Risk & Compliance

Fastow Won’t Testify at First Enron Trial

Speculation has it that if the former CFO didn't do well during cross-examination, he wouldn't be as effective a witness against former CEO Jeffrey...
Stephen TaubJune 3, 2004

Former Enron Corp. chief financial officer Andrew Fastow is not on the witness list for the first criminal trial involving the former energy giant, scheduled to start Monday.

Although Fastow was clearly at the center of the alleged fraud, according to the Houston Chronicle, prosecutors did not add him to their witness list.

The case involves a $12 million sale of three electricity-generating barges off the coast of Nigeria in 1999. Four former Merrill Lynch executives — James A. Brown, Daniel Bayly, William Fuhs, and Robert Furst — and two former Enron employees — Dan Boyle and Sheila Kahanek — are charged with conspiracy to commit wire fraud, fraud, making false statements, and obstruction. Merrill Lynch itself has not been charged with wrongdoing.

The government alleges that Fastow orally promised Merrill Lynch that if it pretended to buy the barges so Enron could fraudulently pump up its bottom line, then Fastow would guarantee the property would be bought back and Merrill Lynch would make a profit, the Chronicle explained.

The barges were repurchased by an Enron side company that Fastow controlled, and Merrill Lynch did make a profit, added the newspaper.

“His [Fastow’s] presence could alter the way the jury sees the case,” a defense attorney told the paper. “If they pull him out of a hat later, it could be problematic.”

Lawyers speculated that Fastow isn’t being called in this case because prosecutors prefer not to provide the defense with government interviews with Fastow. They are also concerned that if Fastow didn’t do well during cross-examination, he wouldn’t be as effective as a witness against former chief executive officer Jeffrey Skilling and other top former executives.

Possible prosecution witnesses in the current case include three former Enron officials who have already pleaded guilty to crimes: former treasurer Ben Glisan Jr., who is serving a five-year prison term for conspiracy; former finance executive Michael Kopper, who pleaded guilty to fraud and money laundering charges in August 2002 and is awaiting sentencing; and Paula Rieker, a former Enron investor relations executive, who pleaded guilty to insider trading last month.

Other possible government witnesses, according to the Chronicle, are four current or former Merrill Lynch employees, four other former or current Enron employees, two former partners of Arthur Andersen, and government officials with the Federal Bureau of Investigation, the Securities and Exchange Commission, and a legislative committee that took testimony about the barge deal.

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