Kenneth Lay Hid Enron's Troubles, Former CFO Says
MICHELE NORRIS, Host:
From NPR News this is ALL THINGS CONSIDERED. I'm Michele Norris.
MELISSA BLOCK, Host:
And I'm Melissa Block. At the Enron trial in Houston the cross-examination of Enron's former finance chief Andrew Fastow has gotten underway. Yesterday, Fastow described how he set up the partnerships that made Enron's books look much better than they really were. He said that Jeffrey Skilling, the company's president, approved the partnerships and told Fastow, "give me all the juice you can."
This morning Fastow turned his attention to former chairman Kenneth Lay and quickly implicated him in the alleged conspiracy. NPR's Wade Goodwyn is covering the trial in Houston. And Wade, we're going to get to that cross-examination of Andrew Fastow in a moment. But first let's talk about what he had to say this morning, specifically about Kenneth Lay.
WADE GOODWYN: Well, Fastow said that two days after Jeff Skilling resigned, this was back in August of 2001, that he and Lay had a private meeting. With Skilling's resignation, Lay was resuming direct control of Enron, so Fastow was briefing him. He told Lay that Enron had between five and seven billion dollars in embedded losses that no outsiders knew about. Fastow said that even if we're smart and don't make any wrong moves, we'll barely make it over the next five years.
And then prosecutors took Fastow through the statements that Lay made subsequent to that conversation. Over the next few weeks in meetings with analysts, and meetings with employees, and in response to journalists' questions, Lay said that Enron was probably in the best shape that it's ever been, and that there was no other shoe to drop. Lay insisted that the company's accounting in its major divisions were all fine. And when prosecutors asked Fastow if this company line was all a lie, Fastow said it was lie.
BLOCK: Now it's the defense lawyers turn for cross-examination of Andrew Fastow, and it sounds like they gave him, started to give him a pretty tough time.
GOODWYN: Jeff Skilling's attorney, Daniel Petrocelli, has the first crack at Fastow and he's come out very aggressively, attacking Fastow's credibility. And Petrocelli's first exhibit is how Fastow allowed his wife to go to prison for a year for crimes Fastow committed. Lee Fastow pleaded guilty to making false statements on their tax returns. That's because Fastow was using his wife and children to launder kickbacks. Fastow says his wife was innocent, that he misled her about the true nature of these checks for thousands of dollars that they were receiving from his colleagues.
Now, Fastow's decisions in this regard have been something of a mystery to me, too. From the beginning of his indictment, Fastow played hardball with the government and refused to cooperate. So eventually prosecutors played hardball with him, too, and indicted his wife. And today Skilling's lawyer drilled Fastow about why he let his wife get indicted and go to prison instead of coming clean and pleading guilty.
The point Petrocelli was driving home is that Fastow would do almost anything to save himself, including hanging his wife out to dry, and by extension testifying against his client, Jeff Skilling.
BLOCK: And how did Andrew Fastow respond to that
GOODWYN: Well there's not a whole lot he could say. He took responsibility for his wife's fate, saying it was my actions that caused my wife to go to jail, and I'll have to live with that for the rest of my life. Petrocelli accused Fastow of being consumed by an insatiable greed, and again Fastow was forced to agree. I was greedy, he said, I lost my moral compass. Petrocelli then accused Fastow of wanting Skilling to go to jail, that he wished the jury would convict Skilling. But Fastow took issue with that characterization. He said, I'm sad that any family has to go through what I put my family through.
But at a later point when he asked, was asked by Petrocelli about whether he thought Skilling was guilty, Fastow said, yes, he thought Skilling had conspired with him and other Enron executives to deceive investors and analysts. Petrocelli's doing a good job getting all of Fastow's motives on the table, and after Petrocelli gets finished with Fastow, Ken Lay's legal tea gets their turn.
BLOCK: Now this is pretty much what defense attorneys do, is try to discredit government witnesses. That's especially true in this case, discrediting Andrew Fastow.
GOODWYN: Yeah, Fastow's so important to Skilling's defense because he's been the first witness to directly link Skilling to the alleged conspiracy. He provided the prosecution with the smoking gun that connects Skilling to fraudulent accounting. So it's important for, for Skilling and Skilling's lawyer that the jury come away from Fastow's testimony thinking they can't believe a word he said.
BLOCK: Wade, thanks very much.
GOODWYN: It's my pleasure.
BLOCK: That's NPR's Wade Goodwyn who's covering the Enron trial in Houston.
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