Lawyer for Enron’s Lay attacks ex-CFO as liar, exaggerator |

Lawyer for Enron’s Lay attacks ex-CFO as liar, exaggerator

HOUSTON – A lawyer for Enron Corp. founder Kenneth Lay assailed a key prosecution witness Monday as a skillful liar who exaggerated the financial peril the company faced in 2001.Lawyer Michael Ramsey also played tapes for jurors in which Lay, just after taking the reins as Enron chief executive in August 2001, flatly told employees that some of the company’s overseas assets were “generating a very, very low return on investment.”Ramsey aggressively challenged the credibility of Andrew Fastow, the former chief financial officer at Enron, who testified last week that Lay was well aware of the dire straits faced by the company, even as he talked it up to employees and the public.The defense lawyer grilled Fastow about an Aug. 15, 2001, meeting with Lay in which Fastow says he stressed to the CEO that he was loyal to Enron and planned to stay on as finance chief.”In connection with stealing from Enron,” Ramsey asked, “you were just looking Mr. Lay in the face and telling him a lie?”Fastow has admitted stealing money from Enron through a string of schemes he hid from his bosses.”Yes, I was not loyal to him or Enron when I committed those crimes,” Fastow said.Fastow was undergoing a fourth day of questioning – and his third day of cross-examination – in the trial of Lay and former Enron Chief Executive Jeffrey Skilling, who face fraud, conspiracy and other charges in the spectacular collapse of energy trading company.Still, Ramsey’s questioning did not repeat the courtroom fireworks of last week, when a lawyer for Skilling relentlessly attacked Fastow as a greed-driven cheat, a liar and a bad husband and father.The ex-CFO testified last week he gave Lay a rundown of huge looming write-offs because of overvalued international assets and a massive accounting error that would force a $1.2 billion writedown in shareholder equity.He also said he and Lay met with executives from brokerage firm Goldman Sachs & Co. to discuss a restructuring of Enron in late 2001 – all while Lay was insisting to employees and reporters that Enron was fundamentally sound.Ramsey challenged Fastow’s account of the Goldman meeting.Fastow said he chose Goldman because it was not one of Enron’s major lenders – and therefore could not pull its credit out from under the company when it learned how bad the finances were.But Ramsey noted to Fastow that Goldman was Enron’s primary issuer of so-called commercial paper, or crucial short-term debt.The defense lawyer asked: “Didn’t it just cross your mind a little bit that if we tell our major commercial-paper broker our secrets the paper is gonna dry up overnight?””That’s not what I was thinking, sir,” Fastow answered.When prosecutors questioned Fastow last week, they keyed on interviews Lay gave in 2001 and statements he made to employees at the time insisting Enron had a strong balance sheet.But Ramsey appeared to suggest Monday that Lay came clean about the more troubled parts of the business.In an Aug. 16, 2001, meeting with employees, for example, Lay acknowledged Enron had billions locked up in some international assets that were “earning almost no income,” and that it was “imperative” to milk a better return out of those assets.The defense maintains it was negative publicity, shattered market confidence and an overall bear market – not overarching fraud – that forced Enron to seek bankruptcy protection in 2001.Earlier Monday, a lawyer for Skilling questioned the authenticity of a document that Fastow contends showed improper deals to hide losses at the company that were approved by Skilling.Fastow said he created the document, a list dubbed Global Galactic, to keep track of Enron’s assurances that partnerships he ran would not lose money on deals with the company.Fastow has said he destroyed the original document but a copy turned up in 2004, tucked into a folder in a safe-deposit box maintained by Fastow and his wife.”Is there some possibility, sir, that later on, having perhaps lost or tossed out the original, you went back and recreated or reconstructed the list?” Skilling lawyer Daniel Petrocelli asked Monday.”No, sir,” Fastow answered.Petrocelli also asked Fastow whether he was “100 percent certain” that the initials on the document belonged to him and Richard Causey, the former top accountant at Enron.”I recall being there when Mr. Causey initialed them, seeing him do that,” Fastow said.Fastow testified last week that Skilling personally approved some of the side deals, and that Causey assured him Skilling had approved all the deals on the Global Galactic list. Fastow has conceded he has no hard evidence of those meetings with Skilling.The government claims the deals with Fastow’s partnerships, known as LJMs, allowed Enron to shed poorly performing assets and improve the bottom line – with secret promises to LJM that Enron would buy them back at a premium.Petrocelli also showed jurors notes Fastow took of phone conversations with Skilling in October 2001, including one in which Skilling called Fastow “brilliant” and said shareholders “should give us medals for doing all these deals.”—AP Business Writer Kristen Hays contributed to this report.

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