Heartbreaking and angry words from few of the thousands of Enron employees and investors wiped out by the company‘s collapse. And tears on the witness from the key prosecution witness in the trial of Enron‘s top executives Ken Lay and Jeff Skilling. The man‘s name is Andrew Fastow.
He was once Enron‘s chief financial officer. He is now a felon facing a 10-year prison sentence for fraud. When Enron was riding high, Fastow helped it get there by hiding hundreds of millions in losses to—quote— “juice Enron‘s earnings.” Fastow personally made millions off the deals as well. He broke down briefly on the stand when talking about charges against his wife, Lea, who spent a year in prison for filing a false tax return.
Dan Abrams was joined by business columnist for “The Houston Chronicle” Loren Steffy, securities attorney Gary Brown, who is special counsel to the Senate‘s Committee on Governmental Affairs investigating Enron‘s collapse, and white-collar criminal defense attorney Ron Fischetti to discuss the Fastow's court appearance.
DAN ABRAMS, HOST, 'ABRAMS REPORT': Loren Steffy look, you are there, you‘ve been in the courtroom. How is Fastow doing on the stand?
LOREN STEFFY, “THE HOUSTON CHRONICLE”: He has actually done a very good job as a witness. He has walked the jury through a number of these very complex partnership transactions and he has done it in a very clear and concise way. I have actually been surprised at how quickly the government has been able to move through the various points of this case.
ABRAMS: Are they making it understandable? I mean the concern is that a lot of these deals that he was engaging in are pretty tough to understand.
STEFFY: Well, they are tough to understand. And I think he has done a very good job of breaking that down for the jury and kind of walking them through step-by-step not only what they were designed to do, but why Enron wanted to do it, and that‘s really kind of the key point in this whole trial.
ABRAMS: The attorney for Ken Lay was on this program and said this about Andrew Fastow. "There was—what—by Enron‘s standards were minor thefts going on by Andrew Fastow over the years which finally were gradually coming to light I think which set off the panic that eventually sank Enron."
So you have got the defense basically saying it‘s all Fastow‘s fault. You‘ve got the prosecution saying come on the big boys knew about this. Gary Brown, is Fastow the make or break issue in this case?
GARY BROWN, SECURITIES ATTORNEY: Well he‘s certainly important because the government has two things to do. One is I‘m glad to hear what Loren is saying that it‘s trying to simple because question number one is did Enron use these transactions to manipulate its books? Yes or no and if the answer is yes then you go on to the next question, who knew about it and that‘s the importance of Andy to—Andy Fastow to get them into the higher levels of the organization.
ABRAMS: Ron Fischetti, they are going to go after him, right, on cross-examine—I mean they are going to try and rip this guy.
RON FISCHETTI, CRIMINAL DEFENSE ATTORNEY: Sure, I mean he is the one person that they can rip. One of the things that‘s kind of interesting to me in this case—I have tried a number of cases like this—is why they are putting him on now like almost last. I mean he‘s the one that can be cross-examined and most damaged by defense counsel.
Why not put him on first and get it over with and then put on the other prosecution witnesses who made deals and then the corroboration that they had. I just kind of wondered why they put him on almost last. But he certainly is going to be beaten up on the basis that he made a lot of money and they are going to say that he made it without Lay or Skilling knowing anything about it.
ABRAMS: But you know—but that seems to be a defense that hasn‘t been working as of late, which is we the people in charge didn‘t know what was going on at the company.
FISCHETTI: That‘s right. And more than that in this case they are basically taking a position in this case that they pleaded to crimes that never happened. A number of prosecution witnesses testified, lied before the SEC when they said Enron wasn‘t doing anything wrong. And now they are admitting to crimes and the defense is going to have to argue that these crimes never occurred and these witnesses pled to something they never did.
ABRAMS: And Gary Brown, the defense is saying that Enron was really a good company. They are saying the bottom line here is yes, Fastow was engaging in self-dealing but the government coming after Enron is really what sunk them.
BROWN: Well, and I‘m mystified by that because you look at the, for example, Merrill Lynch-Nigerian barge deal, that‘s where people didn‘t plead guilty. They were found guilty by a jury of criminal aiding and abetting securities fraud. I liken this very much to gun ownership.
It‘s legal to own a gun. It‘s legal to fire a gun. It‘s not illegal to kill someone with a gun. Structured finance and insider transactions are not illegal by nature, but they are illegal if they are used to manipulate the books of the company.
ABRAMS: Loren Steffy, he was crying on the witness stand. What was he crying about and how did it play with the jurors?
STEFFY: Well that happened right after lunch. We all came back from lunch. The jury came in and sat down and they immediately started asking Andy Fastow about the plea arrangement with his wife. As you may know, his wife pled guilty to filing a false tax return. She spent a year in prison or at least part of the year in prison, part of it on probation.
And it was a very dramatic moment because the prosecutors were asking him to explain that. This is obviously something the defense is going to try to pick apart even further. But what Andy Fastow said was that basically he had evidence that could have proved his wife was innocent, but he wasn‘t able to present it because if he had done that he would have incriminated himself in his own case.
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