HOUSTON -- Former Enron Corp. chief executive Jeffrey Skilling told other top executives ''they're on to us," when a small analyst firm produced a research note critical of the company's sales to partnerships run by then-chief financial officer Andrew Fastow, a former top executive testified in a bombshell revelation yesterday.
Minutes before that, Skilling said at the May 2001 meeting -- attended by company founder Kenneth Lay -- that he had ''brought Andy here" to talk about those partnerships, called LJM1 and LJM2.
''Fastow said, 'LJM is a good deal for me,' " Kevin Hannon, then chief operating officer of the company's broadband unit, told jurors in the fraud and conspiracy trial of Lay and Skilling.
''As I remember, [the comment] was met by stunned silence," Hannon said.
''Did Mr. Skilling say anything?" prosecutor Cliff Stricklin asked.
''Yes. He said, 'They're on to us,' " Hannon said. ''It seemed to indicate the investment community was beginning to understand how Enron made money."
Hannon's statements -- in the last 10 minutes of testimony yesterday -- were a potentially devastating blow to the defendants. Their lawyers have maintained that Lay and Skilling did nothing wrong and there was no fraud at Enron besides the theft of money by Fastow and two other former executives.
But Hannon's inside view of the company's executive policy meeting appeared to directly challenge the defendants' insistence that the LJM partnerships were proper and received appropriate approvals from lawyers and accountants as well as Enron's board.
Prosecutors contend the partnerships were one of a slew of accounting tricks used to prop up a wobbly company that Lay and Skilling touted publicly as healthy before it spiraled into bankruptcy proceedings in December 2001.