Former Enron Broadband chief operating officer Kevin Hannon will finish his testimony today in the trial of former key Enron executives Ken Lay and Jeff Skilling. Most likely, with the testimony of former Enron CFO Andy Fastow to follow, Hannon’s testimony will quickly fade into obscurity.
However, the nature of the media reporting on Hannon’s testimony from last Thursday afternoon got me to thinking. The prosecution went for a cheap score with Hannon by eliciting from him that Skilling had supposedly admitted during a May 2001 meeting with a group of other Enron executives that “they’re on to us” after a small analyst firm had produced a research note critical of some Enron transactions. Most of the media covering the trial (representative examples: NY Times and Houston Chronicle) seized on Hannon’s statement as gripping testimony that could prove to be highly probative in the government’s case against Skilling.
Well, maybe so, but doesn’t Hannon’s testimony really undermine the government’s case? The report that supposedly prompted Skilling’s remark was based on negative information about Enron that the company had made available to the efficient securities market. The report was not even a particularly novel analysis of Enron, given that it came a couple of months after Peter Elkind and Bethany McLean’s much-bantered Fortune article that suggested that Enron stock was overpriced. Despite the negative inference that Hannon attributed to Skilling’s alleged comment, it’s at least just as likely that Skilling — if he made the statement at all — was making light of the report to a group of company executives while emphasizing that his more optimistic opinion of the same information should also be made known to the markets.
But more importantly, how does the Enron Task Force square the report’s negative evaluation based upon information that Enron disclosed to the efficient securities markets with its core allegation that Skilling withheld such information from the markets?
Call it the risk of going for the cheap score. The prosecution went for testimony that seemed damaging to Skilling on its face, but in substance is counterproductive to the prosecution’s case. By the time Skilling lawyer Mark Holscher had elicited from Hannon on cross-examination yesterday that previous anti-Skilling witness David Delainey had also attended the meeting and heard Skilling’s supposed dramatic admission, but somehow failed to recall it in his testimony last week, it would not be surprising if the jury is, might we say, skeptical of Hannon’s testimony about Skilling’s statement and of the prosecution’s motive in eliciting it.
All of which just reinforces that Lay and Skilling will never win their case in the court of public opinion. But they still just might win it in court.