The big news from the Lay/Skilling trial yesterday wasn't so much the testimony given, but the promise of one of next week's witnesses. Andrew Fastow, the former Enron CFO and the man who put together a series of shady side deals at Enron, is scheduled to testify next week, and we imagine both sides can't wait.
The prosecutors will likely hope to use Fastow's testimony to prove that Ken Lay, Enron's former chairman, and ex-CEO Jeff Skilling knew what was going on as the company collapsed. Defense lawyers will try to portray Fastow as the man whose financial wrangling pushed one of the first Enron dominoes. Fastow hasn't made any public statements since he was indicted on charges of conspiracy to commit wire fraud and conspiracy to commit wire and securities fraud; he is cooperating in a plea deal and could be sentenced to 10 years in prison.
In the trial yesterday, former Enron retail division CEO David Delainey underwent cross-examination, saying he and other Enron managers lied to make the company seem more profitable and stable than it was.
"We didn't use the word 'crime,'" Delainey said. But he went on to say that "everyone knew what was going on" at a meeting in March 2001 when he, Skilling and others plotted to hide $200 million in retail division losses among the wholesale trading division's profit. He said the point was to keep the public from knowing that retail was a losing proposition rather than the growing company it was touted to be.He said he wishes "on his kid's lives" that he had left that meeting.
Delainey did admit to Skilling lawyer Daniel Petrocelli that he lied to government investigators for a while before deciding to cooperate and plead guilty to one count of insider trading in 2003. Petrocelli also got Delainey to say that he lied to retail division employees about whether the $200 million in losses was moved for profit of efficiency — in a video from a June 2001 employee meeting, Delainey said the move was a good thing.
The other witness on cross-examination Wednesday, former Enron West Coast trading desk head Timothy Belden, maintained that moving the millions of dollars in losses to his division was not done for efficiency's sake. Belden's refusal to bend apparently amused Lay, who at one point "laughed and then reached down to adjust his sock while looking at his lawyer Mike Ramsey and continuing to laugh." At other times, jurors giggled when defense lawyers had trouble breaking witnesses, but as the Chronicle notes, "it's hard to tell whether they think the witnesses stubborn ... the attorneys amusing or the process comical."
Today, Delainey will remain under cross, followed by a man who was a victim of Enron's collapse and Kevin Hannon, the former CEO of Enron Broadband Services, who pleased guilty to conspiracy to commit securities and wire fraud and has been cooperating with the government. Fastow is scheduled to take the stand after Hannon.
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