Law

Key Witness Takes Stand at Enron Trial

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The architect of Enron's financial schemes testifies that former CEO Jeffrey Skilling knew about fraudulent deals at the energy company. Andrew Fastow says Skilling made it clear that he wanted "juice" to cover up Enron losses. Skilling and Enron founder Kenneth Lay are on trial for fraud and conspiracy.

STEVE INSKEEP, host:

In a Houston courtroom, the man in the spotlight is Andrew Fastow. The former Enron executive testified against two former CEOs. He linked one, Jeffrey Skilling, to a plan to deceive investors.

Here's NPR's Wade Goodwyn.

WADE GOODWYN reporting:

Andrew Fastow's testimony was all about the off-the-books partnerships that helped Enron both hide its losses and inflate its profits by hundreds of millions of dollars. They started off small. Fastow created an entity he named LJM, using the initials of his wife and children.

LJM was capitalized with Enron stock at $15 million, and Fastow was in charge. The company quickly learned how handy these partnerships were when LJM helped bail Enron out of a Brazilian power plant deal that was going sour. Instead of having to take losses, Enron sold a portion of the plant deal to LJM, and booked the revenue as income.

When Fastow later went to Skilling and proposed creating a new partnership to be dubbed LJM II, Fastow said Skilling told him, "Give me as much of that juice as you can." LJM II was capitalized with nearly $400 million, and the game was on in earnest.

Fastow was equally candid when describing Skilling's alleged knowledge of, and participation in, the conspiracy. In the Brazilian power plant deal, Fastow testified that Skilling told him to his face that LJM would incur no risk from the sale, that if necessary, Enron would buy back the power plant later at a profit to LJM. That secret side deal meant the sale was a fraud. Eventually, there were so many secret side agreements, that Fastow had to make himself a handwritten list to keep track.

Today, Skilling's defense lawyers will get their turn at Fastow. They're expected to portray him as the true mastermind of the criminal conspiracy, one who stole tens of millions of dollars from Enron.

Wade Goodwyn, NPR News, Houston.

INSKEEP: You can learn how key players in the Enron trial ended up on the witness stand by going to NPR.org.

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