Risk & Compliance

Defense Finishes Fastow Cross-Exam

''I had all of those people fooled, yes sir," acknowledges the former finance chief.
Stephen TaubMarch 13, 2006


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The defense wrapped up its cross-examination of Andrew Fastow on Monday at the trial of Kenneth Lay and Jeffrey Skilling.

Lay’s lead attorney, Mike Ramsey, picked up where Skilling attorney Daniel Petrocelli left off last week — attacking Fastow’s honesty and integrity.

“You were very proficient at looking [Lay] right straight in the face and telling you were loyal and he could count on you, but you knew in your heart you were stealing from the house,” Ramsey asserted, according to Reuters. “You were successful in your lying and your deceit from 1997 all the way up to 2001, weren’t you sir?”

Fastow reportedly responded, “With regard to everything, I had all of those people fooled, yes sir.”

“Would you exaggerate to help your position with lawyers on the [Enron] task force?” Ramsey later asked. “No sir, I believe exaggeration would not be telling the truth. I’m trying to be truthful,” Fastow responded.

Throughout the trial, the defense has maintained that Lay and Skilling truly believed Enron was in great financial shape because they had been duped by Fastow and others. A key to the defense strategy, then, is to establish that key prosecution witnesses such as the former finance chief are not to be believed.

Ramsey also pressed Fastow on whether he has any tangible proof that links Lay to wrongdoing — any documents, memoranda, notes, or written proof of conversations — to prove that in October 2001 Lay knew that the company was in dire straits, yet still lied to analysts, according to the Houston Chronicle.

Ramsey reportedly went claim by claim through Fastow’s assertions that Enron, at Lay’s direction, misrepresented the company’s financial health.

At one point, while being questioned about an alleged $1.2 billion accounting error, Fastow asserted that “there is a document that verifies this was discussed with senior management,” according to the Chronicle. He reportedly added that the document lists “potential write-offs for the 3rd quarter of 2001” and that it “would look more like a spreadsheet prepared by Mr. Causey’s group,” referring to Enron’s former chief accounting officer.

Prosecutors did not offer this spreadsheet in evidence, Ramsey reportedly noted. During “the hundreds of hours you’ve spent” preparing for trial, the attorney asked Fastow, had he come across the document? No, was the reply. “So it’s your word but for the spreadsheet?” said Ramsey, who continued his questioning without waiting for a response, the Chronicle reported.

The cross-examination concluded Monday afternoon, after which prosecutors began their re-direct by introducing evidence to corroborate Fastow’s testimony. The evidence includes a note, from former treasurer Ben Glisan to Fastow, concerning a controversial Nigerian barge deal. Defense attorneys maintain that the deal was a legitimate business transaction; according to the Chronicle, Fastow has contended that the arrangement, with Merrill Lynch, was designed to provide Enron with millions of dollars in profits without taking any risk.

Glisan is expected to testify later this week, the newspaper noted.