In a dramatic personal con-frontation on Capitol Hill yesterday, Enron's former chief executive, Jeffrey Skilling, flatly rejected assertions that he must have known of the problems that sent the company into bankruptcy.
With Sherron Watkins, the Enron vice-president and celebrated whistleblower sitting just two places away from him, Mr Skilling tried to convince sceptical members of the Senate commerce committee that he simply did not understand the complexities of secret partnerships whose debts brought the biggest corporate collapse in US history in December.
The clash came as the Justice Department made a possiblebreakthrough in its criminal investigation of the affair, with the report that a key former executive was co-operating with prosecutors.
Until he was sacked last November, Ben Glisan was Enron's treasurer, as well as a participant and financial beneficiary of the partnerships. If Mr Glisan strikes a deal with prosecutors, his evidence could hasten the indictment of senior executives, including Andrew Fastow, Enron's former chief financial officer who made at least $30m (£21m) from the partnerships, and perhaps Mr Skilling.
"I am not an accountant," the icily composed Mr Skilling told one senator after another. "I relied on our accountants. Andersen had taken a hard look at this structure. They believed it was appropriate. The board approved it after accountants signed off on it."
But his professions of ignorance were flatly contradicted by Ms Watkins. Last August she warned Kenneth Lay, Enron's former chairman, that the company risked being consumed by a gigantic accounting scandal. Without making eye contact with Mr Skilling, she in effect accused him of lying. "Mr Skilling was aware of the problem," she said.
Asked later why she didn't go to Mr Skilling with her doubts, she replied: "I thought it would be a job-terminating move. Mr Fastow would not have put his hand in the Enron candy jar without explicit approval from Mr Skilling."
Ms Watkins described the appointment of Mr Glisan as Enron's treasurer as akin to "letting the fox into the chicken coop".
Several senators criticised Enron's practice of using its own stock to back transactions by several of the partnerships, and thus to conceal debt. The dealings enabled Enron to artificially inflate its earnings, until the whole scheme unravelled last year.
Ms Watkins had declared repeatedly that the practice was illegal – quite apart from the conflicts of interest involved when the same people represented both Enron and the partnerships that were supposedly independent of it.
One group of partnerships, called Raptors, "owed us $700m and was going to pay us back by using our own stock", she said, noting for good measure that the value of that stock was plunging, making it increasingly difficult for the debt ever to be repaid.
Mr Skilling was forced to admit that, despite having a business masters degree from Harvard, he was unaware that a company's equity should not be used to manipulate its earnings. The Raptors, Mr Skilling maintained, were there to hedge Enron against volatile high-technology investments. He was "absolutely concerned" about protecting the company from risk. "I did not dupe Ken Lay, I have not lied to Congress, and my testimony has not been contradictory," he claimed, before launching into a diatribe against his inquisitors.
He said "common sense and common decency" had been thrown out of the window in the congressional hearings, where several Enron executives, including Mr Fastow and Mr Lay, have already invoked their constitutional rights to avoid self incrimination. "We are labelled hucksters and criminals with complete disregard for the facts," Mr Skilling declared.Reuse content