Enron whistleblower tells of 'crooked company'

Earlier in the day, the company's former head of risk and research, Vince Kaminski, testified he tried to do his job in telling top executives when he believed Enron conducted risky business.

But his criticism in 1999 of a partnership backed by Enron stock got him pushed out of the company’s risk squad by Chief Executive Jeffrey Skilling. Kaminski thought the partnership overflowed with conflicts of interest because it was run by Chief Financial Officer Andrew Fastow.

The next time he spoke up, at an October 2001 management meeting headed by Enron founder Kenneth Lay weeks before the company imploded, he was cut off. He then got a call from a human resources executive, which made Kaminski fear being fired.

“You weren’t fired, were you Mr. Kaminski?” federal prosecutor Sean Berkowitz asked Tuesday at the fraud and conspiracy trial of Lay and Skilling.

“Eventually, everybody was fired,” Kaminski replied somberly, referring to the collapse and loss of thousands of jobs at the Houston-based energy trading company where he worked nearly 10 years.

Under cross-examination by Lay attorney Bruce Collins, Kaminski, 58, acknowledged that while he had a business degree, he was not an accountant and not an accounting expert.

“I think I had a duty to act to the best of my abilities and voice my concerns,” the mathematician and economist said of his criticisms, including an Oct. 2, 2001, e-mail to an auditor at Arthur Anderson, Enron’s accounting firm. In the note, he sarcastically reminded the auditor of what he called “Accounting 001: One cannot eat the cake and have it too.”

When Collins reminded him he was not addressing accounting students in the note, Kaminski replied: “Maybe in some occasions they needed some remedial accounting classes, just have some common sense ... At the same time this was a firm in recent years that had a series of professional lapses that were well publicized.”

With a mandate he viewed as making certain Enron “was not taking excessive reckless risk,” Kaminski said his cool reaction in June 1999 to the Fastow-run partnership LJM1 earned him a phone call from Skilling.

“Mr. Skilling told me that he decided to transfer my group,” he recalled. “He said he received complaints about the work of my group, specifically my group acted more like cops, preventing people from executing transactions instead of helping them.”

Two years later his team, which had been moved from risk assessment to Enron’s trading division, was asked to assess the value of financial structures known as Raptors. Like LJM1, they were similarly backed by Enron stock and used to lock in gains while keeping hundreds of millions of dollars in debt off the energy company’s books.

Richard Carson / Reuters “I felt the company was threatened and I had a duty to speak up," former Enron managing director Vince Kaminski, seen here entering court Wednesday, testified.

“In my view they were based on the same flawed principles as the first LJM transaction I had looked at in June 1999,” he said.

Kaminski refused to bless the unwinding procedure. He said he told former Chief Risk Officer Rick Buy: “I’m not going to sign off, even if I’m going to be fired.”

He felt just as strongly at an Oct. 22, 2001, meeting of Enron executives, headed by Lay.

“I felt the company was threatened and I had a duty to speak up,” Kaminski said.

When Lay turned the conversation to Fastow and reports that questioned his integrity, Lay said the company’s board was “fully united” behind Fastow.

“I told him I’m in a terrible position of having to disagree with you,” Kaminski said, which Lay said was fine.

“And I said I believe what Andy Fastow did was not only improper but terminally stupid, and what Enron should do at this point is come clean.”

He said his then-boss, trading division head Greg Whalley, gently pushed him from the podium.

“I probably said too much for his comfort,” Kaminski said.

The trial recessed until Monday after Watkins was released because prosecutors had scheduling conflicts with upcoming witnesses.

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