Former CFO Fastow Set to Testify in Enron Trial

Observers expect high drama in the trial of former Enron executives Ken Lay and Jeffrey Skilling next week, when former Enron Chief Financial Officer Andrew Fastow is set to testify. Madeleine Brand discusses the trial with Kurt Eichenwald, author of Conspiracy of Fools, a book about the collapse of the once-giant energy trading firm amid fraud charges.

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MADELEIN BRAND, host:

Let's turn now to Houston and the Enron trial. The government's key witness Andrew Fastow is scheduled to testify next week. He was Enron's Chief Financial Officer and is expected to give devastating details about what his former bosses did at the company. Ken Lay and Jeffrey Skilling are accused of fraud, conspiracy and insider trading, among other crimes.

This week their defense was dealt another blow with the testimony of David Delaney, a former high-ranking executive at Enron. And here to catch us up on the Enron trail is Kurt Eichenwald. He's author of the book Conspiracy of Fools. That's about the Enron scandal. And he's also monitoring the trial for the New York Times.

Hi, Kurt.

Mr. KURT EICHENWALD (Author of Conspiracy of Fools): Hey, how you doing?

BRAND: Fine, thank you. Well, tell us about David Delaney. I understand he has been the prosecution's strongest witness so far. Who is he and what's he saying in court?

Mr. EICHENWALD: David Delaney was somebody who was a senior executive both in the wholesale trading unit, which was Enron's chief money maker, and later in its retail unit, and that makes him a very powerful witness because he was present at a particular discreet transaction when Enron moved assets from the retail unit to the wholesale unit in what the government contends was an effort to disguise losses in retail. Basically retail wasn't working and the way they made it look better was by moving money-losing assets into a division that was working. That is the story the government is putting forward.

BRAND: And is Delaney testifying that Skilling and Lay told him to do that?

Mr. EICHENWALD: Delaney is delivering powerful evidence against Jeff Skilling. He has not gotten to Ken Lay in any significant way. But the evidence against Jeff Skilling, he's testifying about a meeting that was held in 2001 where they are talking about the losses. Jeff Skilling is there. There is an open discussion by Delaney about how he doesn't think it's the right thing to do. And the problem with the Enron trial is that people often times have trouble focusing on detail. And you simply cannot get a criminal conviction because you think things went badly in general. You need specificity.

This is a very specific allegation dealing with a very specific transaction and one where you have someone who was in the room saying at the time I thought it was illegal, I thought it was improper. I wish on my kid's lives that I had gotten up and walked away from that table. And he places Jeff Skilling right there, so that is very, very powerful evidence.

BRAND: And what has Skilling said in response?

Mr. EICHENWALD: Well, they're doing a cross examination and that cross examination is, truthfully I haven't quite figured out the direction that they're going with it yet. They're trying to undermine Delaney's credibility, but have not succeeded in doing so yet. And you know, one of the things that's interesting coming out of this is we all have been talking for years about Andy Fastow, but it's actually looking as if the government may not even need Andy Fastow.

They have established a very strong case on fraud relating to broadband. They have established a strong case on fraud relating to the retail unit. They have done a significant amount of damage to Jeff Skilling. But in going forward, you know, Andy Fastow brings a lot of problems to the table. Most of them, you know, being other crimes he committed. And so people are looking at this going at this point the government had done a very strong job in presenting its case. And you know, obviously we haven't heard the defense case yet. We wait to hear that. But they have a very high hill to climb.

BRAND: And Kurt, turning to next week and the testimony of Andrew Fastow, briefly what is he expected to say?

Mr. EICHENWALD: Fastow's expected to be a, mostly again, a Skilling witness. That Skilling knew about certain illegal transaction involving off books partnerships. And not speaking so much to the role of Ken Lay. And basically, you know, in the end Fastow is not necessarily going to be the knockout witness. There have been a lot of knockouts going on in this case so far.

BRAND: Kurt Eichenwald is the author of the book Conspiracy of Fools, about the Enron scandal. Kurt Eichenwald, thanks again.

Mr. EICHENWALD: Thanks for having me.

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