Enron Boss 'tried to Stifle Critical Voices'

Former Enron chairman Ken Lay, who is facing a raft of fraud charges relating to one of America’s largest corporate collapses, asked one of his senior lieutenants if a Wall Street analyst could be excluded from meetings with management after the analyst asked difficult and probing questions, a court in Houston heard.

Mark Koenig, head of investor relations at Enron, said Mr Lay had become frustrated with John Olson, of Merrill Lynch. Unlike almost all of his counterparts, Mr Olson considered the Houston-based energy trading business to be overvalued, despite its published earnings growth.

Mr Koenig, who has himself pleaded guilty to fraud charges as part of a plea bargain deal with prosecutors, recalled how, five years ago, Mr Olson stood out among analysts. "He was one of the few that went out on a limb in probing and had a negative opinion about the company."

After one meeting in February 2001, Mr Koenig said: "Mr Lay asked me if we even had to invite Mr Olson to future meetings ... and I told Mr Lay that we did." He said Mr Olson was not frozen out from subsequent meetings, though former Enron chief executive Jeff Skilling also asked if invites could be stopped. Mr Koenig also recalled Mr Skilling putting Enron’s case to Mr Olson "forcefully" at a reception.

Mr Lay and Mr Skilling deny charges related to the alleged spearheading of a complex accounting conspiracy designed to mask spiraling Enron losses from investors over two years while the two bosses won bonuses and sold stock.

Mr Olson was fired from Merrill Lynch, blaming his dismissal on influence brought to bear by Mr Lay. At a later analyst conference call, tempers again rose, with Mr Skilling referring to one questioner as an "asshole".

Mr Koenig, who is the first witness for the prosecution, also told the jury of the pressure he was under to manage analysts’ expectations of Enron’s future earnings per share. The day before publishing earnings for the last three months of 1999 he became aware that average expectation had risen to 31 cents a share. This was above what was to be the published 30 cents earnings figure, breaking the company’s prized record of meeting or beating Wall Street expectations.

Quick discussions with senior accountants and Mr Skilling followed and the published earnings figure was raised to 31 cents. The decision, Mr Koenig said, was taken by Mr Skilling.

Mr Koenig said he had discussed analysts’ reaction with Mr Lay after the announcement had been published. "Mr Lay said when he went to bed we were at 30 cents and when he woke up we were at 31 cents." Mr Lay had not been alarmed by the episode. Mr Koenig said a similar fudge had been ordered by Mr Skilling the following year. Mr Koenig was one of a circle of about eight executive vice presidents in close daily contact with either Mr Lay or Mr Skilling. The trial continues.