Lay Feels Betrayed by Enron 'Whiz Kid'
washingtonpost.com
Company's Board Believed Fastow, Former Chairman's Lawyer Says
By Carrie Johnson
Washington Post Staff Writer
Friday, January 16, 2004; Page E01
A lawyer for former Enron Corp. chairman Kenneth L. Lay said yesterday that Lay feels betrayed by the former finance chief who admitted cooking the company's books.
Michael Ramsey said former Enron chief financial officer Andrew S. Fastow was "the golden boy of Wall Street," a "whiz kid" whose complex business deals were reviewed by lawyers and accountants.
"Everybody at the board level believed what Andy Fastow was telling them," Ramsey said in an interview. "It is a betrayal of trust that is tragic in its proportions."
Fastow, who pleaded guilty to two conspiracy charges Wednesday, will turn over $29 million in ill-gotten gains and will be sentenced to 10 years in prison. In his plea agreement, Fastow admitted manipulating the company's financial statements with "members of Enron's senior management," whom he did not identify, to boost the stock price. He also agreed to help the investigation of widespread earnings manipulation at the Houston energy firm.
Prosecutors said Wednesday that Fastow's help for the first time allows them a window into what went on in the company's 50th-floor executive suites. They continue to probe what Lay and former chief executive Jeffrey K. Skilling knew about Enron's mounting financial problems at the same time the two executives were making optimistic public statements and selling their own Enron stock.
With Fastow's assistance, according to lawyers involved in the case, the two-year-old Enron investigation could rapidly accelerate. As soon as next week, prosecutors plan to announce criminal charges against former chief accounting officer Richard A. Causey, the lawyers said.
Causey worked closely with Fastow and reported to Skilling. Prosecutors are pursuing the theory that the company's finances were made to appear better than they were through secretive deals that hid billions of dollars in debt and inflated earnings. Causey could be central to understanding how the accounting maneuvers on such deals worked and which of the company's top leaders kept track of them.
Fastow said in his plea agreement Wednesday that he and Causey had entered into an improper, unwritten deal that would allow one of Fastow's business partnerships to benefit at Enron's expense. Fastow's partnerships, called the Raptors, allowed Enron to move hundreds of millions of dollars in losses off its balance sheet, according to investigators.
Reid H. Weingarten, a lawyer for Causey, yesterday said his client "is a thoroughly decent man who always acted in good faith and never believed that he was misleading or defrauding anyone."
Causey told lawyers for Enron's board of directors that Skilling was familiar with the accounting for the Raptors partnerships. The Raptors were used in part to hedge Enron's investments in volatile technology companies, and the partnerships began to bleed financially in late 2000 and early 2001 after the tech investments soured. Skilling has said he is not an accountant by training and that he relied on the judgments of experts.
Bruce A. Hiler, a lawyer for Skilling, said he understood the pressure to plead guilty, but Fastow's deal "changes nothing about the true facts. Bottom line, if the truth is told, there still will be no case against Jeff Skilling."
Lawyers following the Enron case pointed out that prosecutors will need to painstakingly corroborate any information they receive from Fastow and that the bar is high for proving Enron's top officials acted with criminal intent.
Houston lawyer David H. Berg said that Skilling, who told Congress in 2002 that he was unaware of a looming financial crisis at Enron, may have opened himself up to heightened scrutiny from prosecutors by giving sworn statements in public.
"His appearance before Congress is his Achilles' heel," Berg said. "His testimony was incredible under any circumstance." |
