Enron's Fastow deflates court grilling by admitting to 'extreme greed'

HOUSTON - A federal court in Houston was supposed to be the stage for one of the most indisputably evil of white-collar criminals, Andrew Fastow, to incriminate his notorious ex-bosses at Enron and then get ripped to shreds by their lawyers.

It didn't entirely work out that way last week. Yes, Fastow gave damaging evidence against former chief executive officers Kenneth Lay and Jeffrey Skilling. He pointed out lie after lie that each of them told the public about Enron's financial health. Plus, he said Skilling cut multiple, illegal secret side deals with him so that Fastow's convoluted off-books partnerships could better hide Enron's losses.

But when it came time for a defence lawyer to pound Fastow's credibility into pulp, the script fizzled.

It wasn't for lack of material. Fastow's own conduct at Enron offered plenty of helpful ways to undercut his believability. Fastow told lies that put his wife in prison, appropriated his children's names for crooked schemes, stole from his company, lied to Skilling and Lay, betrayed shareholders' trust and even cheated one of his partners in crime.

And then, when Enron was sinking and Fastow was put on leave, he had the audacity to demand US$9 million ($14.9 million) in severance from the crumbling company he had helped destroy. Who could trust someone like that?

Nor was it for lack of trying or lack of flair that Daniel Petrocelli, Skilling's lawyer and the first to cross-examine Fastow, failed to shatter Fastow's credibility. He lit into the witness with a vengeance.

The problem for Petrocelli was that Fastow admitted all his misdeeds.

"I was extremely greedy," Fastow said. "I did things I very much regret."

In fact, at times Petrocelli and Fastow seemed to be competing to come up with the worst things Fastow had done.

"You destroyed evidence?" Petrocelli asked.

Fastow admitted he had. "And I encouraged others to destroy evidence," he said.

It is no fun to pick on someone like that. The attacker winds up looking like a bully. For Fastow, the best defence is no defence and he is using it effectively.

"Fastow has been well-prepared," says Robert Mintz, a former federal prosecutor and now a white-collar defence lawyer.

"He's been contrite. He's been direct, and, by all accounts, he has been credible."

And so, Petrocelli's attacks backfired.

He pointed out that Fastow was basking in national acclaim for his work at Enron even while ripping off the company.

"Did you have any conscience about it, sir?"

"I sure have some conscience now," the witness replied.

"I have asked my family, my friends, my community for forgiveness. It's an awful thing that I did. Shameful. But I wasn't thinking that way at the time."

Okay, so if Fastow's history as a liar isn't enough to discredit his testimony, there is always the standard defence tactic of trying to show he's the prosecutors' puppet.

For all of his audacious and wide-ranging financial crimes, Fastow won a plea deal that recommends a 10-year prison sentence.

Compare that to Bernard Ebbers' 25-year sentence for lying about WorldCom.'s finances.

If prosecutors decide Fastow hasn't upheld his end of the bargain, they can put him on trial - and his wife, too - prosecuting them for charges that were dropped when they pleaded guilty.

"You have a lot riding on this testimony," Petrocelli pointed out.

"That is why I need to be truthful," Fastow replied. And then there was this: "My sentence isn't affected by whether Mr Skilling is convicted or not."

He has a point there.

So maybe Fastow doesn't want to go down without taking Skilling with him?

"When the history books are written about what happened at Enron, you know your name is going to be on that page," Petrocelli told Fastow. "You want to make sure that Mr Skilling's name is on that page."

Again, Fastow showed himself an able witness: "You know what I want on that page? That I had the character to admit what I've done wrong."

Petrocelli clearly tried to goad Fastow into displaying the nastier aspects of his personality. That didn't work either.

"We have not seen any glimpse of his legendary, hair-trigger temper or the arrogance that personified his conduct at Enron," said Mintz, a partner at McCarter & English in New Jersey.

Lay's lawyer hardly made any headway with Fastow this week either.

However, in the two days last week that Petrocelli cross-examined Fastow, he did manage to show that the witness committed many of his crimes by deceiving Skilling and Lay, not by conspiring with them. He showed that Fastow quite literally stole tens of millions of dollars from Enron, something neither of the defendants is accused of doing. At least not directly.

"A significant number of senior management participated in this activity to misrepresent our company," Fastow said. "We all benefited financially from this at the expense of others. That, in my mind, was stealing."

And that fraud is what Lay and Skilling are accused of helping perpetrate.

- BLOOMBERG