Enron prosecution hits IR man

It's tough for me to read about the first witness for the prosecution in the Enron trial. He's the former head of Investor Relations for Enron, and he's been was on the stand for three days. In August 2004 he made his guilty plea and now faces from zero(yes 0) to ten years in prison depending on how he handles himself. He has a wife and three children. This kind of prosecutorial leverage should taint the proceedings from the outset.

But let me talk about the job of this first premier witness. The head of Investor Relations for most corporations has the primary responsibility of communicating the company's message and results to the investment community, following SEC rules, and receiving the opinions of investors and analysts and making sure that management is kept well informed. Additionally, Investor Relations has administrative responsibility for arranging for analysts and investors to meet with management, arranging conferences with investors, and arranging road trips to go out and talk to major shareholders and prospective shareholders. It's generally a big communications and admin job.

But let me get to the heart of the matter. My guess is that if 5% of Investor Relations officers have a seat at the table when important strategic decisions are being made that would be a very high number; if 10% are observers when really important financial decisions are being made that would be a very high number; and I would be surprised if 20% of Investor Relations officers across all industries had any but the most cursory corporate finance and accounting background.

It seems to be easy to tell from press reports that Mark Koenig, the Enron IR guy, had no role in corporate strategy. It's also clear that he wasn't at the table when important financial decisions were made. And as far as an accounting and finance background, it doesn't seem like he's aces there either, because he does not seem to be able to explain anything that happened other than "one day the number was this, the next day it was that".

Some of his commentary is damaging to the defense and has merit, if not coerced. Those comments relate to the underperforming non-trading units and Enron's decisions to obfuscate, at best, the reality of those businesses. What he says makes sense, and reflects an understanding of what investors will pay for---they want real businesses with growing predictable returns and not just a big possibly volatile trading business. So Enron apparently made sure to emphasize those businesses that were non-trading businesses, at the same time that trading may have represented 100% plus of earnings(and of course that's why Enron collapsed so quickly. Pull liquidity from a trading business and it can't trade).

My point here, however, is that the prosecution is making a spectacle of a man who had no strategic input, no meaningful accounting background, no input on significant financial decisions, and who they have by the cojones. Just the pictures of this man in the newspaper are painful to see.

For what it's worth I see Skilling, along with Fastow, as the person that needs focus, Lay as a secondary character, and I watch the prosecution lay the groundwork with a person that is way in over his head. Regardless of the merit of the prosecution or defense, the prosecution, in my opinion, has made a mistake. Everyone can see that Mark Koenig is the wrong man to destroy.