Fastow Says 'We Stole' as Enron Defense Assails His 'Greed'
By Carrie Johnson
Washington Post Staff Writer
Thursday, March 9, 2006; D01
HOUSTON, May 8 -- Enron's former chief financial officer, Andrew S. Fastow, kept his composure on the witness stand Wednesday, refusing to budge from his accusations against his former bosses under attack by defense lawyers who portrayed him as "consumed by insatiable greed" at the expense of the company and even his family.
Fastow, 44, held up under five hours of hostile questions from the lead defense lawyer for former chief executive Jeffrey K. Skilling, parrying attacks on his credibility with frank admissions of wrongdoing.
Skilling lawyer Daniel M. Petrocelli walked Fastow through a series of secret deals that Fastow used to enrich himself, pointing out that Skilling never received a cut of the "booty." Fastow admitted he lied and stole, but he said he was not the only member of "senior management" to do so.
"When you misrepresent the nature of the company, artificially inflate earnings, hide losses, when you do things like this to cause your stock price to rise, that is stealing," Fastow said. "We stole."
Fastow pleaded guilty to conspiracy and will serve a 10-year prison sentence in part for siphoning more than $45 million from the company. His former superiors, chairman Kenneth L. Lay and Skilling, face multiple fraud charges and could spend most of the rest of their lives in prison if they are convicted.
"I got news for you. I'm going to ask you a lot of questions," Skilling's lawyer told Fastow as the cross-examination began.
Fastow said, "I can see by the binders," looking at a cart crowded with defense exhibit notebooks and drawing a laugh from spectators.
Later Petrocelli told Fastow that his answers sounded rehearsed. "With all due respect, your questions sound rehearsed to me," the witness interjected.
The defense saved the most fire for Fastow's dealings with his wife, Lea W. Fastow, who pleaded guilty to filing a false tax return related to his partnerships and served one year in prison. Petrocelli argued to the eight-woman, four-man jury that Fastow could have saved his wife from being indicted if he had taken responsibility for his actions earlier.
"Your greed was so great you allowed your wife to go to prison," the defense lawyer said.
"It was my actions that put her in that position . . . and I'll live with that for the rest of my life," Fastow said, taking a sip of water from a Dixie cup.
Later, his voice choked, he called his actions "reprehensible" and concluded, "I've destroyed my life."
On Tuesday, Fastow implicated Skilling in a series of secretive business partnerships that Enron used to hide debt and manufacture earnings from the late 1990s until its December 2001 collapse into bankruptcy protection. Skilling blessed many of the deals, Fastow testified, rewarding him with promotions.
He spent two more hours Wednesday morning walking the jury through Enron's final months, when Lay resumed control of day-to-day operations upon Skilling's abrupt departure in August 2001. He said Lay made a series of "false" and "misleading" statements, choosing not to mention severe problems in the international unit, at the company's highly touted Internet broadband venture and within its increasingly risky trading division.
Within days of Skilling's Aug. 14 exit, Fastow said, he met with Lay to point out that the company had $5 billion to $7 billion of losses that it had not reported on its books. At another top management meeting Aug. 20, the men discussed "a big hole" in earnings targets Enron was trying to hit. Nonetheless, Lay told a reporter Aug. 24 that "there are no accounting issues, no trading issues, no reserve issues, no previously unknown problem issues." He said, "The company is probably in the strongest and best shape that it has ever been."
Lay told employees in an online forum Sept. 26 that Enron was "fundamentally sound," after seeing dire financial reports showing an earnings gap of $826 million less than two weeks earlier, Fastow testified. The company ultimately plugged the hole by improperly releasing rainy day cash reserves.
By late October, Enron had entered into what Fastow called the "death knell" when trading partners refused to keep doing business with the company. Lay's comments were designed to create a positive outside view of Enron, he said, while the inside view was "very different."
Fastow was animated, gesturing, shrugging and making faces as the hours passed. He is likely to remain on the stand into next week, as part of a defense strategy designed to wear him down.
Petrocelli's cross-examination highlighted Fastow's deception -- from requests to destroy subordinates' computers to furtive meetings in the Cayman Islands, none attended by Skilling or Lay.
"Were you a hero when you stole from Enron?" Petrocelli asked, picking up on Fastow's description on Tuesday of how he had viewed himself. "Were you a hero when you deceived Enron? Were you a hero when you cheated and defrauded Enron shareholders?"
Fastow replied: "In the culture of corruption that Enron had, a culture that rewarded financial reporting as opposed to economic value . . . I was a hero. It was not a good thing. That's why I'm here today."
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