixth day on the witness stand. Koenig is the government's first witness in the fraud and conspiracy trial of his former bosses.

''He was involved before, but he took on a whole new duty," Koenig said. Lay remained chairman of Enron throughout 2001, but he ceded the CEO position to Skilling in February that year. Skilling abruptly resigned six months later.

Lay's new duties included a hastily arranged conference call with Wall Street analysts on the day Enron disclosed Skilling's resignation in mid-August 2001, Koenig said. He said Enron was obligated to make executives available on the call to try to calm any market jitters sparked by the unexpected resignation.

Ramsey's questioning appeared to try to highlight what Lay claimed publicly when he was indicted in July 2004: Lay knew of no skullduggery, and was like a student cramming for an exam when his hand-picked successor as CEO quit.

''We think the company's on solid footing," Lay told analysts on the August 2001 conference call played in court for the jury. On the same call, Skilling tried to reassure analysts that his departure was ''purely a personal decision" and he stressed that it had nothing to do with Enron.

Skilling lawyer Daniel Petrocelli, before he wrapped up three days of cross examination, sought to show how Skilling discussed bad news with analysts in conference calls earlier in 2001. Those discussions included the meltdown of the telecom industry in 2001 as Enron pushed its venture into broadband and bandwidth trading. The downturn siphoned potential bandwidth trading partners, he said.

Prosecutors contend Lay and Skilling hid bad news as they painted a rosy picture of Enron.

Koenig is among 16 ex-Enron executives who have cut plea deals with prosecutors. He pleaded guilty in August 2004 to aiding and abetting securities fraud for lying to investors about Enron's finances. As head of investor relations, he was the company's chief liaison to Wall Street.

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