Before former Enron Chief Financial Officer Andrew Fastow took the witness stand this week in the fraud and conspiracy trial of his bosses, Jeffrey Skilling and Kenneth Lay, he had a certain swagger.
Now the 44-year-old just looks beaten.
“I think I said on more than one occasion yesterday that I was greedy,” he said on the second day of a cross-examination by lead Skilling lawyer Daniel Petrocelli. The attorney relentlessly shamed the ex-CFO as a liar, cheat and thief who roped his wife into his crimes and watched her serve a year in prison.
Petrocelli’s punches left jurors to decide whether they can believe the prosecution’s most highly anticipated witness.
Fastow testified that he had no written proof that he and former Chief Executive Skilling discussed the ex-CFO’s use of partnerships to help Enron manipulate earnings and that they “committed crimes together.”
He also said Lay knew Enron was in serious financial trouble by the fall of 2001, even as the company founder gave rosy reports of its health to investors, employees and reporters. Lead Lay lawyer Michael Ramsey will get his turn with Fastow on Monday.
The short fuse for which Fastow was known at Enron never ignited. He never minimized his own culpability as he repeatedly linked Lay and Skilling to a web of lies that promoted Enron as healthy and stable.
The defense contends there was no fraud at Enron, Skilling and Lay did nothing wrong, and the company spiraled into bankruptcy proceedings in December 2001 because of negative publicity coupled with loss of market confidence.
Petrocelli also took the same approach he has with other ex-Enron executives who have pleaded guilty to crimes and testified against Lay and Skilling in hopes of getting lenient punishments in return: Look at the liar saying what the government wants to hear.
Unlike most of those others, Fastow did agree up front to serve a decade in prison when he pleaded guilty to two counts of conspiracy in January 2004. He is to be sentenced in June. The oldest of his two sons will be college-age by the time he is released — “a terrible price for what I’ve done wrong,” he said.
But the government can still prosecute Fastow for 96 criminal counts that are to be dismissed at his sentencing if unhappy with his cooperation.
“While this may be the most theatrical moment of the trial, it will be only one piece of a much larger puzzle when everyone is looking back at (closing argument) time,” said Samuel Buell, a former prosecutor with the Justice Department’s Enron Task Force who now teaches at the University of Texas School of Law.
“The baggage is the baggage, but the most important thing is that he seems to be genuinely agreeing, without spite, that he and others behaved shamefully,” Buell said.
By the time Petrocelli finished with him, Fastow looked worn down, often blinking slowly as though trying to remain alert. When he sat in the witness chair during breaks, he stared at the floor with a furrowed brow rather than glance at the defendants or anyone else, looking much older than when he invoked his Fifth Amendment rights before Congress more than four years ago.
“The idea that you would sit in jail for 10 years while Mr. Skilling is a free man, that doesn’t sit well with you, does it?” Petrocelli demanded.
“Mr. Petrocelli, I know how much devastation going through a situation like this causes to a family. I’m not suggesting that anyone should feel sorry for me or my family. I’m responsible for my actions,” Fastow said.
“But notwithstanding anything you’ve said about my feelings toward Mr. Skilling, I’m sad about any family that has to go through anything like what I put my family through.”
Michael Wynne, a white-collar defense attorney and former federal prosecutor in Houston who has watched Fastow testify, said the government’s case doesn’t rise or fall on Fastow’s testimony in a months-long trial where the ex-CFO is a piece of a big puzzle — albeit a notable piece.
Petrocelli’s attacks clearly challenge Fastow’s credibility, Wynne said. But such theatrics can backfire, even with the man whose crimes helped fuel the company’s failure.
“Those confessions of moral lapses, in public like this, might allow jurors to conclude that he is resigned, resolved and finally telling his part,” Wynne said.
In another exchange, Petrocelli pressed Fastow.
“When the history books are written about what happened at Enron, you know your name is going to be written on the page. And you want to make sure that Mr. Skilling’s name is on that page too, don’t you?” Petrocelli asked.
“No, sir. It’s not relevant to me whether Mr. Skilling or Mr. Lay or anyone else’s name is on that page. I know what I’ve done,” a resigned Fastow replied.
“You know what I’d like written on that page? That I had the character to recognize and admit what I’ve done wrong; to take responsibility for what I’ve done wrong; to ask forgiveness of my family, my friends, my community for what I’ve done wrong; and then to try to be the best person I could going forward.”
“And what you’re saying is that you don’t think Mr. Skilling has the character to do the same?” Petrocelli asked.
“I didn’t say that, sir” Fastow said.
“You think he’s guilty, right?” the attorney pressed.
“I think we committed crimes together, yes,” Fastow replied.
Jacob Frenkel, another former federal prosecutor who is following the trial, said that Fastow has come across as repentant and human despite his image as a selfish, greedy executive who took his crimes home.
“Even if the defense is making points, as they undoubtedly are on cross-examination, Mr. Fastow’s genuineness combined with Mr. Petrocelli’s theatrics are shedding a more positive light on Andy Fastow than would otherwise occur,” Frenkel said. “That said, when you get to the Lay cross-examination of Andy Fastow, it may well prove far more effective and compelling.”
Skilling, who was CEO for six months until resigning in August 2001, faces 31 counts of fraud, conspiracy, insider trading and lying to auditors. Lay, who resumed his role as CEO after Skilling’s abrupt departure, faces seven counts of fraud and conspiracy.