In his third day on the witness stand, former Enron Corp. Chief Financial Officer Andrew Fastow once again spent a fair amount of time telling jurors how former chief executive Jeffrey Skilling was aware of sham deals with off-balance-sheet partnerships designed to boost the financial strength of the one-time energy giant.
The former finance executive even detailed two specific instances in which Skilling personally guaranteed that the LJM partnerships, named after Fastow’s wife and sons, would not lose money when it purchased Enron assets, reported Bloomberg. The partnership deals helped Enron meet its quarterly earnings estimates.
However, for a large part of the day, Skilling’s lawyer, Daniel Petrocelli, tried to drive home the notion that for all of Fastow’s accounts of conversations and meetings with Skilling and former chief Kenneth Lay, the CFO had no proof that there was direct complicity in the crimes that Fastow has pleaded guilty. Fastow will soon begin serving 10 years in prison for the accounting fraud crimes.
For example, Fastow conceded he had no record of conversations in which he says he and Skilling made secret side deals that helped the company manipulate its earnings, noted the Associated Press. Fastow has claimed that Skilling made verbal promises—which Fastow called “bear hugs”—that the partnerships would not lose money on side deals, added the wire service.
But, when Petrocelli asked whether there was “any piece of paper, any e-mail, any notes written on the back of a business card, anything” that documented the conversations with Skilling, the former finance executive reportedly replied, “I can’t recall any specific document.” Fastow continued, “[Skilling] didn’t give me a document,” according to Bloomberg. “He didn’t say, Mr. Fastow, here’s a coupon for a bear hug.”
Fastow also said he destroyed the original paperwork, dubbed the Global Galactic memo, that listed the side deals and payment details. But in 2004, a photocopy of it was found in a folder along with Fastow’s employment agreement in a safe deposit box. That photocopy was initialed by Fastow and Richard Causey, Enron’s former top accountant, but not Skilling, the AP noted.
Petrocelli then questioned whether Fastow knew whether Causey went over the document with Skilling in detail, according to Bloomberg. “I don’t recall Mr. Causey saying he went over every term of every agreement with Mr. Skilling,” Fastow reportedly replied. “My understanding was that Causey had reviewed these transactions with Mr. Skilling and Mr. Skilling agreed to them.”
Petrocelli then reminded Fastow that his office was on the same floor as Skilling’s, Bloomberg pointed out, asking, “If you really wanted to be sure Mr. Skilling was on board with these items, you could have taken the 60 seconds to walk over to his office, couldn’t you?” Fastow replied, “I supposed so, but it never dawned on me it would be necessary to do so,” added Bloomberg.
When Fastow testified that the written records he kept of phony deals “incriminate” Skilling in the company’s fraud, Petrocelli asked Fastow whether the two-page Global Galactic list of deals amount to “a smoking gun.” Fastow answered that, “I know they incriminate me and I believe they incriminate others, as well,” reported Bloomberg, indicating under further questioning that Skilling was among those implicated in crimes by the list.
This is Fastow’s second day of cross-examination. The Chronicle pointed out that his testimony was still delivered with precision, but he was starting to appear fatigued, with pronounced bags under his eyes. The paper said he spoke more slowly than the prior days and was much less animated. In contrast, the paper compared Petrocelli to the Energizer Bunny.