Enron, the disgraced US energy company, built a fake command centre as part of a sting operation to impress Wall Street analysts, it emerged today.

Employees were ordered to act as if they were making deals for a 1998 annual analysts' conference, months before the trading centre was ready.

Then Enron chairman, Kenneth Lay, and the firm's ex-president, Jeffrey Skilling, led a rehearsal the day before the charade.

"We held a rehearsal with Skilling and Lay the day before, and Skilling said he wanted to play the Paul Newman character from the movie The Sting when the analysts came through," Mike Regala, a former vice president for Enron Energy Services (EES), told the Wall Street Journal Online.

Elaborate measures were taken to dupe analysts with a whole floor gutted and equipped with big screen televisions, computers and telephones for $500m, and converted into a "war room" that was touted to analysts as the heart of EES.

The stage-managed war room was called Enron's Potemkin Village, a reference to the sham villages set up by Russian general Grigory Potemkin to impress Catherine the Great in the Crimea in the 18th century.

Despite the mirage, the deals EES ultimately executed were legitimate.

"EES went on to successfully close a great many profitable deals, so in hindsight the temporary ruse seemed OK in the end and bought us some time to really develop our infrastructure," Joseph Phelan, an ex-director of EES, told Reuters.

Though it was ultimately profitable, EES in 1998 was very small and deals were few and far between.

EES promised to manage the energy needs of large industrial customers for a fee, and eventually signed several major companies in deals worth over $1bn.

In a separate development, two big insurers are reportedly refusing to honour policies they wrote covering Enron's directors and officers against the cost of lawsuits.

If the Royal Insurance Company of America and the St Paul Mercury Insurance Company are successful in walking away from their policies, the nine other insurers that wrote officers' and directors' coverage for Enron could follow their lead.

St Paul Mercury is part of the St Paul Companies, and Royal is a unit of the British insurer Royal & SunAlliance.

In a New York Times report, Royal and St Paul Mercury said in separate filings in the US bankruptcy court in Manhattan they had relied on what turned out to be "material misrepresentations" when they issued the policies.