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Enron's Skilling defends stock sale

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HOUSTON, Apr 18 (Reuters) Former Enron CEO Jeffrey Skilling has defended his sale of millions of dollars in Enron stock, and said he had no idea the company had launched an internal probe into accounting issues.

Sean Berkowitz, head of the Enron Task Force, accused Skilling during cross examination of discussing with former Enron CEO and Chairman Kenneth Lay a whistle-blower's note about possible accounting fraud at Enron shortly before Skilling sought to sell 200,000 shares of stock.

The meeting between Lay and Skilling took place on August. 22, 2001, Berkowitz said, a week after Skilling resigned from Enron and whistle-blower Sherron Watkins sent Lay an email citing financial abuses in the company.

Skilling denied Lay told him about the letter or that Lay was scheduled to meet with Watkins later that same day.

''I didn't hear about it, the note, until it was published in the newspapers that following January,'' Skilling said yesterday.

Skilling faces 28 charges of conspiracy, fraud and insider trading linked to the collapse of the Houston company in December 2001 in what was then the largest ever US bankruptcy.

He is being tried alongside former Enron CEO and Chairman Kenneth Lay, 64, who faces six charges of conspiracy and fraud.

Enron collapsed after its use of off-balance sheet deals to hide billions of dollars in debt while propping up debt was revealed.

Under often tense questioning, Skilling stuck to his contention he did not remember placing the order to sell 200,000 Enron shares on September. 6, 2001 and denied he would have done so based on knowledge the company had launched an investigation into Watkins' allegations.

''I didn't know about any investigation into accounting improprieties,'' he said.

Skilling is accused of using insider information to sell nearly million in company stock. He has said he sold those shares either for tax purposes or to help pay for the construction of his 4 million dollar house in Houston.

The September. 6 order was never executed, although Skilling did sell 500,000 shares later that month because he said he feared the market turmoil following the September. 11 attacks against the United States.

FASTOW DEALS Berkowitz also questioned Skilling on the deals Enron undertook with partnerships operated by former chief financial officer Andrew Fastow that Fastow has said were used by Enron to unload poorly performing assets.

Skilling, 52, said approval paperwork for those deals never crossed his desk, and allegations those deals propped up Enron's finances were false.

''I don't think it would have made a tremendous difference'' to Enron's earnings, Skilling said.

Both Skilling and Lay have blamed the collapse of Enron, once the nation's seventh largest company, on a crisis of investor confidence after it was revealed Fastow skimmed millions of dollars from partnerships he operated.

Fastow, who agreed to serve a 10-year prison sentence under a deal with prosecutors, testified earlier at the trial he did the deals with Skilling's approval.

Berkowitz also presented copies of checks totaling 0,000 Skilling wrote to a former girlfriend and ex-Enron employee who had started an Internet business that Skilling said was an investment in the new company.

That company relied on Enron for most of its business, Berkowitz showed, making Skilling's investment a violation of the company's ethics policy because he never cleared his ownership stake with Enron's board of directors .

''It may be (a violation),'' Skilling said. ''It didn't occur to me.'' Skilling testified for four days on his own behalf last week and is expected to undergo several days of cross examination this week.

Lay is also expected to take the witness stand in his own defense later in the trial, which began in late January.

REUTERS PDS PM0641

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