By Carrie Johnson
Washington Post Staff Writer
Saturday, March 18, 2006
HOUSTON, March 16 -- When former Enron Corp. executive Sherron Watkins took the witness stand Wednesday, she spoke confidently of the failings of her former bosses, chief executive Jeffrey K. Skilling and chairman Kenneth L. Lay.
The media-savvy Watkins, who won plaudits from Congress and the public for her warnings that the Houston company would collapse, volunteered opinions about everything from accounting strategy to board members she called inept.
But on cross-examination, defense lawyers took one of Watkins's apparent strengths -- her outspokenness -- and turned it against her.
Ron Woods, a lawyer for Skilling, asked whether Watkins had developed a reputation at Enron for overheated judgments and for failing to listen, and Watkins more or less concurred.
"I found out my nickname was 'Buzzsaw,' " the witness said.
Seven weeks into the blockbuster fraud trial of Lay and Skilling, defense lawyers have tried to wear down the government's witnesses with questions tailored to exploit personality quirks, large or small. Cross-examination, after all, is a high-stakes game of endurance and amateur psychology -- a matter of finding a witness's Achilles' heel, that trait most likely to undermine their performances on the witness stand.
And, in this case, the defense has plenty of weapons at its disposal. "The fact is, the defense does have a somewhat unusual amount of material to cross-examine them with," said Washington criminal defense lawyer E. Lawrence Barcella Jr. of the Enron investigation, which generated countless articles and voluminous written reports from Congress, a bankruptcy examiner, the company's board and federal regulators.
The defense came out of the gate in February determined to test the endurance of the government's witnesses, many of them former executives who pleaded guilty and agreed to testify in exchange for reduced prison terms. Former investor relations chief Mark E. Koenig, the fraud trial's first witness, remained on the stand for eight days -- including five of protracted cross-examination in which a tired Koenig sometimes appeared to agree with the defense on certain points, if only to shorten his ordeal.
Questions to Kevin P. Hannon, a former official in Enron's high-speed-Internet unit who followed Koenig to the stand, appealed to the jury's sense of humor -- and Hannon's apparent lack of one.
Hannon delivered one of the most surprising bits of testimony so far -- saying under oath that Skilling uttered, "They're on to us," in a May 2001 meeting at which high-level executives discussed a research report suggesting that Enron's stock was overvalued. In a prosecution case built on subtle, indirect testimony, that quote resonated.
But Skilling lawyer Mark Holscher managed to diminish its impact. He underscored Hannon's stiff demeanor, repeatedly highlighting the witness's inability to react to a joke. Holscher suggested that Skilling often employed sarcasm to deride investors who bet that Enron's stock price would fall, implying that the "They're on to us" remark was a note of humor that everyone else in the room picked up but Hannon.
"Do you recall Mr. Skilling making reference to the Mr. Bill segment on 'Saturday Night Live'? The gag routine with Mr. Bill, 'Ooooh, noooo, Mr. Bill'?" Holscher asked.
No, Hannon replied solemnly.
"You're a rather tightly wound, intense person aren't you, Mr. Hannon?" the smiling defense lawyer said.
Taking a different tack, Skilling's lawyer Daniel M. Petrocelli hammered away at former investor relations official and corporate secretary Paula H. Rieker last month. Rieker is a controlled, impeccably dressed woman who spent most of her questioning by prosecutors smiling, nodding and speaking directly to the jury in calm tones. But she was rattled and blinked repeatedly after Petrocelli pounded at exhibits in a notebook in front of her and stood directly beside her, invading her space until she asked him, with a chill in her voice, to step back to the podium.
The defense lawyer later turned the moment into a joke, asking the witness rather than the judge if he might "approach." Rieker granted him permission, but she had lost some of the confidence that characterized her earlier performance on the stand.
"Sometimes it's not what you get a witness to say but how you get a jury to perceive a witness," said Chip Lewis, a lawyer for Lay who led the cross-examination of Watkins on Wednesday.
The Enron defendants are following a strategy similar to that of former HealthSouth Corp. founder Richard M. Scrushy, acquitted by a Birmingham jury last year of three dozen criminal charges related to a $2.7 billion accounting fraud. At Scrushy's urging, and armed with his insights about former colleagues, his lawyers vigorously went after five chief financial officers who testified against him. James Parkman, Scrushy's lawyer, goaded the government's star witness, William T. Owens, into demonstrating a formidable ego that once led him to call himself "the smartest man in the world." Jurors later said they discounted his testimony.
Houston trial lawyer Rusty Hardin, whose questions in a successful probate dispute over the estate of billionaire J. Howard Marshall II sparked his widow, model and reality-TV star Anna Nicole Smith, to lose her cool and holler, "Screw you, Rusty!" from the witness stand, has taken a softer approach when circumstances called for it.
For instance, sensing that a key witness did not believe he had really broken the law, the lawyer gently prodded auditor David B. Duncan to raise questions about his own guilt, to which he had pleaded, and by implication, that of his firm, Arthur Andersen LLP, in a 2002 obstruction-of-justice case. Jurors ultimately convicted Andersen, but the Supreme Court tossed out the verdict because of faulty jury instructions that struck at the heart of Hardin's argument: that no one had intended to commit a crime.
Cross-examination involves walking a delicate line between discrediting a witness and being too harsh and invoking sympathy from the jury, he said.
"You have to stay polite," Hardin said. "I want a jury to like me, because I want 'em to go back there and resolve the close issues in my favor. They're suspicious of lawyers to begin with. You don't want to be in a position of beating up on a cripple."
Despite scoring points on many of the government's 15 witnesses, lawyers for Skilling and Lay, who argued in opening statements that no major fraud occurred at Enron, have yet to get one of prosecutors' cooperating witnesses to recant the way Duncan did in the Andersen trial. And while they have raised questions about the motives and the truthfulness of former executives who pleaded guilty, they have met with less success in shaking them from assertions that at least two of Enron's core business units performed disastrously in the company's final years and that management was aware of the disasters at the same time Lay and Skilling were reassuring investors and employees that all was well.
And even as Skilling lawyer Ron Woods confronted Watkins with the prospect that her lucrative speech-making career could be cut short if jurors acquit the defendants, Watkins got the last word Wednesday afternoon.
"Sir, I speak on leadership failures," she said. "They remain failed business leaders."