Defense Attacks Prosecution Witness at Enron Trial

STEVE INSKEEP, host:

The former chief financial officer of Enron is not done giving testimony against his former bosses. Andrew Fastow testifies again today. Yesterday, prosecutors focused on former chairman Ken Lay, and Lay's participation in an alleged conspiracy to deceive investors. NPR's Wade Goodwyn reports from Houston.

WADE GOODWYN reporting:

Andrew Fastow began the day by describing for jurors a meeting he had with Ken Lay two days after Jeff Skilling suddenly and unexpectedly resigned in the summer of 2001. At a time when we was looking toward retirement, Lay was forced to take back direct control of the company. In a private meeting, Fastow told Lay that Enron had between $5 and 7$ billion of embedded debt unknown to the outside world.

Prosecutors then focused on the statements Ken Lay made to analysts, employees, and news organizations in the weeks subsequent to Fastow's warning. Lay reported that, quote, "Enron was probably in the best shape it's ever been," and that there was, quote, "no other shoe to drop."

Chris Bebel is a former federal prosecutor who specialized in securities fraud and white-collar crime. Bebel says Fastow damaged both executives.

Mr. CHRISTOPHER BEBEL (Former Federal Prosecutor): Mr. Fastow is uniquely situated, because he was high on the pecking order, and he had direct access to Mr. Lay and Mr. Skilling on a regular basis. The testimony that has been given by Andrew Fastow has been tremendously incriminating.

GOODWYN: After prosecutors finished their questioning of Fastow, it was the defense's turn, and Jeff Skilling's lawyer, Daniel Petrocelli, came after Fastow like a bulldog. He attacked Fastow for allowing his wife to be indicted and imprisoned for crimes Fastow conceded he himself committed.

Lee Fastow pleaded guilty to filing false tax returns, because her husband was laundering money using her and her children. Former prosecutor Bebel says Petrocelli scored with his opening gambit.

Mr. BEBEL: This is high-level drama that could not have been imagined by the most gifted scriptwriter. Mr. Fastow has effectively acknowledged that he caused his wife to be sent to prison, and he would not take the stand to testify on her behalf and exonerate here. Mr. Fastow did that in order to save his own skin. Fastow came across as a complete scoundrel.

GOODWYN: But Bebel says Petrocelli did less well later in the day. On two occasions, Petrocelli's questions about Fastow's own criminal conduct gave Fastow the opportunity to drag Skilling and Lay down with him. Fastow described in detail how Enron's top executives had hidden massive losses, how they conspired to artificially pump up the company's earnings and reap tens of millions of dollars in bonuses and stock proceeds.

Mr. BEBEL: Fastow made it point, went out of his way to acknowledge that he had committed crimes while working in conjunction with others. Immediately, Petrocelli called him on it and said don't mince words. You mean Jeff Skilling, isn't that right? At that point, Fastow didn't back down. He said, that's right, I mean Jeff Skilling. He was one of the people that committed crimes with me.

GOODWYN: Andrew Fastow still has a long way to go. He's not expected to be able to escape the stand until next week.

Wade Goodwyn, NPR News, Houston.

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