Ex-Fastow aide describes sham deals with Enron
HOUSTON – A former Enron investment analyst on Tuesday corroborated testimony from a key prosecution witness that the company improperly used partnerships to help its earnings seem better than they were.But Chris Loehr, who worked for partnerships run by former Enron Corp. Chief Financial Officer Andrew Fastow, could not directly link ex-CEO Jeffrey Skilling to the deals because his contact with the company’s top echelon didn’t stretch that far.Loehr didn’t even mention Skilling or Enron founder Kenneth Lay under questioning from a prosecutor in the fraud and conspiracy trial of the two executives. His testimony corroborated that of Fastow, who on Monday finished four days on the witness stand.The investment analyst described several transactions in which Fastow’s LJM1 and LJM2 partnerships bought whole or part interest in Enron assets, allowing the energy trading company to book earnings.Fastow, who pleaded guilty to two counts of conspiracy in January 2004, had testified that he created the entities exclusively to conduct such deals with Enron.Loehr, who is testifying as part of an immunity deal, said Fastow told him Enron gave unwritten assurances it would resell or buy back those interests at a profit, which meant the deals weren’t legitimate because the partnerships’ investments weren’t at risk.The investment analyst didn’t say who gave Fastow the assurances, but Fastow testified last week he got them from Skilling in private conversations that the ex-CFO didn’t document.Loehr also described Enron’s so-called Raptors, financial structures backed by Enron stock that were used to lock in gains from asset values or investments and to keep hundreds of millions of dollars in debt off the energy company’s books. The Raptors were intertwined with LJM2.Initially, Fastow sought to market the Raptors to other companies, but those efforts shriveled.”I thought he was crazy,” Loehr said. “This was some of Enron’s dirtiest laundry.”Upcoming government witnesses include Vince Kaminski, former head of Enron’s risk research group, to be followed by Sherron Watkins, a former executive who warned Lay in August 2001 of impending financial doom.Loehr noted that Enron always paid his salary even though he split his time between the company and LJM, which was supposed to be independent of Enron. Fastow sold his interest in the LJM partnerships to a former top aide, which eliminated questions of independence.On cross-examination by lead Skilling lawyer Daniel Petrocelli, Loehr said he didn’t think he was breaking the law. “I thought I was aiding others in doing that,” he said.”I’d say everyone who worked on these deals were contributing,” Loehr said.One of the deals Loehr described involved LJM1’s $11.3 million investment in a troubled Brazilian power plant in 1999. Loehr said he initially included in that deal’s paperwork that Enron was obligated to buy back that interest within months.An in-house Enron accountant told him that outside auditors wouldn’t approve the deal as a legitimate sale if that language were included.”We removed the language,” Loehr said.Asked by prosecutor John Hueston whether in-house Enron accountants were aware of that and other undocumented side deals ensuring the LJMs wouldn’t lose money, Loehr said, “Yes, on several occasions. In general, the accountants would say, ‘I didn’t hear that, see no evil, hear no evil’ sort of comments.”Loehr said he quit Enron in August 2001, even though he was in his mid-20s earning an $85,000 salary, because he was uncomfortable with the LJM deals and his role in them. But Petrocelli noted he wrote on exit interview documents that what he liked most about his job were the deals he worked on.Loehr said he thought the deals were innovative and complex, but “I realized that what we were doing was more window dressing for accounting treatment with side deals.”Vail, Colorado
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