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Enron Accused Wait for Whistleblower in Court
The Times
By James Doran, Wall Street Correspondent
March 4, 2006
(c) 2006 Times Newspapers Limited. All rights reserved

ANDREW FASTOW, the former finance chief of Enron, faces a week of intense interrogation at the hands of lawyers working for Ken Lay and Jeff Skilling, his former bosses, who were charged with fraud based on evidence that he gave to American prosecutors after turning whistleblower in the notorious bankruptcy case.

Fastow, who is expected to be called to the stand on Tuesday, is perhaps the most hotly awaited witness in any of the big US corporate fraud cases of the past five years.

The former finance director has already pleaded guilty to fraud charges and has helped US government prosecutors to build what they believe to be the most important white-collar case in history.

"Andy Fastow knows where all the bodies are buried," Jake Zamansky, a Wall Street lawyer who has closely followed the Enron case, said. "He will admit being the architect of the massive fraud at Enron and he will implicate both Lay and Skilling as being complicit with him. It is going to be quite a show."

Mr Lay, Enron's former chairman, and Mr Skilling, its one-time chief executive, have waited four years to confront Fastow, who they claim is lying about their alleged role in the fraud to save his own skin. They deny all the charges against them.

The former finance chief reached an agreement with government prosecutors that he hopes will gain him a reduced sentence in exchange for giving evidence against his former bosses. Fastow was originally charged with 98 counts of fraud and conspiracy, which would have carried a maximum sentence far longer than his natural life.

After he blew the whistle on Enron, however, the US Government charged him with just two fraud counts, which carry a more lenient ten-year prison term.

Fastow admitted setting up secret partnerships that were used to hide debt and create the illusion that Enron was doing business in areas where it was not. He has also admitted making tens of millions of dollars in personal gains by creaming money from the secret partnerships.

His testimony is expected by some analysts to be less damaging to Mr Lay and Mr Skilling than the defendants at first feared.

Mike Ramsey, Mr Lay's lawyer, gave a hint of his cross-examination during opening statements in the case. He described Fastow as a "crook", a "liar" and a "pitiful guy" who had already seen his wife sent to jail for a year because of crimes that he had committed. More importantly, Mr Ramsey pointed out that there was no paper trail to prove Fastow's allegations that Mr Lay and Mr Skilling had known about and had participated in his fraud.

The greatest challenge for the prosecution in the Enron case is the task of convincing the jury that Fastow is telling them the truth in implicating Mr Lay and Mr Skilling.

Co-operating witnesses are always branded unreliable by defence lawyers because they have a clear motivation to lie. The prosecutors are also under enormous pressure to secure a victory in this case.

Although the Enron executives are not the first to stand trial on fraud charges, their company's collapse was the first in a wave of bankruptcies that changed the face of corporate America.

The Justice Department set up a special "Enron task force" that has worked for more than four years, spending millions of dollars, to bring the pair to trial.

(c) Times Newspapers Ltd, 2006

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